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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
| liquidity and capital resources our primary source of liquidity is our cash and cash equivalents , which increased by approximately $ 1.9 million to $ 13.1 million as of september 30 , 2016 from $ 11.2 million as of september 30 , 2015 . at september 30 , 2016 , cash equivalents totaled $ 0.5 million of this amount . 17 significant sources of cash for the year ended september 30 , 2016 included net income of approximately $ 2.6 million , an increase in deferred revenues of approximately $ 1.8 million , an increase in pension and retirement plans liabilities of $ 0.6 million , depreciation of approximately $ 0.6 million , and an increase in other assets of approximately 0.6 million . partially offsetting these sources of cash were a decrease in accounts payable and accrued expenses of approximately $ 1.6 million , payment of dividends of approximately $ 1.7 million , purchases of property and equipment of approximately $ 0.7 million and unfavorable currency exchange fluctuation of approximately $ 0.8 million . cash held by our foreign subsidiaries located in germany and the u.k. totaled approximately $ 6.4 million as of september 30 , 2016 and $ 3.3 million as of september 30 , 2015 . this cash is included in our total cash and cash equivalents reported above . we consider this cash to be permanently reinvested into these foreign locations because repatriating it would result in unfavorable tax consequences .
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in certain instances , our clients request enhancements to the underlying features and functionality of our enterprise and mid-market solution , and in these instances , revenue from subscriptions is recognized over the remaining term of the agreement once the additional features are delivered to the client . we generally invoice our clients a portion of the annual subscription fees upfront for multi-year subscriptions and upfront for consulting services . for amounts not invoiced in advance for multi-year subscriptions or consulting services , we invoice under various terms over the subscription and service periods . we record amounts invoiced for annual subscription periods that have not occurred or services that have not been performed as deferred revenue on our balance sheet . with the growth in the number of clients , our revenue has grown to $ 339.7 million for the year ended december 31 , 2015 from $ 263.6 million for the same period in 2014 . we have historically experienced seasonality in terms of when we enter into client agreements . we usually sign a significantly higher percentage of agreements with new clients , as well as renewal agreements with existing clients , in the fourth quarter of each year . in addition , within a given quarter , we typically sign a large portion of these agreements during the last month , and often the last two weeks , of that quarter . we believe this seasonality is driven by several factors , most notably the tendency of procurement departments at our enterprise clients to purchase technology at the end of a quarter or calendar year , possibly in order to use up their available quarterly or annual funding allocations , or to be able to deploy new talent management capabilities prior to the beginning of a new financial or performance period . as the terms of most of our client agreements are measured in full year increments , agreements initially entered into the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years . this seasonality is reflected to a much lesser extent , and sometimes is not immediately apparent , in our revenue , due to the fact that we recognize subscription revenue over the term of the client agreement , which is generally three years . in addition , this seasonality is reflected in changes in our deferred revenue balance , which generally is impacted by the timing of when we enter into agreements with new clients , the timing of when we invoice new clients , the timing of when we invoice existing clients for annual subscription periods , and the timing of when we recognize revenue . we expect this seasonality to continue in the future , which may cause fluctuations in certain of our operating results and financial metrics , and thus limit our ability to predict future results . we believe the market for talent management remains large and underpenetrated , providing us with significant growth opportunities . we expect businesses and other organizations to continue to increase their spending on talent management solutions in order to maximize the productivity of their employees , manage changing workforce demographics and ensure compliance with global regulatory requirements . historically , many of these software solutions have been human resource applications running on hardware located on organizations ' premises . we have seen many of these organizations increasingly choose saas for their talent management solutions and we anticipate that trend will continue . we have focused on growing our business to pursue what we believe is a significant market opportunity , and we plan to continue to invest in building for growth . as a result , we expect our cost of revenue and operating expenses to increase in future periods . sales and marketing expenses are expected to increase , as we continue to expand our direct sales teams , increase our marketing activities , and grow our international operations . research and development expenses are expected to increase as we continue to improve the existing functionality for our solutions . we also believe that we must invest in maintaining a high degree of client service and support that is critical for our continued success . we plan to continue our policy of implementing best practices across our organization , expanding our technical operations and investing in our network infrastructure and services capabilities in order to support continued future growth . we also expect to incur additional general and administrative expenses as a result of our growth . 42 our operating results have fluctuated in the past and may continue to fluctuate in the future based on a number of factors , many of which are beyond our control . in addition to those described in the “ risk factors ” section of this annual report on form 10-k , such factors include : our ability to attract new clients ; the timing and rate at which we enter into agreements for our solutions with new clients ; the timing and duration of our client implementations , which is often outside of our direct control , and our ability to provide resources for client implementations and consulting projects ; the extent to which our existing clients renew their subscriptions for our solutions and the timing of those renewals ; the extent to which our existing clients purchase additional products or add incremental users ; the extent to which our clients request enhancements to underlying features and functionality of our solutions and the timing for us to deliver the enhancements to our clients ; changes in the mix of our sales between new and existing clients ; changes to the proportion of our client base that is comprised of enterprise or mid-sized organizations ; seasonal factors affecting the demand for our solutions ; our ability to manage growth , including in terms of new clients , additional users , additional headcount and story_separator_special_tag for consulting services , we analyze both bundled arrangements that include subscriptions to our solutions and consulting services , as well as standalone purchases 46 of different types of consulting services made subsequent to the original subscription . for these consulting services arrangements , we then examine the actual rate per hour we charge or , for fixed fee arrangements , the implied average rate per hour based on the fixed fee divided by the estimated hours to complete the service . the besp is then the product of this average rate per hour and our estimate of the hours needed to complete the services . for e-learning content , we estimate besp by reviewing fees for content in order to establish an average annual fee per user that reflects the cost we incur to acquire the related content from third-party providers . additionally , we estimate besp by reviewing fees for content-hosting by reviewing the selling price of gigabytes sold in order to establish a fee on a per user or bandwidth basis . the determination of besp for our deliverables as described above requires us to make significant estimates and judgments , including the comparability of different subscription arrangements and consulting services and estimates of the hours required to complete various types of services . in addition , we consider other factors including : nature of the deliverables . for example , in categorizing our subscriptions into meaningful groupings for determining besp , we consider the number and type of products the client purchased . for consulting services , we consider the type of consulting service and the estimated hours required to complete the service or average selling price for fixed fee services based on our historical experience . location of our clients . our pricing is different for domestic and international clients , and therefore in determining besp of subscriptions to our solutions , we evaluate domestic arrangements separately from international arrangements . market conditions and competitive landscape for the sale . our pricing and discounting varies based on the economic environment and competition . we consider these factors in determining the grouping of comparable services and the periods over which we compare arrangements to compute the besp . internal costs . our pricing for consulting services and e-learning content considers our internal costs to provide the consulting services and the third-party purchase costs of e-learning content . size of the arrangement . discounting generally increases as the relative size of an arrangement increases , and we take this into consideration in the grouping of our clients to determine besp . our discounting for multiple-deliverable arrangements varies based on the extent and type of the consulting services and content included with the subscriptions in the arrangement . the determination of besp is made through consultation with our senior management . we update our estimates of besp on an ongoing basis as events and circumstances require , and we update our determination to use besp on a periodic basis , including assessing whether we can determine vsoe or tpe . after we determine the fair value of revenue allocable to each deliverable based on the relative selling price method , we recognize the revenue for each based on the type of deliverable . for subscriptions to our solutions , we recognize the revenue on a straight-line basis over the term of the client agreement , which is typically three years . for consulting services , we generally recognize revenue using the proportional performance method over the period the services are performed . in a limited number of cases , the client 's intended use of a solution requires enhancements to its underlying features and functionality . in some of these cases , revenue is recognized as one unit of accounting on a straight-line basis from the point at which the enhancements have been made to the solution through the remaining term of the agreement . in other cases where the enhancement is not required for the client 's intended use , revenue is recognized separately for the enhancement and the solution . the enhancement revenue is recognized based on the allocated value on a straight-line basis once the enhancement has been made to the solution . for arrangements in which we resell third-party e-learning content to our clients or host client or third-party e-learning content provided by the client , we recognize revenue in accordance with accounting guidance as to when to report gross revenue as a principal and when to report net revenue as an agent . we recognize e-learning content revenue in the gross amount that we invoice our client when : ( i ) we are the primary obligor , ( ii ) we have latitude to establish the price charged and ( iii ) we bear the credit risk in the transaction . for arrangements involving our sale of e-learning content , we charge our clients for the content based on pay-per-use or a fixed rate for a specified number of users and recognize the gross amount invoiced as revenue as the content is delivered . for arrangements where clients purchase e-learning content directly from a third-party , or provide it themselves , and we integrate the content into our solutions , we charge a hosting fee . in such cases , we recognize the amount invoiced for hosting as the content is delivered , excluding any portion we invoice that is attributable to fees the third-party charges for the content . 47 commission expense we defer commissions paid to our sales force because these amounts are recoverable from future revenue from the non-cancelable client agreements that give rise to the commissions . we defer expense recognition upon payment and amortize expense to sales and marketing expenses over the term of the client agreement in proportion to the revenue that is recognized . commissions are direct and incremental costs of our client agreements and we generally commence payment of commissions within 45 to 75
| liquidity and capital resources our primary source of liquidity is our cash and cash equivalents , which increased by approximately $ 1.9 million to $ 13.1 million as of september 30 , 2016 from $ 11.2 million as of september 30 , 2015 . at september 30 , 2016 , cash equivalents totaled $ 0.5 million of this amount . 17 significant sources of cash for the year ended september 30 , 2016 included net income of approximately $ 2.6 million , an increase in deferred revenues of approximately $ 1.8 million , an increase in pension and retirement plans liabilities of $ 0.6 million , depreciation of approximately $ 0.6 million , and an increase in other assets of approximately 0.6 million . partially offsetting these sources of cash were a decrease in accounts payable and accrued expenses of approximately $ 1.6 million , payment of dividends of approximately $ 1.7 million , purchases of property and equipment of approximately $ 0.7 million and unfavorable currency exchange fluctuation of approximately $ 0.8 million . cash held by our foreign subsidiaries located in germany and the u.k. totaled approximately $ 6.4 million as of september 30 , 2016 and $ 3.3 million as of september 30 , 2015 . this cash is included in our total cash and cash equivalents reported above . we consider this cash to be permanently reinvested into these foreign locations because repatriating it would result in unfavorable tax consequences .
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in certain instances , our clients request enhancements to the underlying features and functionality of our enterprise and mid-market solution , and in these instances , revenue from subscriptions is recognized over the remaining term of the agreement once the additional features are delivered to the client . we generally invoice our clients a portion of the annual subscription fees upfront for multi-year subscriptions and upfront for consulting services . for amounts not invoiced in advance for multi-year subscriptions or consulting services , we invoice under various terms over the subscription and service periods . we record amounts invoiced for annual subscription periods that have not occurred or services that have not been performed as deferred revenue on our balance sheet . with the growth in the number of clients , our revenue has grown to $ 339.7 million for the year ended december 31 , 2015 from $ 263.6 million for the same period in 2014 . we have historically experienced seasonality in terms of when we enter into client agreements . we usually sign a significantly higher percentage of agreements with new clients , as well as renewal agreements with existing clients , in the fourth quarter of each year . in addition , within a given quarter , we typically sign a large portion of these agreements during the last month , and often the last two weeks , of that quarter . we believe this seasonality is driven by several factors , most notably the tendency of procurement departments at our enterprise clients to purchase technology at the end of a quarter or calendar year , possibly in order to use up their available quarterly or annual funding allocations , or to be able to deploy new talent management capabilities prior to the beginning of a new financial or performance period . as the terms of most of our client agreements are measured in full year increments , agreements initially entered into the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years . this seasonality is reflected to a much lesser extent , and sometimes is not immediately apparent , in our revenue , due to the fact that we recognize subscription revenue over the term of the client agreement , which is generally three years . in addition , this seasonality is reflected in changes in our deferred revenue balance , which generally is impacted by the timing of when we enter into agreements with new clients , the timing of when we invoice new clients , the timing of when we invoice existing clients for annual subscription periods , and the timing of when we recognize revenue . we expect this seasonality to continue in the future , which may cause fluctuations in certain of our operating results and financial metrics , and thus limit our ability to predict future results . we believe the market for talent management remains large and underpenetrated , providing us with significant growth opportunities . we expect businesses and other organizations to continue to increase their spending on talent management solutions in order to maximize the productivity of their employees , manage changing workforce demographics and ensure compliance with global regulatory requirements . historically , many of these software solutions have been human resource applications running on hardware located on organizations ' premises . we have seen many of these organizations increasingly choose saas for their talent management solutions and we anticipate that trend will continue . we have focused on growing our business to pursue what we believe is a significant market opportunity , and we plan to continue to invest in building for growth . as a result , we expect our cost of revenue and operating expenses to increase in future periods . sales and marketing expenses are expected to increase , as we continue to expand our direct sales teams , increase our marketing activities , and grow our international operations . research and development expenses are expected to increase as we continue to improve the existing functionality for our solutions . we also believe that we must invest in maintaining a high degree of client service and support that is critical for our continued success . we plan to continue our policy of implementing best practices across our organization , expanding our technical operations and investing in our network infrastructure and services capabilities in order to support continued future growth . we also expect to incur additional general and administrative expenses as a result of our growth . 42 our operating results have fluctuated in the past and may continue to fluctuate in the future based on a number of factors , many of which are beyond our control . in addition to those described in the “ risk factors ” section of this annual report on form 10-k , such factors include : our ability to attract new clients ; the timing and rate at which we enter into agreements for our solutions with new clients ; the timing and duration of our client implementations , which is often outside of our direct control , and our ability to provide resources for client implementations and consulting projects ; the extent to which our existing clients renew their subscriptions for our solutions and the timing of those renewals ; the extent to which our existing clients purchase additional products or add incremental users ; the extent to which our clients request enhancements to underlying features and functionality of our solutions and the timing for us to deliver the enhancements to our clients ; changes in the mix of our sales between new and existing clients ; changes to the proportion of our client base that is comprised of enterprise or mid-sized organizations ; seasonal factors affecting the demand for our solutions ; our ability to manage growth , including in terms of new clients , additional users , additional headcount and story_separator_special_tag for consulting services , we analyze both bundled arrangements that include subscriptions to our solutions and consulting services , as well as standalone purchases 46 of different types of consulting services made subsequent to the original subscription . for these consulting services arrangements , we then examine the actual rate per hour we charge or , for fixed fee arrangements , the implied average rate per hour based on the fixed fee divided by the estimated hours to complete the service . the besp is then the product of this average rate per hour and our estimate of the hours needed to complete the services . for e-learning content , we estimate besp by reviewing fees for content in order to establish an average annual fee per user that reflects the cost we incur to acquire the related content from third-party providers . additionally , we estimate besp by reviewing fees for content-hosting by reviewing the selling price of gigabytes sold in order to establish a fee on a per user or bandwidth basis . the determination of besp for our deliverables as described above requires us to make significant estimates and judgments , including the comparability of different subscription arrangements and consulting services and estimates of the hours required to complete various types of services . in addition , we consider other factors including : nature of the deliverables . for example , in categorizing our subscriptions into meaningful groupings for determining besp , we consider the number and type of products the client purchased . for consulting services , we consider the type of consulting service and the estimated hours required to complete the service or average selling price for fixed fee services based on our historical experience . location of our clients . our pricing is different for domestic and international clients , and therefore in determining besp of subscriptions to our solutions , we evaluate domestic arrangements separately from international arrangements . market conditions and competitive landscape for the sale . our pricing and discounting varies based on the economic environment and competition . we consider these factors in determining the grouping of comparable services and the periods over which we compare arrangements to compute the besp . internal costs . our pricing for consulting services and e-learning content considers our internal costs to provide the consulting services and the third-party purchase costs of e-learning content . size of the arrangement . discounting generally increases as the relative size of an arrangement increases , and we take this into consideration in the grouping of our clients to determine besp . our discounting for multiple-deliverable arrangements varies based on the extent and type of the consulting services and content included with the subscriptions in the arrangement . the determination of besp is made through consultation with our senior management . we update our estimates of besp on an ongoing basis as events and circumstances require , and we update our determination to use besp on a periodic basis , including assessing whether we can determine vsoe or tpe . after we determine the fair value of revenue allocable to each deliverable based on the relative selling price method , we recognize the revenue for each based on the type of deliverable . for subscriptions to our solutions , we recognize the revenue on a straight-line basis over the term of the client agreement , which is typically three years . for consulting services , we generally recognize revenue using the proportional performance method over the period the services are performed . in a limited number of cases , the client 's intended use of a solution requires enhancements to its underlying features and functionality . in some of these cases , revenue is recognized as one unit of accounting on a straight-line basis from the point at which the enhancements have been made to the solution through the remaining term of the agreement . in other cases where the enhancement is not required for the client 's intended use , revenue is recognized separately for the enhancement and the solution . the enhancement revenue is recognized based on the allocated value on a straight-line basis once the enhancement has been made to the solution . for arrangements in which we resell third-party e-learning content to our clients or host client or third-party e-learning content provided by the client , we recognize revenue in accordance with accounting guidance as to when to report gross revenue as a principal and when to report net revenue as an agent . we recognize e-learning content revenue in the gross amount that we invoice our client when : ( i ) we are the primary obligor , ( ii ) we have latitude to establish the price charged and ( iii ) we bear the credit risk in the transaction . for arrangements involving our sale of e-learning content , we charge our clients for the content based on pay-per-use or a fixed rate for a specified number of users and recognize the gross amount invoiced as revenue as the content is delivered . for arrangements where clients purchase e-learning content directly from a third-party , or provide it themselves , and we integrate the content into our solutions , we charge a hosting fee . in such cases , we recognize the amount invoiced for hosting as the content is delivered , excluding any portion we invoice that is attributable to fees the third-party charges for the content . 47 commission expense we defer commissions paid to our sales force because these amounts are recoverable from future revenue from the non-cancelable client agreements that give rise to the commissions . we defer expense recognition upon payment and amortize expense to sales and marketing expenses over the term of the client agreement in proportion to the revenue that is recognized . commissions are direct and incremental costs of our client agreements and we generally commence payment of commissions within 45 to 75
| cash provided by operating activities during 2014 of $ 33.0 million was a result of the continued growth of our business and our continued investments for further growth . in the year ended december 31 , 2014 , $ 59.5 million , or 92 % , of our net loss of $ 64.9 million consisted of non-cash items , including $ 33.7 million of stock-based compensation , $ 15.1 million of depreciation and amortization , $ 8.3 million of accretion of debt discount and amortization of debt issuance costs , $ 1.7 million of unrealized foreign exchange losses , and amortization of a purchased premium of $ 0.8 million related to investment securities . cash provided by operating activities includes a $ 55.2 million increase in deferred revenue due to increased billings during the year ended december 31 , 2014 , a $ 6.4 million increase in accrued liabilities primarily due to the timing of payments , an increase in accounts payable of $ 4.6 million attributable to increased expenses associated with our growth , and $ 1.2 million decrease in prepaid and other assets primarily due to the timing of payments to vendors . cash provided by operating activities is partially offset by a $ 18.7 million increase in accounts receivable attributable to higher billings in the fiscal year 2014 due to an increased number of clients , a $ 10.1 million increase in deferred commissions due to increased sales , and decrease in other liabilities of $ 0.3 million . cash provided by operating activities during 2013 of $ 17.4 million was a result of the continued growth of our business and our continued investments for further growth . in the year ended december 31 , 2013 , $ 32.2 million , or 80 % , of our net loss of $ 40.4 million consisted of non-cash items , including $ 20.8 million of stock-based compensation , $ 9.7 million of depreciation and amortization , and $ 4.3 million of accretion of debt discount and amortization of debt issuance costs .
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since our beginning in 1986 , we have compiled an extensive device control knowledge library that includes nearly 9,000 brands comprising over 800,000 device models across av and smart home platforms , supported by many common smart home protocols , including ir , hdmi-cec , zigbee , and home network or cloud control . this device knowledge graph is backed by our unique device fingerprinting technology which includes over 700,000 unique device fingerprints across both av and smart home devices . our technology also includes other remote controlled home entertainment devices and home automation control modules , as well as wired consumer electronics control ( `` cec `` ) and wireless internet protocol ( `` ip `` ) control protocols commonly found on many of the latest hdmi and internet connected devices . our proprietary software automatically detects , identifies and enables the appropriate control commands for any given home entertainment , automation and air conditioning device in the home . our libraries are continuously updated with device control codes used in newly introduced av and internet of things ( `` iot `` ) devices . these control codes are captured directly from original remote control devices or from the manufacturer 's written specifications to ensure the accuracy and integrity of the library . our proprietary software and know-how permit us to offer a device control code database that is more robust and efficient than similarly priced products of our competitors . we operate as one business segment . we have 2 domestic subsidiaries and 24 international subsidiaries located in argentina , brazil , british virgin islands , cayman islands , france , germany , hong kong ( 3 ) , india , italy , japan , korea , mexico , the netherlands , people 's republic of china ( the `` prc `` ) ( 6 ) , singapore , spain and the united kingdom . to recap our results for 2019 : net sales increased 10.8 % to $ 753.5 million in 2019 from $ 680.2 million in 2018 . our gross profit percentage increased to 22.6 % in 2019 from 20.8 % in 2018 . operating expenses , as a percent of sales , decreased to 20.6 % in 2019 from 21.1 % in 2018 . operating income increased to $ 15.3 million in 2019 from an operating loss of $ 1.7 million in 2018 , and our operating margin percentage increased to 2.0 % in 2019 , compared to an operating deficit of 0.2 % in 2018 . 29 our effective tax rate increased to 65.1 % in 2019 from 54.4 % in 2018 . our strategic business objectives for 2020 include the following : continue to develop and market the advanced remote control products and technologies our customer base is adopting ; continue to broaden our home control and home automation product offerings ; further penetrate international subscription broadcasting markets ; acquire new customers in historically strong regions ; increase our share with existing customers ; and continue to seek acquisitions or strategic partners that complement and strengthen our existing business . we intend for the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements , the changes in certain key items in those financial statements from period to period , and the primary factors that accounted for those changes , as well as how certain accounting principles , policies and estimates affect our consolidated financial statements . critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states ( `` u.s. gaap `` ) requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , 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 . on an ongoing basis , we evaluate our estimates and judgments , including those related to revenue recognition , allowances for doubtful accounts , inventory valuation , impairment of long-lived assets , intangible assets and goodwill , business combinations , income taxes , stock-based compensation expense and performance-based common stock warrants . actual results may differ from these judgments and estimates , and they may be adjusted as more information becomes available . any adjustment may be significant and may have a material impact on our consolidated financial position or results of operations . an accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made , if different estimates reasonably may have been used , or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements . management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . in addition to the accounting policies mentioned below , see `` item 8. financial statements and supplementary data — notes to consolidated financial statements — note 2 `` for other significant accounting policies . revenue recognition revenue is recognized when control of a good or service is transferred to a customer . control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good or service . revenues are generated from manufacturing and delivering universal control , sensing and automation products and av accessories , which are sold through multiple channels , and licensing intellectual property that is embedded in these products or licensed to others for use in their products . story_separator_special_tag we recognize the fair value of performance-based common stock warrants as a reduction to net sales ratably as the warrants vest based on the projected number of warrants that will vest , the proportion of the performance criteria achieved by the customer within the period relative to the total performance required ( aggregate purchase levels ) for the warrants to vest and the then-current fair value of the related unvested warrants . if we do not have a reliable forecast of future purchases to be made by the customer by which to estimate the number of warrants that will vest , then the maximum number of potential warrants is assumed until such time that a reliable forecast of future purchases is available . to the extent that our projections change in the future as to the number of warrants that will vest , a cumulative catch-up adjustment will be recorded in the period in which our estimates change . the fair value of performance-based common stock warrants is determined utilizing the black-scholes option pricing model . the assumptions utilized in the black-scholes model include the price of our common stock , the risk-free interest rate , expected volatility , expected life in years and dividend yield . the price of our common stock is equal to the average of the high and low trade prices of our common stock on the measurement date . the risk-free interest rate over the expected life is equal to the prevailing u.s. treasury note rate over the same period . expected volatility is determined utilizing historical volatility over a period of time equal to the expected life of the warrant . expected life is equal to the remaining contractual term of the warrant . the dividend yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future . results of operations the following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated . replace_table_token_4_th year ended december 31 , 2019 ( `` 2019 `` ) compared to year ended december 31 , 2018 ( `` 2018 `` ) net sales . net sales for 2019 were $ 753.5 million , an increase of 10.8 % compared to $ 680.2 million in 2018 . the increase in net sales was primarily due to the recent launches of higher end platforms by existing customers in the subscription broadcasting channel , a newly acquired customer and continued strength in home automation . gross profit . gross profit in 2019 was $ 170.2 million compared to $ 141.8 million in 2018 . gross profit as a percent of sales increased to 22.6 % in 2019 from 20.8 % in 2018 . the gross profit percentage was favorably impacted by product mix as small- to medium-sized subscription broadcasters launched advanced platforms ; an increase in royalty revenue as certain consumer electronic companies are embedding our technology in their devices ; lower raw material costs during 2019 ; and foreign currency as the u.s. dollar strengthened by approximately 400 basis points versus the chinese yuan renminbi . the gross profit percentage was unfavorably impacted by higher u.s. tariffs on many of our products that are manufactured in the prc and imported into the u.s. in an effort to mitigate the effect of the increased tariffs , we transitioned the production of many of our goods destined for the u.s. market from our prc factories to our factory in mexico . in connection with this transition , which began in the fourth quarter of 2018 , we incurred costs related to the movement of materials , duplicative labor efforts and indirect costs including unabsorbed duplicative overhead . 34 research and development ( `` r & d `` ) expenses . r & d expenses increased 23.5 % to $ 29.4 million in 2019 from $ 23.8 million in 2018 primarily due to our continued investment in the development of new products that enhance the user experience in home entertainment and home automation . selling , general and administrative ( `` sg & a `` ) expenses . sg & a expenses increased 4.9 % to $ 125.5 million in 2019 from $ 119.7 million in 2018 , primarily due to increases in incentive compensation expense and an increase in contingent consideration recorded in connection with our acquisition of the net assets of ecolink intelligent technology , inc. ( `` ecolink `` ) . partially offsetting these increases was payroll expense , which decreased as a result of our ongoing corporate restructuring initiatives . interest income ( expense ) , net . net interest expense was $ 3.9 million in 2019 compared to $ 4.7 million in 2018 . this decrease was a result of a lower average quarterly loan balance . gain on sale of guangzhou factory . in june 2018 , we completed the sale of our guangzhou manufacturing facility in exchange for cash proceeds of $ 51.3 million , resulting in a pre-tax gain of $ 37.0 million . other income ( expense ) , net . net other expense was $ 1.0 million in 2019 compared to $ 4.5 million in 2018 . this change was driven primarily by both a decline in foreign currency losses associated with fluctuations in the chinese yuan renminbi versus the u.s. dollar and foreign currency gains associated with fluctuations in the brazilian real versus the u.s. dollar in 2019. income tax expense . income tax expense was $ 6.8 million in 2019 compared to $ 14.2 million in 2018 . our effective tax rate was 65.1 % in 2019 compared to 54.4 % in 2018 . our effective tax rate was higher than normal in 2018 as a result of the recording of an $ 8.1 million valuation allowance against u.s. federal and state deferred tax assets . in 2019 , the u.s. incurred a loss and , because
| cash provided by operating activities during 2014 of $ 33.0 million was a result of the continued growth of our business and our continued investments for further growth . in the year ended december 31 , 2014 , $ 59.5 million , or 92 % , of our net loss of $ 64.9 million consisted of non-cash items , including $ 33.7 million of stock-based compensation , $ 15.1 million of depreciation and amortization , $ 8.3 million of accretion of debt discount and amortization of debt issuance costs , $ 1.7 million of unrealized foreign exchange losses , and amortization of a purchased premium of $ 0.8 million related to investment securities . cash provided by operating activities includes a $ 55.2 million increase in deferred revenue due to increased billings during the year ended december 31 , 2014 , a $ 6.4 million increase in accrued liabilities primarily due to the timing of payments , an increase in accounts payable of $ 4.6 million attributable to increased expenses associated with our growth , and $ 1.2 million decrease in prepaid and other assets primarily due to the timing of payments to vendors . cash provided by operating activities is partially offset by a $ 18.7 million increase in accounts receivable attributable to higher billings in the fiscal year 2014 due to an increased number of clients , a $ 10.1 million increase in deferred commissions due to increased sales , and decrease in other liabilities of $ 0.3 million . cash provided by operating activities during 2013 of $ 17.4 million was a result of the continued growth of our business and our continued investments for further growth . in the year ended december 31 , 2013 , $ 32.2 million , or 80 % , of our net loss of $ 40.4 million consisted of non-cash items , including $ 20.8 million of stock-based compensation , $ 9.7 million of depreciation and amortization , and $ 4.3 million of accretion of debt discount and amortization of debt issuance costs .
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since our beginning in 1986 , we have compiled an extensive device control knowledge library that includes nearly 9,000 brands comprising over 800,000 device models across av and smart home platforms , supported by many common smart home protocols , including ir , hdmi-cec , zigbee , and home network or cloud control . this device knowledge graph is backed by our unique device fingerprinting technology which includes over 700,000 unique device fingerprints across both av and smart home devices . our technology also includes other remote controlled home entertainment devices and home automation control modules , as well as wired consumer electronics control ( `` cec `` ) and wireless internet protocol ( `` ip `` ) control protocols commonly found on many of the latest hdmi and internet connected devices . our proprietary software automatically detects , identifies and enables the appropriate control commands for any given home entertainment , automation and air conditioning device in the home . our libraries are continuously updated with device control codes used in newly introduced av and internet of things ( `` iot `` ) devices . these control codes are captured directly from original remote control devices or from the manufacturer 's written specifications to ensure the accuracy and integrity of the library . our proprietary software and know-how permit us to offer a device control code database that is more robust and efficient than similarly priced products of our competitors . we operate as one business segment . we have 2 domestic subsidiaries and 24 international subsidiaries located in argentina , brazil , british virgin islands , cayman islands , france , germany , hong kong ( 3 ) , india , italy , japan , korea , mexico , the netherlands , people 's republic of china ( the `` prc `` ) ( 6 ) , singapore , spain and the united kingdom . to recap our results for 2019 : net sales increased 10.8 % to $ 753.5 million in 2019 from $ 680.2 million in 2018 . our gross profit percentage increased to 22.6 % in 2019 from 20.8 % in 2018 . operating expenses , as a percent of sales , decreased to 20.6 % in 2019 from 21.1 % in 2018 . operating income increased to $ 15.3 million in 2019 from an operating loss of $ 1.7 million in 2018 , and our operating margin percentage increased to 2.0 % in 2019 , compared to an operating deficit of 0.2 % in 2018 . 29 our effective tax rate increased to 65.1 % in 2019 from 54.4 % in 2018 . our strategic business objectives for 2020 include the following : continue to develop and market the advanced remote control products and technologies our customer base is adopting ; continue to broaden our home control and home automation product offerings ; further penetrate international subscription broadcasting markets ; acquire new customers in historically strong regions ; increase our share with existing customers ; and continue to seek acquisitions or strategic partners that complement and strengthen our existing business . we intend for the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements , the changes in certain key items in those financial statements from period to period , and the primary factors that accounted for those changes , as well as how certain accounting principles , policies and estimates affect our consolidated financial statements . critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states ( `` u.s. gaap `` ) requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , 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 . on an ongoing basis , we evaluate our estimates and judgments , including those related to revenue recognition , allowances for doubtful accounts , inventory valuation , impairment of long-lived assets , intangible assets and goodwill , business combinations , income taxes , stock-based compensation expense and performance-based common stock warrants . actual results may differ from these judgments and estimates , and they may be adjusted as more information becomes available . any adjustment may be significant and may have a material impact on our consolidated financial position or results of operations . an accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made , if different estimates reasonably may have been used , or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements . management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . in addition to the accounting policies mentioned below , see `` item 8. financial statements and supplementary data — notes to consolidated financial statements — note 2 `` for other significant accounting policies . revenue recognition revenue is recognized when control of a good or service is transferred to a customer . control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good or service . revenues are generated from manufacturing and delivering universal control , sensing and automation products and av accessories , which are sold through multiple channels , and licensing intellectual property that is embedded in these products or licensed to others for use in their products . story_separator_special_tag we recognize the fair value of performance-based common stock warrants as a reduction to net sales ratably as the warrants vest based on the projected number of warrants that will vest , the proportion of the performance criteria achieved by the customer within the period relative to the total performance required ( aggregate purchase levels ) for the warrants to vest and the then-current fair value of the related unvested warrants . if we do not have a reliable forecast of future purchases to be made by the customer by which to estimate the number of warrants that will vest , then the maximum number of potential warrants is assumed until such time that a reliable forecast of future purchases is available . to the extent that our projections change in the future as to the number of warrants that will vest , a cumulative catch-up adjustment will be recorded in the period in which our estimates change . the fair value of performance-based common stock warrants is determined utilizing the black-scholes option pricing model . the assumptions utilized in the black-scholes model include the price of our common stock , the risk-free interest rate , expected volatility , expected life in years and dividend yield . the price of our common stock is equal to the average of the high and low trade prices of our common stock on the measurement date . the risk-free interest rate over the expected life is equal to the prevailing u.s. treasury note rate over the same period . expected volatility is determined utilizing historical volatility over a period of time equal to the expected life of the warrant . expected life is equal to the remaining contractual term of the warrant . the dividend yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future . results of operations the following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated . replace_table_token_4_th year ended december 31 , 2019 ( `` 2019 `` ) compared to year ended december 31 , 2018 ( `` 2018 `` ) net sales . net sales for 2019 were $ 753.5 million , an increase of 10.8 % compared to $ 680.2 million in 2018 . the increase in net sales was primarily due to the recent launches of higher end platforms by existing customers in the subscription broadcasting channel , a newly acquired customer and continued strength in home automation . gross profit . gross profit in 2019 was $ 170.2 million compared to $ 141.8 million in 2018 . gross profit as a percent of sales increased to 22.6 % in 2019 from 20.8 % in 2018 . the gross profit percentage was favorably impacted by product mix as small- to medium-sized subscription broadcasters launched advanced platforms ; an increase in royalty revenue as certain consumer electronic companies are embedding our technology in their devices ; lower raw material costs during 2019 ; and foreign currency as the u.s. dollar strengthened by approximately 400 basis points versus the chinese yuan renminbi . the gross profit percentage was unfavorably impacted by higher u.s. tariffs on many of our products that are manufactured in the prc and imported into the u.s. in an effort to mitigate the effect of the increased tariffs , we transitioned the production of many of our goods destined for the u.s. market from our prc factories to our factory in mexico . in connection with this transition , which began in the fourth quarter of 2018 , we incurred costs related to the movement of materials , duplicative labor efforts and indirect costs including unabsorbed duplicative overhead . 34 research and development ( `` r & d `` ) expenses . r & d expenses increased 23.5 % to $ 29.4 million in 2019 from $ 23.8 million in 2018 primarily due to our continued investment in the development of new products that enhance the user experience in home entertainment and home automation . selling , general and administrative ( `` sg & a `` ) expenses . sg & a expenses increased 4.9 % to $ 125.5 million in 2019 from $ 119.7 million in 2018 , primarily due to increases in incentive compensation expense and an increase in contingent consideration recorded in connection with our acquisition of the net assets of ecolink intelligent technology , inc. ( `` ecolink `` ) . partially offsetting these increases was payroll expense , which decreased as a result of our ongoing corporate restructuring initiatives . interest income ( expense ) , net . net interest expense was $ 3.9 million in 2019 compared to $ 4.7 million in 2018 . this decrease was a result of a lower average quarterly loan balance . gain on sale of guangzhou factory . in june 2018 , we completed the sale of our guangzhou manufacturing facility in exchange for cash proceeds of $ 51.3 million , resulting in a pre-tax gain of $ 37.0 million . other income ( expense ) , net . net other expense was $ 1.0 million in 2019 compared to $ 4.5 million in 2018 . this change was driven primarily by both a decline in foreign currency losses associated with fluctuations in the chinese yuan renminbi versus the u.s. dollar and foreign currency gains associated with fluctuations in the brazilian real versus the u.s. dollar in 2019. income tax expense . income tax expense was $ 6.8 million in 2019 compared to $ 14.2 million in 2018 . our effective tax rate was 65.1 % in 2019 compared to 54.4 % in 2018 . our effective tax rate was higher than normal in 2018 as a result of the recording of an $ 8.1 million valuation allowance against u.s. federal and state deferred tax assets . in 2019 , the u.s. incurred a loss and , because
| liquidity and capital resources sources and uses of cash replace_table_token_5_th replace_table_token_6_th net cash provided by operating activities increased $ 72.4 million in 2019 compared to 2018 , primarily due to the net impact of the gain on sale of the guangzhou factory and changes in working capital associated with accounts receivable and accounts payable . accounts receivable and contract assets produced cash inflows of $ 17.2 million in 2019 compared to $ 5.5 million in 2018 largely due to a decrease in days sales outstanding from 71 days at december 31 , 2018 to 64 days at december 31 , 2019. accounts payable and accrued liabilities produced net cash inflows of $ 14.2 million during 2019 compared to cash outflows of $ 7.4 million in 2018 , largely as a result of timing of payments . our inventory turns remained relatively consistent with 3.3 turns at december 31 , 2018 compared to 3.2 turns at december 31 , 2019. net cash used for investing activities during 2019 was $ 24.0 million compared to net cash provided by investing activities of $ 23.6 million during 2018 . in 2019 , acquisitions of property , plant and equipment were $ 21.3 million which reflects a normalized level of spending . in 2018 , we received net cash proceeds of $ 46.2 million for the sale of our guangzhou factory , which was completed in june 2018 , which was partially offset by acquisitions of property , plant and equipment of $ 20.1 million . net cash used for financing activities was $ 39.2 million during 2019 compared to net cash used for financing activities of $ 53.3 million during 2018 . the primary drivers of our cash flows from financing activities in 2019 and 2018 were borrowings and 35 repayments on our line of credit and repurchases of shares of our common stock on the open market . net payments on our line of credit were $ 33.5 million and $ 36.5 million in 2019 and 2018 , respectively .
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the company provides these services to its clients under annual client service contracts , although such contracts are generally cancelable on short or no notice without penalty . the company also derives some revenue from its custom and other research projects . services are provided under subscription-based service agreements . the company recognizes subscription-based service revenue over the period of time the service is provided . generally , the subscription periods are for twelve months and revenue is recognized equally over the subscription period . certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project . revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method . under the proportional performance method , the company recognizes revenue based on output measures or key milestones such as survey set-up , survey mailings , survey returns and reporting . the company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly . management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method . if management made different judgments and estimates , then the amount and timing of revenue for any period could differ materially from the reported revenue . the company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities . the company 's revenue also includes software-related revenue for software license revenue , installation services , post-contract support ( maintenance ) and training . software-related revenue is recognized in accordance with the provisions of accounting standards codification ( “ asc ” ) 985-605 , software-revenue recognition . hosting arrangements to provide customers with access to the company 's propriety software are marketed under long-term arrangements , generally over periods of one to three years . under these arrangements , the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty , and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software . upfront fees for set-up services are typically billed for our hosting arrangements . however , these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services . therefore , we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met . other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement , determining that the collection of the revenue is probable , and determining that fees are fixed and determinable . the company 's software arrangements typically involve the sale of a time-based license bundled with installation services , post-contract support ( “ pcs ” ) and training . license terms range from one year to three years and require an annual fee for bundled elements of the arrangement . pcs is also contractually provided for a period that is co-terminus with the term of the time-based license . the company 's installation services are not considered to be essential to the functionality of the software license . the company does not achieve vendor-specific objective evidence ( “ vsoe ” ) of the fair value of the undelivered elements of its software arrangements ( primarily pcs ) and , therefore , these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled pcs period . 18 the company 's revenue arrangements ( not involving software elements ) may include multiple elements . in assessing the separation of revenue for elements of such arrangements , we first determine whether each delivered element has standalone value based on whether we or other vendors sell the services separately . we also consider whether there is sufficient evidence of the fair value of the elements in allocating the fees in the arrangement to each element . revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue . on january 1 , 2011 , the company prospectively adopted accounting standard update ( “ asu ” ) 2009-13 , revenue recognition ( topic 605 ) : multiple-deliverable revenue arrangements ( asu 2009-13 ) . for arrangements entered into or materially modified beginning january 1 , 2011 , we allocated revenue to arrangements with multiple elements based on relative selling price using a selling price hierarchy . the selling price for a deliverable is based on its vsoe if it exists , otherwise third-party evidence of selling price . if neither exists for a deliverable , the best estimate of the selling price is used for that deliverable based on list price , representing a component of management 's market strategy , and an analysis of historical prices for bundled and standalone arrangements . valuation of goodwill and identifiable intangible assets intangible assets include customer relationships , trade names , non-compete agreements and goodwill . intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable . the company reviews intangible assets with indefinite lives for impairment annually as of october 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable . story_separator_special_tag 23 net cash provided by operating activities was $ 18.5 million for the year ended december 31 , 2011 , which included net income of $ 11.6 million , plus non-cash charges ( benefits ) for deferred tax expense , depreciation and amortization , tax benefit from exercise of stock options and non-cash stock compensation totaling $ 7.2 million . changes in working capital decreased 2011 cash flows from operating activities by $ 273,000 , primarily due to timing of initial billings on new or renewal contracts decreasing cash flows provided from trade accounts receivable and deferred revenue , partially offset by timing of payments on accrued expenses and income taxes . net cash provided by operating activities was $ 14.6 million for the year ended december 31 , 2010 , which included net income of $ 8.5 million , plus non cash charges ( benefits ) for deferred tax expense , depreciation and amortization and non-cash stock compensation totaling $ 6.1 million . story_separator_special_tag the company believes it has adequate cash flows from operations to meet its debt and capital needs . the company entered into a revolving credit note in 2006. the maximum aggregate amount available under the revolving credit note following an addendum to the note in march 2008 , is $ 6.5 million . the revolving credit note was renewed in june 2012 to extend the term to june 30 , 2013. the company may borrow , repay and re-borrow amounts under the revolving credit note from time to time until its maturity on june 30 , 2013. the company expects to extend the term of the revolving credit note for at least one year beyond the maturity date . if , however , the note can not be extended , the company believes it has adequate cash flows from operations to meet its debt and capital needs . the term notes and revolving line of credit are secured by certain of the company 's assets , including the company 's land , building , accounts receivable and intangible assets . the term notes and the revolving credit note contain various restrictions and covenants applicable to the company , including requirements that the company maintain certain financial ratios at prescribed levels and restrictions on the ability of the company to consolidate or merge , create liens , incur additional indebtedness or dispose of assets . as of december 31 , 2012 , the company was in compliance with these restrictions and covenants . the maximum aggregate amount available under the revolving credit note of $ 6.5 million is subject to a borrowing base equal to 75.0 % of the company 's eligible accounts receivable . borrowings under the renewed revolving credit note bear interest at a variable annual rate , with three rate options at the discretion of management as follows : ( 1 ) 2.5 % plus the daily reset one-month london interbank offered rate ( “ libor ” ) rate , or ( 2 ) 2.2 % plus the one- , two- , three- , six- or twelve-month libor rate , or ( 3 ) the bank 's money market loan rate . the rate at december 31 , 2012 , was 2.71 % . as of december 31 , 2012 , the revolving credit note did not have a balance . according to borrowing base requirements , the company had the capacity to borrow $ 6.5 million as of december 31 , 2012 . 25 contractual obligations the company had contractual obligations to make payments in the following amounts in the future as of december 31 , 2012 : replace_table_token_8_th ( 1 ) amounts are inclusive of interest payments , where applicable ( 2 ) we have $ 224,000 in liabilities associated with uncertain tax positions . we are unable to reasonably estimate the expected cash settlement dates of these uncertain tax positions with the taxing authorities . the company generally does not make unconditional , non-cancelable purchase commitments . the company enters into purchase orders in the normal course of business , but these purchase obligations do not exceed one year . shareholders ' equity increased $ 1.2 million to $ 56.7 million in 2012 , from $ 55.6 million in 2011. the increase was primarily due to net income of $ 15.1 million and $ 8.2 million of related share-based compensation , partially offset by dividends paid of $ 17.4 million and stock re-purchases of $ 5.2 million . dividends paid in 2012 include $ 10.3 million for a special dividend paid in the fourth quarter of 2012. stock repurchase program in february 2006 , the board of directors of the company authorized the repurchase of 750,000 shares of common stock in the open market or in privately negotiated transactions . as of december 31 , 2012 , the remaining number of shares that could be purchased under this authorization was 143,398. off-balance sheet obligations the company has no significant off-balance sheet obligations other than the operating lease commitments disclosed in “ liquidity and capital resources . ” adoption of new accounting pronouncements in june 2011 , the fasb issued asu no . 2011-05 , presentation of comprehensive income , which amends asc 220 , comprehensive income , by requiring all non-owner changes in shareholders ' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements . the guidance was effective retrospectively for fiscal years and interim periods within those years beginning after december 15 , 2011. in december 2011 , the fasb issued asu no . 2011-12 , deferral of the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in accounting standards update no . 2011-05 , which defers certain portions of asu no . 2011-05 indefinitely and will be further deliberated by the fasb at a future date . the company adopted the requirements of asu 2011-05 and asu 2011-12 by
| liquidity and capital resources sources and uses of cash replace_table_token_5_th replace_table_token_6_th net cash provided by operating activities increased $ 72.4 million in 2019 compared to 2018 , primarily due to the net impact of the gain on sale of the guangzhou factory and changes in working capital associated with accounts receivable and accounts payable . accounts receivable and contract assets produced cash inflows of $ 17.2 million in 2019 compared to $ 5.5 million in 2018 largely due to a decrease in days sales outstanding from 71 days at december 31 , 2018 to 64 days at december 31 , 2019. accounts payable and accrued liabilities produced net cash inflows of $ 14.2 million during 2019 compared to cash outflows of $ 7.4 million in 2018 , largely as a result of timing of payments . our inventory turns remained relatively consistent with 3.3 turns at december 31 , 2018 compared to 3.2 turns at december 31 , 2019. net cash used for investing activities during 2019 was $ 24.0 million compared to net cash provided by investing activities of $ 23.6 million during 2018 . in 2019 , acquisitions of property , plant and equipment were $ 21.3 million which reflects a normalized level of spending . in 2018 , we received net cash proceeds of $ 46.2 million for the sale of our guangzhou factory , which was completed in june 2018 , which was partially offset by acquisitions of property , plant and equipment of $ 20.1 million . net cash used for financing activities was $ 39.2 million during 2019 compared to net cash used for financing activities of $ 53.3 million during 2018 . the primary drivers of our cash flows from financing activities in 2019 and 2018 were borrowings and 35 repayments on our line of credit and repurchases of shares of our common stock on the open market . net payments on our line of credit were $ 33.5 million and $ 36.5 million in 2019 and 2018 , respectively .
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the company provides these services to its clients under annual client service contracts , although such contracts are generally cancelable on short or no notice without penalty . the company also derives some revenue from its custom and other research projects . services are provided under subscription-based service agreements . the company recognizes subscription-based service revenue over the period of time the service is provided . generally , the subscription periods are for twelve months and revenue is recognized equally over the subscription period . certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project . revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method . under the proportional performance method , the company recognizes revenue based on output measures or key milestones such as survey set-up , survey mailings , survey returns and reporting . the company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly . management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method . if management made different judgments and estimates , then the amount and timing of revenue for any period could differ materially from the reported revenue . the company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities . the company 's revenue also includes software-related revenue for software license revenue , installation services , post-contract support ( maintenance ) and training . software-related revenue is recognized in accordance with the provisions of accounting standards codification ( “ asc ” ) 985-605 , software-revenue recognition . hosting arrangements to provide customers with access to the company 's propriety software are marketed under long-term arrangements , generally over periods of one to three years . under these arrangements , the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty , and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software . upfront fees for set-up services are typically billed for our hosting arrangements . however , these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services . therefore , we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met . other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement , determining that the collection of the revenue is probable , and determining that fees are fixed and determinable . the company 's software arrangements typically involve the sale of a time-based license bundled with installation services , post-contract support ( “ pcs ” ) and training . license terms range from one year to three years and require an annual fee for bundled elements of the arrangement . pcs is also contractually provided for a period that is co-terminus with the term of the time-based license . the company 's installation services are not considered to be essential to the functionality of the software license . the company does not achieve vendor-specific objective evidence ( “ vsoe ” ) of the fair value of the undelivered elements of its software arrangements ( primarily pcs ) and , therefore , these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled pcs period . 18 the company 's revenue arrangements ( not involving software elements ) may include multiple elements . in assessing the separation of revenue for elements of such arrangements , we first determine whether each delivered element has standalone value based on whether we or other vendors sell the services separately . we also consider whether there is sufficient evidence of the fair value of the elements in allocating the fees in the arrangement to each element . revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue . on january 1 , 2011 , the company prospectively adopted accounting standard update ( “ asu ” ) 2009-13 , revenue recognition ( topic 605 ) : multiple-deliverable revenue arrangements ( asu 2009-13 ) . for arrangements entered into or materially modified beginning january 1 , 2011 , we allocated revenue to arrangements with multiple elements based on relative selling price using a selling price hierarchy . the selling price for a deliverable is based on its vsoe if it exists , otherwise third-party evidence of selling price . if neither exists for a deliverable , the best estimate of the selling price is used for that deliverable based on list price , representing a component of management 's market strategy , and an analysis of historical prices for bundled and standalone arrangements . valuation of goodwill and identifiable intangible assets intangible assets include customer relationships , trade names , non-compete agreements and goodwill . intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable . the company reviews intangible assets with indefinite lives for impairment annually as of october 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable . story_separator_special_tag 23 net cash provided by operating activities was $ 18.5 million for the year ended december 31 , 2011 , which included net income of $ 11.6 million , plus non-cash charges ( benefits ) for deferred tax expense , depreciation and amortization , tax benefit from exercise of stock options and non-cash stock compensation totaling $ 7.2 million . changes in working capital decreased 2011 cash flows from operating activities by $ 273,000 , primarily due to timing of initial billings on new or renewal contracts decreasing cash flows provided from trade accounts receivable and deferred revenue , partially offset by timing of payments on accrued expenses and income taxes . net cash provided by operating activities was $ 14.6 million for the year ended december 31 , 2010 , which included net income of $ 8.5 million , plus non cash charges ( benefits ) for deferred tax expense , depreciation and amortization and non-cash stock compensation totaling $ 6.1 million . story_separator_special_tag the company believes it has adequate cash flows from operations to meet its debt and capital needs . the company entered into a revolving credit note in 2006. the maximum aggregate amount available under the revolving credit note following an addendum to the note in march 2008 , is $ 6.5 million . the revolving credit note was renewed in june 2012 to extend the term to june 30 , 2013. the company may borrow , repay and re-borrow amounts under the revolving credit note from time to time until its maturity on june 30 , 2013. the company expects to extend the term of the revolving credit note for at least one year beyond the maturity date . if , however , the note can not be extended , the company believes it has adequate cash flows from operations to meet its debt and capital needs . the term notes and revolving line of credit are secured by certain of the company 's assets , including the company 's land , building , accounts receivable and intangible assets . the term notes and the revolving credit note contain various restrictions and covenants applicable to the company , including requirements that the company maintain certain financial ratios at prescribed levels and restrictions on the ability of the company to consolidate or merge , create liens , incur additional indebtedness or dispose of assets . as of december 31 , 2012 , the company was in compliance with these restrictions and covenants . the maximum aggregate amount available under the revolving credit note of $ 6.5 million is subject to a borrowing base equal to 75.0 % of the company 's eligible accounts receivable . borrowings under the renewed revolving credit note bear interest at a variable annual rate , with three rate options at the discretion of management as follows : ( 1 ) 2.5 % plus the daily reset one-month london interbank offered rate ( “ libor ” ) rate , or ( 2 ) 2.2 % plus the one- , two- , three- , six- or twelve-month libor rate , or ( 3 ) the bank 's money market loan rate . the rate at december 31 , 2012 , was 2.71 % . as of december 31 , 2012 , the revolving credit note did not have a balance . according to borrowing base requirements , the company had the capacity to borrow $ 6.5 million as of december 31 , 2012 . 25 contractual obligations the company had contractual obligations to make payments in the following amounts in the future as of december 31 , 2012 : replace_table_token_8_th ( 1 ) amounts are inclusive of interest payments , where applicable ( 2 ) we have $ 224,000 in liabilities associated with uncertain tax positions . we are unable to reasonably estimate the expected cash settlement dates of these uncertain tax positions with the taxing authorities . the company generally does not make unconditional , non-cancelable purchase commitments . the company enters into purchase orders in the normal course of business , but these purchase obligations do not exceed one year . shareholders ' equity increased $ 1.2 million to $ 56.7 million in 2012 , from $ 55.6 million in 2011. the increase was primarily due to net income of $ 15.1 million and $ 8.2 million of related share-based compensation , partially offset by dividends paid of $ 17.4 million and stock re-purchases of $ 5.2 million . dividends paid in 2012 include $ 10.3 million for a special dividend paid in the fourth quarter of 2012. stock repurchase program in february 2006 , the board of directors of the company authorized the repurchase of 750,000 shares of common stock in the open market or in privately negotiated transactions . as of december 31 , 2012 , the remaining number of shares that could be purchased under this authorization was 143,398. off-balance sheet obligations the company has no significant off-balance sheet obligations other than the operating lease commitments disclosed in “ liquidity and capital resources . ” adoption of new accounting pronouncements in june 2011 , the fasb issued asu no . 2011-05 , presentation of comprehensive income , which amends asc 220 , comprehensive income , by requiring all non-owner changes in shareholders ' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements . the guidance was effective retrospectively for fiscal years and interim periods within those years beginning after december 15 , 2011. in december 2011 , the fasb issued asu no . 2011-12 , deferral of the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in accounting standards update no . 2011-05 , which defers certain portions of asu no . 2011-05 indefinitely and will be further deliberated by the fasb at a future date . the company adopted the requirements of asu 2011-05 and asu 2011-12 by
| cash flows from investing activities net cash of $ 2.3 million was used for investing activities in the year ended december 31 , 2012. purchases of property and equipment totaled the $ 2.3 million . net cash of $ 6.9 million was used for investing activities in the year ended december 31 , 2011. earn-out payments related to the miv acquisition approximated $ 4.1 million , and purchases of property and equipment totaled $ 2.8 million . net cash of $ 17.0 million was used for investing activities in the year ended december 31 , 2010. cash of $ 15.3 million was used for the acquisition of ocs and $ 172,000 was paid under the earn-out related to the miv acquisition . cash of $ 1.5 million was used for the purchase of property and equipment . cash flows from financing activities net cash used in financing activities was $ 16.7 million in the year ended december 31 , 2012. proceeds from the exercise of stock options and the excess tax benefit of share-based compensation provided cash of $ 1.3 million and $ 2.1 million , respectively , partially offset by repurchases of shares for payroll tax withholdings related to share-based compensation of $ 527,000. cash was used to pay dividends of $ 17.4 million , including a special dividend of $ 10.3 million in the fourth quarter of 2012. cash was also used to repay borrowings under the term note totaling $ 2.1 million and capital lease obligations of $ 109,000. net cash used in financing activities was $ 6.9
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we record revenue from product sales upon delivery to our distributors and specialty pharmacies ( collectively , our customers ) . revenue from product sales is recognized at a point in time when our customer is deemed to have obtained control of the product , which generally occurs upon receipt by our customers . the amount of revenue we recognize from product sales varies due to rebates , chargebacks , and discounts provided under governmental and other programs , distribution-related fees , and other sales-related deductions . in order to determine the transaction price , we estimate , utilizing the expected value method , the amount of variable consideration that we will be entitled to . this estimate is based upon contracts with customers and government agencies , statutorily-defined discounts applicable to government-funded programs , historical experience , estimated payer mix , and other relevant factors . calculating these provisions involves estimates and judgments . we review our estimates of rebates , chargebacks , and other applicable provisions each period and record any necessary adjustments in the current period 's net product sales . refer to the `` results of operations - revenues - net product sales `` section below for further details regarding our provisions , and credits/payments , for sales-related deductions . collaboration revenue we have entered into various agreements related to our activities to research , develop , manufacture , and commercialize product candidates and utilize our technology platforms . we earn collaboration revenue in connection with collaboration agreements to utilize our technology platforms and develop and or commercialize product candidates . depending on the terms of the arrangement , we may defer the recognition of all or a portion of the consideration received because the performance obligations are satisfied over time . our collaboration agreements may require us to deliver various rights , services , and or goods across the entire life cycle of a product or product candidate . in agreements involving multiple goods or services promised to be transferred to a customer , we must assess , at the inception of the contract , whether each promise represents a separate performance obligation ( i.e . , is `` distinct `` ) , or whether such promises should be combined as a single performance obligation . at the inception of the contract , the transaction price reflects the amount of consideration we expect to be entitled to in exchange for transferring promised goods or services to our customer . we review our estimate of the transaction price each period , and make revisions to such estimates as necessary . in arrangements where we satisfy performance obligation ( s ) during the development phase over time , we recognize collaboration revenue over time typically using an input method on the basis of our research and development costs incurred relative to the total expected cost which determines the extent of our progress toward completion . due to the variability in the scope of activities and length of time necessary to develop a drug product , potential delays in development programs , changes to development plans and budgets as programs progress , including if we and our collaborators decide to expand or contract our clinical plans for a drug candidate in various disease indications , and uncertainty in the ultimate requirements to obtain governmental approval for commercialization , revisions to our estimates are likely to occur periodically , and could result in material changes to the amount of revenue recognized each year in the future . when we are entitled to reimbursement of all or a portion of the research and development expenses that we incur under a collaboration , we record those reimbursable amounts as collaboration revenue proportionately as we recognize our expenses . if the collaboration is a cost-sharing arrangement in which both we and our collaborator perform development work and share costs , we also recognize , as research and development expense in the period when our collaborator incurs development expenses , the portion of the collaborator 's development expenses that we are obligated to reimburse . our collaborators provide us with estimated development expenses for the most recent fiscal quarter . our collaborators ' estimates are reconciled to their actual expenses for such quarter in the subsequent fiscal quarter , and our portion of our collaborators ' development expenses that we are obligated to reimburse is adjusted on a prospective basis accordingly , as necessary . under certain of our collaboration agreements , product sales and cost of sales may be recorded by our collaborators as they are deemed to be the principal in the transaction . we share in any profits or losses arising from the commercialization of such products , and record our share of the variable consideration , representing net product sales less cost of goods sold and shared commercialization and other expenses , as collaboration revenue in the period in which such underlying sales occur and costs are incurred by the collaborator . our collaborator provides us with our estimated share of the profits or losses from commercialization of such products for the most recent fiscal quarter . our collaborators ' estimates of profits or losses for such quarter are reconciled 62 to actual profits or losses in the subsequent fiscal quarter , and our share of the profit or loss is adjusted on a prospective basis accordingly , as necessary . in arrangements where the collaborator records product sales , we may be obligated to use commercially reasonable efforts to supply commercial product to our collaborators , and may be reimbursed for our manufacturing costs as commercial product is shipped to our collaborators ; however , recognition of such cost reimbursements as collaboration revenue is deferred until the product is sold by our collaborators to third-party customers . clinical trial expenses clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors . story_separator_special_tag average headcount in 2017 increased compared to 2016 principally in connection with expanding our manufacturing activities . operating expenses in 2018 , 2017 , and 2016 included a total of $ 427.4 million , $ 507.3 million , and $ 559.9 million , respectively , of non-cash compensation expense related to employee stock options and restricted stock . the decrease in total non-cash compensation expense in 2018 , compared to 2017 , is largely attributable to a revision in our estimate of the number of stock options that are expected to be forfeited , partly offset by the immediate recognition of non-cash compensation expense in connection with annual employee grants made in december 2018 to certain retirement-eligible employees . as of december 31 , 2018 , unrecognized non-cash compensation expense related to outstanding stock options and unvested restricted stock was $ 702.6 million and $ 124.4 million , respectively . we expect to recognize this non-cash compensation expense related to stock options and restricted stock over weighted-average periods of 1.9 years and 4.6 years , respectively . research and development expenses the following table summarizes our estimates of direct research and development expenses by clinical development program and other significant categories of research and development expenses . direct research and development expenses are comprised primarily of costs paid to third parties for clinical and product development activities , including costs related to preclinical research activities , clinical trials , drug filling , packaging , and labeling , and the portion of research and development expenses incurred by our collaborators that we are obligated to reimburse . indirect research and development expenses have not been allocated directly to each program , and primarily consist of costs to compensate personnel , overhead and infrastructure costs to maintain our facilities , costs to manufacture bulk drug product ( including pre-launch commercial supplies which were not capitalized as inventory ) at our manufacturing facilities , and other costs related to activities that benefit multiple projects . 69 year ended december 31 , increase ( decrease ) ( in millions ) 2018 2017 * 2016 * 2018 vs. 2017 2017 vs. 2016 direct research and development expenses : dupixent ( dupilumab ) $ 127.3 $ 199.9 $ 221.6 $ ( 72.6 ) $ ( 21.7 ) libtayo ( cemiplimab ) 193.6 114.2 40.5 79.4 73.7 fasinumab 199.9 153.8 110.4 46.1 43.4 praluent ( alirocumab ) 64.7 84.9 85.6 ( 20.2 ) ( 0.7 ) other product candidates in clinical development and other research programs 293.2 288.6 391.3 4.6 ( 102.7 ) total direct research and development expenses 878.7 841.4 849.4 37.3 ( 8.0 ) indirect research and development expenses : payroll and benefits 606.7 578.5 556.1 28.2 22.4 clinical manufacturing costs 358.6 388.2 404.9 ( 29.6 ) ( 16.7 ) lab supplies , licensing , and other research and development costs 95.4 62.9 51.6 32.5 11.3 occupancy and other operating costs 246.7 204.1 190.3 42.6 13.8 total indirect research and development expenses 1,307.4 1,233.7 1,202.9 73.7 30.8 total research and development expenses $ 2,186.1 $ 2,075.1 $ 2,052.3 $ 111.0 $ 22.8 * certain prior year amounts have been reclassified to conform to the current year 's presentation . `` direct research and development expenses - other product candidates in clinical development and other research programs `` in 2016 included the $ 75.0 million up-front payment made in connection with the license and collaboration agreement with intellia . research and development expenses included non-cash compensation expense of $ 229.0 million , $ 271.9 million , and $ 313.0 million in 2018 , 2017 , and 2016 , respectively . there are numerous uncertainties associated with drug development , including uncertainties related to safety and efficacy data from each phase of drug development , uncertainties related to the enrollment and performance of clinical trials , changes in regulatory requirements , changes in the competitive landscape affecting a product candidate , and other risks and uncertainties described in part i , item 1a . `` risk factors . `` there is also variability in the duration and costs necessary to develop a pharmaceutical product , potential opportunities and or uncertainties related to future indications to be studied , and the estimated cost and scope of the projects . the lengthy process of seeking fda approvals , and subsequent compliance with applicable statutes and regulations , require the expenditure of substantial resources . any failure by us to obtain , or delay in obtaining , regulatory approvals could materially adversely affect our business . we are unable to reasonably estimate if our product candidates in clinical development will generate material product revenues and net cash inflows . selling , general , and administrative expenses selling , general , and administrative expenses increased in 2018 , compared to 2017 , primarily due to higher headcount and headcount-related costs , higher contributions to independent not-for-profit patient assistance organizations , an increase in commercialization-related expenses for dupixent , and , to a lesser extent , libtayo , and an accrual for loss contingencies associated with ongoing litigation . selling , general , and administrative expenses increased in 2017 , compared to 2016 , primarily due to ( i ) an increase in commercialization-related expenses associated with dupixent and eylea , and , to a lesser extent , kevzara and libtayo , partly offset by lower commercialization-related expenses associated with praluent , and ( ii ) higher headcount and headcount-related costs . selling , general , and administrative expenses also included $ 169.2 million , $ 208.4 million , and $ 231.2 million of non-cash compensation expense in 2018 , 2017 , and 2016 , respectively . 70 cost of goods sold cost of goods sold decreased slightly in 2018 , compared to 2017 , principally due to a decrease in period costs for our limerick manufacturing facility as a result of higher commercial manufacturing activities . cost of goods sold increased slightly in 2017 , compared to 2016 , principally due
| cash flows from investing activities net cash of $ 2.3 million was used for investing activities in the year ended december 31 , 2012. purchases of property and equipment totaled the $ 2.3 million . net cash of $ 6.9 million was used for investing activities in the year ended december 31 , 2011. earn-out payments related to the miv acquisition approximated $ 4.1 million , and purchases of property and equipment totaled $ 2.8 million . net cash of $ 17.0 million was used for investing activities in the year ended december 31 , 2010. cash of $ 15.3 million was used for the acquisition of ocs and $ 172,000 was paid under the earn-out related to the miv acquisition . cash of $ 1.5 million was used for the purchase of property and equipment . cash flows from financing activities net cash used in financing activities was $ 16.7 million in the year ended december 31 , 2012. proceeds from the exercise of stock options and the excess tax benefit of share-based compensation provided cash of $ 1.3 million and $ 2.1 million , respectively , partially offset by repurchases of shares for payroll tax withholdings related to share-based compensation of $ 527,000. cash was used to pay dividends of $ 17.4 million , including a special dividend of $ 10.3 million in the fourth quarter of 2012. cash was also used to repay borrowings under the term note totaling $ 2.1 million and capital lease obligations of $ 109,000. net cash used in financing activities was $ 6.9
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we record revenue from product sales upon delivery to our distributors and specialty pharmacies ( collectively , our customers ) . revenue from product sales is recognized at a point in time when our customer is deemed to have obtained control of the product , which generally occurs upon receipt by our customers . the amount of revenue we recognize from product sales varies due to rebates , chargebacks , and discounts provided under governmental and other programs , distribution-related fees , and other sales-related deductions . in order to determine the transaction price , we estimate , utilizing the expected value method , the amount of variable consideration that we will be entitled to . this estimate is based upon contracts with customers and government agencies , statutorily-defined discounts applicable to government-funded programs , historical experience , estimated payer mix , and other relevant factors . calculating these provisions involves estimates and judgments . we review our estimates of rebates , chargebacks , and other applicable provisions each period and record any necessary adjustments in the current period 's net product sales . refer to the `` results of operations - revenues - net product sales `` section below for further details regarding our provisions , and credits/payments , for sales-related deductions . collaboration revenue we have entered into various agreements related to our activities to research , develop , manufacture , and commercialize product candidates and utilize our technology platforms . we earn collaboration revenue in connection with collaboration agreements to utilize our technology platforms and develop and or commercialize product candidates . depending on the terms of the arrangement , we may defer the recognition of all or a portion of the consideration received because the performance obligations are satisfied over time . our collaboration agreements may require us to deliver various rights , services , and or goods across the entire life cycle of a product or product candidate . in agreements involving multiple goods or services promised to be transferred to a customer , we must assess , at the inception of the contract , whether each promise represents a separate performance obligation ( i.e . , is `` distinct `` ) , or whether such promises should be combined as a single performance obligation . at the inception of the contract , the transaction price reflects the amount of consideration we expect to be entitled to in exchange for transferring promised goods or services to our customer . we review our estimate of the transaction price each period , and make revisions to such estimates as necessary . in arrangements where we satisfy performance obligation ( s ) during the development phase over time , we recognize collaboration revenue over time typically using an input method on the basis of our research and development costs incurred relative to the total expected cost which determines the extent of our progress toward completion . due to the variability in the scope of activities and length of time necessary to develop a drug product , potential delays in development programs , changes to development plans and budgets as programs progress , including if we and our collaborators decide to expand or contract our clinical plans for a drug candidate in various disease indications , and uncertainty in the ultimate requirements to obtain governmental approval for commercialization , revisions to our estimates are likely to occur periodically , and could result in material changes to the amount of revenue recognized each year in the future . when we are entitled to reimbursement of all or a portion of the research and development expenses that we incur under a collaboration , we record those reimbursable amounts as collaboration revenue proportionately as we recognize our expenses . if the collaboration is a cost-sharing arrangement in which both we and our collaborator perform development work and share costs , we also recognize , as research and development expense in the period when our collaborator incurs development expenses , the portion of the collaborator 's development expenses that we are obligated to reimburse . our collaborators provide us with estimated development expenses for the most recent fiscal quarter . our collaborators ' estimates are reconciled to their actual expenses for such quarter in the subsequent fiscal quarter , and our portion of our collaborators ' development expenses that we are obligated to reimburse is adjusted on a prospective basis accordingly , as necessary . under certain of our collaboration agreements , product sales and cost of sales may be recorded by our collaborators as they are deemed to be the principal in the transaction . we share in any profits or losses arising from the commercialization of such products , and record our share of the variable consideration , representing net product sales less cost of goods sold and shared commercialization and other expenses , as collaboration revenue in the period in which such underlying sales occur and costs are incurred by the collaborator . our collaborator provides us with our estimated share of the profits or losses from commercialization of such products for the most recent fiscal quarter . our collaborators ' estimates of profits or losses for such quarter are reconciled 62 to actual profits or losses in the subsequent fiscal quarter , and our share of the profit or loss is adjusted on a prospective basis accordingly , as necessary . in arrangements where the collaborator records product sales , we may be obligated to use commercially reasonable efforts to supply commercial product to our collaborators , and may be reimbursed for our manufacturing costs as commercial product is shipped to our collaborators ; however , recognition of such cost reimbursements as collaboration revenue is deferred until the product is sold by our collaborators to third-party customers . clinical trial expenses clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors . story_separator_special_tag average headcount in 2017 increased compared to 2016 principally in connection with expanding our manufacturing activities . operating expenses in 2018 , 2017 , and 2016 included a total of $ 427.4 million , $ 507.3 million , and $ 559.9 million , respectively , of non-cash compensation expense related to employee stock options and restricted stock . the decrease in total non-cash compensation expense in 2018 , compared to 2017 , is largely attributable to a revision in our estimate of the number of stock options that are expected to be forfeited , partly offset by the immediate recognition of non-cash compensation expense in connection with annual employee grants made in december 2018 to certain retirement-eligible employees . as of december 31 , 2018 , unrecognized non-cash compensation expense related to outstanding stock options and unvested restricted stock was $ 702.6 million and $ 124.4 million , respectively . we expect to recognize this non-cash compensation expense related to stock options and restricted stock over weighted-average periods of 1.9 years and 4.6 years , respectively . research and development expenses the following table summarizes our estimates of direct research and development expenses by clinical development program and other significant categories of research and development expenses . direct research and development expenses are comprised primarily of costs paid to third parties for clinical and product development activities , including costs related to preclinical research activities , clinical trials , drug filling , packaging , and labeling , and the portion of research and development expenses incurred by our collaborators that we are obligated to reimburse . indirect research and development expenses have not been allocated directly to each program , and primarily consist of costs to compensate personnel , overhead and infrastructure costs to maintain our facilities , costs to manufacture bulk drug product ( including pre-launch commercial supplies which were not capitalized as inventory ) at our manufacturing facilities , and other costs related to activities that benefit multiple projects . 69 year ended december 31 , increase ( decrease ) ( in millions ) 2018 2017 * 2016 * 2018 vs. 2017 2017 vs. 2016 direct research and development expenses : dupixent ( dupilumab ) $ 127.3 $ 199.9 $ 221.6 $ ( 72.6 ) $ ( 21.7 ) libtayo ( cemiplimab ) 193.6 114.2 40.5 79.4 73.7 fasinumab 199.9 153.8 110.4 46.1 43.4 praluent ( alirocumab ) 64.7 84.9 85.6 ( 20.2 ) ( 0.7 ) other product candidates in clinical development and other research programs 293.2 288.6 391.3 4.6 ( 102.7 ) total direct research and development expenses 878.7 841.4 849.4 37.3 ( 8.0 ) indirect research and development expenses : payroll and benefits 606.7 578.5 556.1 28.2 22.4 clinical manufacturing costs 358.6 388.2 404.9 ( 29.6 ) ( 16.7 ) lab supplies , licensing , and other research and development costs 95.4 62.9 51.6 32.5 11.3 occupancy and other operating costs 246.7 204.1 190.3 42.6 13.8 total indirect research and development expenses 1,307.4 1,233.7 1,202.9 73.7 30.8 total research and development expenses $ 2,186.1 $ 2,075.1 $ 2,052.3 $ 111.0 $ 22.8 * certain prior year amounts have been reclassified to conform to the current year 's presentation . `` direct research and development expenses - other product candidates in clinical development and other research programs `` in 2016 included the $ 75.0 million up-front payment made in connection with the license and collaboration agreement with intellia . research and development expenses included non-cash compensation expense of $ 229.0 million , $ 271.9 million , and $ 313.0 million in 2018 , 2017 , and 2016 , respectively . there are numerous uncertainties associated with drug development , including uncertainties related to safety and efficacy data from each phase of drug development , uncertainties related to the enrollment and performance of clinical trials , changes in regulatory requirements , changes in the competitive landscape affecting a product candidate , and other risks and uncertainties described in part i , item 1a . `` risk factors . `` there is also variability in the duration and costs necessary to develop a pharmaceutical product , potential opportunities and or uncertainties related to future indications to be studied , and the estimated cost and scope of the projects . the lengthy process of seeking fda approvals , and subsequent compliance with applicable statutes and regulations , require the expenditure of substantial resources . any failure by us to obtain , or delay in obtaining , regulatory approvals could materially adversely affect our business . we are unable to reasonably estimate if our product candidates in clinical development will generate material product revenues and net cash inflows . selling , general , and administrative expenses selling , general , and administrative expenses increased in 2018 , compared to 2017 , primarily due to higher headcount and headcount-related costs , higher contributions to independent not-for-profit patient assistance organizations , an increase in commercialization-related expenses for dupixent , and , to a lesser extent , libtayo , and an accrual for loss contingencies associated with ongoing litigation . selling , general , and administrative expenses increased in 2017 , compared to 2016 , primarily due to ( i ) an increase in commercialization-related expenses associated with dupixent and eylea , and , to a lesser extent , kevzara and libtayo , partly offset by lower commercialization-related expenses associated with praluent , and ( ii ) higher headcount and headcount-related costs . selling , general , and administrative expenses also included $ 169.2 million , $ 208.4 million , and $ 231.2 million of non-cash compensation expense in 2018 , 2017 , and 2016 , respectively . 70 cost of goods sold cost of goods sold decreased slightly in 2018 , compared to 2017 , principally due to a decrease in period costs for our limerick manufacturing facility as a result of higher commercial manufacturing activities . cost of goods sold increased slightly in 2017 , compared to 2016 , principally due
| liquidity and capital resources our financial condition is summarized as follows : replace_table_token_14_th as of december 31 , 2018 , we also had borrowing availability of $ 750.0 million under a revolving credit facility ( see further description under `` credit facility `` below ) . in addition , and as described in part 1 , item 1 . `` business - collaborations - collaborations with sanofi , '' we and sanofi recently entered into an amended io discovery agreement , pursuant to which sanofi made a payment of $ 461.9 million to us in the first quarter of 2019. sources and uses of cash for the years ended december 31 , 2018 , 2017 , and 2016 replace_table_token_15_th cash flows from operating activities 2018 . our net income of $ 2,444.4 million in 2018 included ( i ) non-cash compensation expense of $ 427.4 million , ( ii ) the recognition of cumulative catch-up adjustments of $ 135.0 million within revenue primarily in connection with the amended io discovery agreement , and ( iii ) other non-cash items , including $ 75.8 million in connection with sanofi satisfying its libtayo development funding obligation in shares of regeneron stock ( see `` sanofi funding of certain development costs '' below ) and $ 41.9 million related to unrealized losses ( net ) on equity securities . deferred tax assets as of december 31 , 2018 increased by $ 140.0 million , compared to december 31 , 2017 , primarily due to the impact of the company 's sale of non-inventory related assets between foreign subsidiaries . 2017 . our net income of $ 1,198.5 million in 2017 included non-cash compensation expense of $ 507.3 million . deferred tax assets as of december 31 , 2017 decreased by $ 318.8 million , compared to december 31 , 2016 , primarily due to the re-measurement of our u.s. net deferred tax assets at the lower enacted corporate tax rates pursuant to the act ( as described in `` results of operations - income taxes `` ) and additional tax depreciation , partly offset by an increase in deferred tax assets related to stock-based compensation .
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our fixed income product category is comprised of revenues related to the brokerage of cash and derivative fixed income products . fixed income volumes typically correlate with 62 fluctuations in interest rates , market volatility and the level of bond issuances . brokertec , a leading electronic trading platform in the fixed income market , reported increased average daily volumes ( `` adv `` ) of 8 % in 2013 vs. 2012. similarly , the securities industry and financial markets association ( `` sifma `` ) reported an increase in the adv of u.s. corporate debt of 8 % and an increase in corporate bond issuance of 1 % for the year ended december 31 , 2013 , as compared to the prior year . however , ice reported a 15 % decline in its credit default swap trade execution revenues compared with the prior year . despite some of these positive metrics , dealer banks and wholesale brokers generally reported declines in their fixed income revenues for 2013 , as compared to the prior year , which they attributed to difficult trading conditions . in comparison , our brokerage revenues from fixed income products declined 7 % in the year ended december 31 , 2013 , as compared to the prior year . interest rate and foreign exchange volumes . our financial product category largely consists of revenues related to the brokerage of foreign exchange and interest rate derivative products . foreign exchange volumes generally increased for the year ended december 31 , 2013 , compared to the same period in the prior year , primarily driven by volatility in the first half of the year from diverging u.s. and japanese monetary policy . it should be noted that market conditions were notably different in the latter half of the year with lower market volatility and regulatory uncertainty negatively impacting volumes . cme foreign exchange futures advs increased 5 % in 2013 , as compared to 2012 , while ebs , an electronic trading platform for spot currencies , reported a 6 % decrease in volumes year over year . reported volumes for interest rate products generally increased during the year ended december 31 , 2013 , as compared to 2012 , with cme reporting a 22 % increase in interest rate futures advs in 2013 , as compared to the prior year . our brokerage revenues from financial products increased 4 % in the year ended december 31 , 2013 , compared to the prior year . equity volumes . our equity product category consists of revenues related to the brokerage of cash equity and equity derivative products . equity derivative volumes in europe and the u.s. generally declined in 2013 , due to lower market volatility . international securities exchange 's equity derivative volumes declined 5 % , and eurex european equity derivative volumes decreased 6 % in 2013 as compared to the prior year . advs for nyse euronext 's u.s. cash products declined 11 % while its european cash products decreased 5 % , year over year . our brokerage revenues from equity products declined 14 % from the prior year . commodity volumes . our commodity product category consists of revenues related to the brokerage of a wide range of energy products , and to a lesser extent , other commodity products . we believe that overall energy notional volumes declined in the u.s. from a year ago due to regulatory , market and economic uncertainty . cme 's energy futures advs decreased 1 % in 2013 from the prior year , while ice 's energy futures volumes increased 1 % . in addition , the annual average rate per contract ( `` rpc `` ) declined approximately 13 % and 4 % for cme and ice , respectively , when compared to the prior year . we believe that the decline in rpc was due to product mix , the introduction of mini contracts which trade in a smaller notional value than standard energy contracts and volume/pricing incentives . our brokerage revenues from commodity products declined 13 % in 2013. clearing services volumes . our kyte subsidiary 's clearing operations are subject to many of the same drivers that influence otc market volumes . although market-wide trading volumes were generally lower in 2013 , kyte 's clearing revenues increased by 18 % , largely due to increased trading activity and the mix of products and exchanges utilized by existing clearing service customers . kyte 's clearing services revenues include the exchange fees that kyte charges to its clients but then passes on to the exchanges . 63 competitive and regulatory environment another major external market factor affecting our business and results of operations is competition , which may take the form of competitive pressure on the commissions we charge for our services or competition for qualified personnel with extensive experience in the specialized markets we serve . we currently compete for the services of skilled brokerage personnel with other wholesale market participants and , more broadly , we compete for the services of highly qualified technology development personnel . we believe that the demand for productive brokers has lessened in recent periods , as the wholesale brokerage industry has been impacted by lower trading volumes and sluggish trading conditions in certain markets we serve . however , we believe that there is increased competition to provide brokerage services to a smaller number of market participants in the near term as dealers continue to exit or reduce their proprietary trading operations . in addition , we believe that the continued regulatory uncertainty in certain markets has resulted in lower trading volumes and fewer participants in these markets . gfi swaps exchange llc , our sef platform , was temporarily registered as a sef by the cftc in september 2013 and many of the rules governing the operation of a multi-lateral trading platform for swaps in the u.s. became effective on october 2 , 2013. story_separator_special_tag year ended december 31 , 2012 compared to the year ended december 31 , 2011 net loss gfi 's net loss for the year ended december 31 , 2012 increased $ 6.8 million to $ 10.0 million from a net loss of $ 3.2 million for the year ended december 31 , 2011. total revenues decreased by $ 90.9 million , or 9.0 % , to $ 924.6 million in the year ended december 31 , 2012 from $ 1.02 billion in the prior year . the decrease in total revenues was primarily due to lower brokerage revenues , which decreased $ 101.1 million , or 12.7 % , partially offset by a net increase in `` other revenues , `` as described in more detail below . total interest and transaction-based expenses increased $ 2.8 million to $ 137.5 million in 2012. the increase resulted from higher transaction fees on clearing services at our kyte subsidiary primarily due to the mix of products and exchanges utilized by existing and new customers . total expenses , excluding interest and transaction-based expenses , decreased by $ 92.4 million , or 10.5 % , to $ 788.3 million for 2012 from $ 880.7 million for 2011. the decrease in total other expenses was largely attributable to a decrease in compensation and employee benefits expense , which resulted primarily from ( i ) lower performance bonus expense as a result of lower brokerage revenues and ( ii ) initiatives implemented during the latter part of 2011 and throughout 2012 to reduce our aggregate compensation expense . the decrease was also due to lower travel and promotion expenses and professional fees . 72 revenues the following table sets forth the changes in revenues for the year ended december 31 , 2012 , as compared to the same period in 2011 ( dollars in thousands , except percentage data ) : replace_table_token_9_th * denotes % of revenues , net of interest and transaction-based expenses * * denotes % change in 2012 as compared to 2011 brokerage revenues we offer our brokerage services in four broad product categories : fixed income , equity , financial , and commodity . below is a discussion of our brokerage revenues by product category for the year ended december 31 , 2012. broker productivity ( defined as total brokerage revenues during the period divided by average monthly brokerage personnel headcount for the period ) across all product categories was $ 562 thousand for 2012 and decreased by approximately 13.1 % as compared to 2011. fixed income product brokerage revenues decreased $ 46.2 million , or 19.7 % , in 2012 compared to 2011. revenues from fixed income derivative and cash products decreased approximately 34.4 % and 5.9 % , respectively , as compared to the year ended december 31 , 2011. this decrease was partially due to lower trading volumes attributable , in part , to pending reform in the swaps market , as well as poor global economic conditions , continued low interest rates , market uncertainty and the ongoing sovereign debt issues in the eurozone . our average monthly brokerage personnel headcount for fixed income products decreased by 21 to 321 in 2012. equity product brokerage revenues decreased $ 39.0 million , or 22.3 % , in 2012 compared to 2011. the decrease was primarily attributable to reduced cash equity and equity derivative trading volumes in the u.s. and europe . this decrease was consistent with the decline in equity volumes reported in the broader exchange-traded cash and derivatives markets . our average monthly brokerage personnel headcount for equity products decreased by 27 to 217 in 2012. financial product brokerage revenues decreased $ 6.6 million , or 3.5 % , in 2012 compared to 2011. the decrease was primarily due to slow trading conditions in emerging markets in latin america and asia , partially offset by revenues from our new brokerage desks in france and switzerland , which commenced operations in october of 2011. our average monthly brokerage personnel headcount for financial products increased by 58 to 391 in 2012 . 73 commodity product brokerage revenues decreased $ 9.2 million , or 4.7 % , in 2012 compared to 2011. we believe that this decrease was largely attributable to regulatory uncertainty as it relates to the u.s. energy markets and the conversion of otc swaps to exchange-traded futures contracts in many north american energy products during the fourth quarter of 2012. partially offsetting this decrease was an increase in commodity brokerage revenues due to growth in certain energy and metals businesses and the addition of new desks in the u.s. and europe . our average monthly brokerage personnel headcount for commodity products decreased by 3 to 308 in 2012. clearing services revenue clearing services revenues increased by 4.7 % , or $ 5.3 million , in 2012 to $ 118.0 million due to a variation in the mix of products and exchanges utilized by our new and existing clearing service customers partially offset by a decrease in the number of trades cleared by our kyte subsidiary . clearing services revenues are related solely to the operations of kyte and consist of fees charged to our clearing service customers for clearing , settlement and other services . kyte also incurs exchange fees on behalf of its customers , which kyte then charges to its customers , and are therefore included in equal amounts in both revenues and expenses . other revenues other revenues were comprised of the following ( dollars in thousands ) : replace_table_token_10_th other revenues increased by $ 4.9 million to $ 111.0 million for the year ended december 31 , 2012 from $ 106.1 million for the year ended december 31 , 2011. this increase was largely related to an increase in our software , analytics and market data revenues of $ 10.5 million , which was primarily attributable to an increase in software revenues at our trayport subsidiary , due to expansion of their customer
| liquidity and capital resources our financial condition is summarized as follows : replace_table_token_14_th as of december 31 , 2018 , we also had borrowing availability of $ 750.0 million under a revolving credit facility ( see further description under `` credit facility `` below ) . in addition , and as described in part 1 , item 1 . `` business - collaborations - collaborations with sanofi , '' we and sanofi recently entered into an amended io discovery agreement , pursuant to which sanofi made a payment of $ 461.9 million to us in the first quarter of 2019. sources and uses of cash for the years ended december 31 , 2018 , 2017 , and 2016 replace_table_token_15_th cash flows from operating activities 2018 . our net income of $ 2,444.4 million in 2018 included ( i ) non-cash compensation expense of $ 427.4 million , ( ii ) the recognition of cumulative catch-up adjustments of $ 135.0 million within revenue primarily in connection with the amended io discovery agreement , and ( iii ) other non-cash items , including $ 75.8 million in connection with sanofi satisfying its libtayo development funding obligation in shares of regeneron stock ( see `` sanofi funding of certain development costs '' below ) and $ 41.9 million related to unrealized losses ( net ) on equity securities . deferred tax assets as of december 31 , 2018 increased by $ 140.0 million , compared to december 31 , 2017 , primarily due to the impact of the company 's sale of non-inventory related assets between foreign subsidiaries . 2017 . our net income of $ 1,198.5 million in 2017 included non-cash compensation expense of $ 507.3 million . deferred tax assets as of december 31 , 2017 decreased by $ 318.8 million , compared to december 31 , 2016 , primarily due to the re-measurement of our u.s. net deferred tax assets at the lower enacted corporate tax rates pursuant to the act ( as described in `` results of operations - income taxes `` ) and additional tax depreciation , partly offset by an increase in deferred tax assets related to stock-based compensation .
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our fixed income product category is comprised of revenues related to the brokerage of cash and derivative fixed income products . fixed income volumes typically correlate with 62 fluctuations in interest rates , market volatility and the level of bond issuances . brokertec , a leading electronic trading platform in the fixed income market , reported increased average daily volumes ( `` adv `` ) of 8 % in 2013 vs. 2012. similarly , the securities industry and financial markets association ( `` sifma `` ) reported an increase in the adv of u.s. corporate debt of 8 % and an increase in corporate bond issuance of 1 % for the year ended december 31 , 2013 , as compared to the prior year . however , ice reported a 15 % decline in its credit default swap trade execution revenues compared with the prior year . despite some of these positive metrics , dealer banks and wholesale brokers generally reported declines in their fixed income revenues for 2013 , as compared to the prior year , which they attributed to difficult trading conditions . in comparison , our brokerage revenues from fixed income products declined 7 % in the year ended december 31 , 2013 , as compared to the prior year . interest rate and foreign exchange volumes . our financial product category largely consists of revenues related to the brokerage of foreign exchange and interest rate derivative products . foreign exchange volumes generally increased for the year ended december 31 , 2013 , compared to the same period in the prior year , primarily driven by volatility in the first half of the year from diverging u.s. and japanese monetary policy . it should be noted that market conditions were notably different in the latter half of the year with lower market volatility and regulatory uncertainty negatively impacting volumes . cme foreign exchange futures advs increased 5 % in 2013 , as compared to 2012 , while ebs , an electronic trading platform for spot currencies , reported a 6 % decrease in volumes year over year . reported volumes for interest rate products generally increased during the year ended december 31 , 2013 , as compared to 2012 , with cme reporting a 22 % increase in interest rate futures advs in 2013 , as compared to the prior year . our brokerage revenues from financial products increased 4 % in the year ended december 31 , 2013 , compared to the prior year . equity volumes . our equity product category consists of revenues related to the brokerage of cash equity and equity derivative products . equity derivative volumes in europe and the u.s. generally declined in 2013 , due to lower market volatility . international securities exchange 's equity derivative volumes declined 5 % , and eurex european equity derivative volumes decreased 6 % in 2013 as compared to the prior year . advs for nyse euronext 's u.s. cash products declined 11 % while its european cash products decreased 5 % , year over year . our brokerage revenues from equity products declined 14 % from the prior year . commodity volumes . our commodity product category consists of revenues related to the brokerage of a wide range of energy products , and to a lesser extent , other commodity products . we believe that overall energy notional volumes declined in the u.s. from a year ago due to regulatory , market and economic uncertainty . cme 's energy futures advs decreased 1 % in 2013 from the prior year , while ice 's energy futures volumes increased 1 % . in addition , the annual average rate per contract ( `` rpc `` ) declined approximately 13 % and 4 % for cme and ice , respectively , when compared to the prior year . we believe that the decline in rpc was due to product mix , the introduction of mini contracts which trade in a smaller notional value than standard energy contracts and volume/pricing incentives . our brokerage revenues from commodity products declined 13 % in 2013. clearing services volumes . our kyte subsidiary 's clearing operations are subject to many of the same drivers that influence otc market volumes . although market-wide trading volumes were generally lower in 2013 , kyte 's clearing revenues increased by 18 % , largely due to increased trading activity and the mix of products and exchanges utilized by existing clearing service customers . kyte 's clearing services revenues include the exchange fees that kyte charges to its clients but then passes on to the exchanges . 63 competitive and regulatory environment another major external market factor affecting our business and results of operations is competition , which may take the form of competitive pressure on the commissions we charge for our services or competition for qualified personnel with extensive experience in the specialized markets we serve . we currently compete for the services of skilled brokerage personnel with other wholesale market participants and , more broadly , we compete for the services of highly qualified technology development personnel . we believe that the demand for productive brokers has lessened in recent periods , as the wholesale brokerage industry has been impacted by lower trading volumes and sluggish trading conditions in certain markets we serve . however , we believe that there is increased competition to provide brokerage services to a smaller number of market participants in the near term as dealers continue to exit or reduce their proprietary trading operations . in addition , we believe that the continued regulatory uncertainty in certain markets has resulted in lower trading volumes and fewer participants in these markets . gfi swaps exchange llc , our sef platform , was temporarily registered as a sef by the cftc in september 2013 and many of the rules governing the operation of a multi-lateral trading platform for swaps in the u.s. became effective on october 2 , 2013. story_separator_special_tag year ended december 31 , 2012 compared to the year ended december 31 , 2011 net loss gfi 's net loss for the year ended december 31 , 2012 increased $ 6.8 million to $ 10.0 million from a net loss of $ 3.2 million for the year ended december 31 , 2011. total revenues decreased by $ 90.9 million , or 9.0 % , to $ 924.6 million in the year ended december 31 , 2012 from $ 1.02 billion in the prior year . the decrease in total revenues was primarily due to lower brokerage revenues , which decreased $ 101.1 million , or 12.7 % , partially offset by a net increase in `` other revenues , `` as described in more detail below . total interest and transaction-based expenses increased $ 2.8 million to $ 137.5 million in 2012. the increase resulted from higher transaction fees on clearing services at our kyte subsidiary primarily due to the mix of products and exchanges utilized by existing and new customers . total expenses , excluding interest and transaction-based expenses , decreased by $ 92.4 million , or 10.5 % , to $ 788.3 million for 2012 from $ 880.7 million for 2011. the decrease in total other expenses was largely attributable to a decrease in compensation and employee benefits expense , which resulted primarily from ( i ) lower performance bonus expense as a result of lower brokerage revenues and ( ii ) initiatives implemented during the latter part of 2011 and throughout 2012 to reduce our aggregate compensation expense . the decrease was also due to lower travel and promotion expenses and professional fees . 72 revenues the following table sets forth the changes in revenues for the year ended december 31 , 2012 , as compared to the same period in 2011 ( dollars in thousands , except percentage data ) : replace_table_token_9_th * denotes % of revenues , net of interest and transaction-based expenses * * denotes % change in 2012 as compared to 2011 brokerage revenues we offer our brokerage services in four broad product categories : fixed income , equity , financial , and commodity . below is a discussion of our brokerage revenues by product category for the year ended december 31 , 2012. broker productivity ( defined as total brokerage revenues during the period divided by average monthly brokerage personnel headcount for the period ) across all product categories was $ 562 thousand for 2012 and decreased by approximately 13.1 % as compared to 2011. fixed income product brokerage revenues decreased $ 46.2 million , or 19.7 % , in 2012 compared to 2011. revenues from fixed income derivative and cash products decreased approximately 34.4 % and 5.9 % , respectively , as compared to the year ended december 31 , 2011. this decrease was partially due to lower trading volumes attributable , in part , to pending reform in the swaps market , as well as poor global economic conditions , continued low interest rates , market uncertainty and the ongoing sovereign debt issues in the eurozone . our average monthly brokerage personnel headcount for fixed income products decreased by 21 to 321 in 2012. equity product brokerage revenues decreased $ 39.0 million , or 22.3 % , in 2012 compared to 2011. the decrease was primarily attributable to reduced cash equity and equity derivative trading volumes in the u.s. and europe . this decrease was consistent with the decline in equity volumes reported in the broader exchange-traded cash and derivatives markets . our average monthly brokerage personnel headcount for equity products decreased by 27 to 217 in 2012. financial product brokerage revenues decreased $ 6.6 million , or 3.5 % , in 2012 compared to 2011. the decrease was primarily due to slow trading conditions in emerging markets in latin america and asia , partially offset by revenues from our new brokerage desks in france and switzerland , which commenced operations in october of 2011. our average monthly brokerage personnel headcount for financial products increased by 58 to 391 in 2012 . 73 commodity product brokerage revenues decreased $ 9.2 million , or 4.7 % , in 2012 compared to 2011. we believe that this decrease was largely attributable to regulatory uncertainty as it relates to the u.s. energy markets and the conversion of otc swaps to exchange-traded futures contracts in many north american energy products during the fourth quarter of 2012. partially offsetting this decrease was an increase in commodity brokerage revenues due to growth in certain energy and metals businesses and the addition of new desks in the u.s. and europe . our average monthly brokerage personnel headcount for commodity products decreased by 3 to 308 in 2012. clearing services revenue clearing services revenues increased by 4.7 % , or $ 5.3 million , in 2012 to $ 118.0 million due to a variation in the mix of products and exchanges utilized by our new and existing clearing service customers partially offset by a decrease in the number of trades cleared by our kyte subsidiary . clearing services revenues are related solely to the operations of kyte and consist of fees charged to our clearing service customers for clearing , settlement and other services . kyte also incurs exchange fees on behalf of its customers , which kyte then charges to its customers , and are therefore included in equal amounts in both revenues and expenses . other revenues other revenues were comprised of the following ( dollars in thousands ) : replace_table_token_10_th other revenues increased by $ 4.9 million to $ 111.0 million for the year ended december 31 , 2012 from $ 106.1 million for the year ended december 31 , 2011. this increase was largely related to an increase in our software , analytics and market data revenues of $ 10.5 million , which was primarily attributable to an increase in software revenues at our trayport subsidiary , due to expansion of their customer
| cash and cash equivalents $ 174,606 $ 227,441 cash held at clearing organizations , net of customer cash 52,414 19,636 total balance sheet cash $ 227,020 $ 247,077 we believe that , based on current levels of operations , our cash from operations , together with our current cash holdings and available borrowings under our credit agreement with bank of america n.a . and certain other lenders ( the `` credit agreement '' ) , will be sufficient to fund our operations for at least the next twelve months . poor financial results , unanticipated expenses or unanticipated acquisitions or strategic investments could give rise to additional financing requirements sooner than we expect . there can be no assurance that equity or debt financing will be available when needed or , if available , that the financing will be on terms satisfactory to us and not dilutive to our then-current stockholders . sources and uses of cash the following table sets forth our cash flows from operating activities , investing activities and financing activities for the indicated periods . replace_table_token_18_th net cash provided by operating activities was $ 19.0 million for the year ended december 31 , 2013 compared with net cash provided by operating activities of $ 48.7 million for the year ended december 31 , 2012 , a net decrease in cash provided by operating activities of $ 29.7 million . the decrease in cash provided by operating activities was primarily due to a $ 26.7 increase in cash used for working capital in the year ended december 31 , 2013. such items include changes in ( i ) payables to clearing service customers , ( ii ) accounts receivable , ( iii ) accrued compensation and accounts payable , ( iv ) receivables from/payables to brokers , dealers , and clearing organizations , and ( v ) other assets and liabilities , largely attributable to deferred tax assets and interest payable .
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allowance for doubtful accounts our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make required payments . credit limits for all customers are established based upon several factors , including but not limited to financial condition and stability , payment history , published credit reports and use of credit references . on a monthly basis , management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value . this review includes accounts receivable agings , other operating trends and relevant business conditions , including general economic factors , as they relate to the company 's domestic and international customers . when a customer 's account balance becomes past due , we initiate dialogue with the customer to determine the cause . if it is determined that the customer will be unable to meet its financial obligation to us , such as in the case of a bankruptcy filing , we record a specific allowance to reduce the related receivable to the amount we expect to recover given all of the information presently available . inventories as a designer and manufacturer of high technology systems , we are exposed to a number of economic and industry factors that could result in portions of our inventories becoming either obsolete or in excess of anticipated usage . these factors include , but are not limited to , technological changes in our markets , our ability to meet changing customer requirements , competitive pressures in products and prices , and the availability of key components from our suppliers . our policy is to record inventory write-downs when conditions exist that suggest our inventories may be in excess of anticipated demand for our products and market conditions . we regularly evaluate the ability to realize the value of our inventories based upon a combination of factors including the following : historical usage rates , forecasted sales or usage , product end of life dates , estimated current and future market values and new product introductions . purchasing requirements and alternative usage avenues are explored within these processes to mitigate inventory exposure . when recorded , our write-downs are intended to reduce the carrying value of our inventories to their net realizable value and establish a new cost basis . deferred taxes the company applies the asset and liability method in recording income taxes , under which deferred income tax assets and liabilities are determined , based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using currently enacted tax rates and laws . additionally , deferred tax assets are evaluated and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized . management continues to review the level of the valuation allowance on a quarterly basis . there can be no assurance that the company 's future operations will produce sufficient earnings so that the deferred tax assets can be fully utilized . intangible assets there is a periodic review of intangible and other long-lived assets for impairment . this review consists of the analysis of events or changes in circumstances that would indicate the carrying amount of the assets may not be recoverable . recoverability is determined by comparing the forecasted future undiscounted net cash flows from the operations to which the assets relate , based on management 's best estimates using the appropriate assumptions and projections at the time , to the carrying amount of the assets . if the carrying value is determined to be in excess of future operating cash flows , the asset is considered impaired and a loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the assets . recently issued accounting pronouncements refer to note 1 of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements . page 18 discussion of operating results replace_table_token_3_th sales sales in the balancer segment increased $ 1.3 million , or 15.7 % , to $ 9.3 million for fiscal 2012 compared to $ 8.0 million for fiscal 2011. this increase is primarily due to higher unit sales volumes in north america offset by decreases in unit sales volumes in asia and europe during the year . north american sales increased $ 1.5 million , or 45.9 % , in fiscal 2012 compared to fiscal 2011. sales into asia decreased $ 370,000 , or 9.7 % , in fiscal 2012 compared to the prior year . sales into europe decreased $ 14,000 , or 1.6 % , in fiscal 2012 compared to fiscal 2011. sales on other regions of the world increased $ 187,000 , or 162.3 % , during fiscal 2012 as compared to the prior year . the increases in north america and other regions of the world are primarily due to higher volumes of shipments as the worldwide automotive and industrial markets in these regions continue to recover from the global economic downturn . the decreases in asia and europe are due to a reduction in orders as economic growth in china is slowing and the uncertainty regarding the european economy continues to have a negative impact on manufacturing . the levels of demand for our balancer products in any of these geographic markets can not be forecasted with any certainty given current economic trends and the historical volatility experienced in this market . sales in the measurement segment increased $ 1.7 million , or 48.5 % , to $ 5.2 million in fiscal 2012 compared to $ 3.5 million in fiscal 2011. sales of laser-based distance measurement and dimensional-sizing products increased $ 772,000 , or 28.3 % , primarily due to a large , non-recurring sale during the fourth quarter of fiscal 2012. story_separator_special_tag sales of remote tank monitoring products increased $ 479,000 to $ 581,000 during fiscal 2012 due to the higher volume of shipments . sales of laser-based surface measurement products increased $ 439,000 , or 67.1 % , primarily due to the sale of two casi scatterometers . future sales of laser-based or ultrasonic measurement products can not be forecasted with any certainty given the historical volatility experienced in this market . sales in the balancer segment increased $ 3.3 million , or 71.5 % , to $ 8.0 million for fiscal 2011 compared to $ 4.7 million for fiscal 2010. this increase is primarily due to higher unit sales volumes in asia , north america and europe during the year . asia sales increased $ 1.8 million , or 93.5 % , in fiscal 2011 compared to fiscal 2010. north american sales increased $ 1.4 million , or 77.9 % , in fiscal 2011 compared to the prior year . european sales increased $ 108,000 , or 13.5 % , in fiscal 2011 compared to fiscal 2010. the increases across all geographies are primarily due to higher volumes of shipments as the worldwide automotive and industrial markets in these regions have begun to recover from the previous low levels due to the global economic downturn . page 19 sales in the measurement segment increased $ 1.3 million , or 63.1 % , to $ 3.5 million in fiscal 2011 compared to $ 2.1 million in fiscal 2010. sales of laser-based distance measurement and dimensional sizing products increased $ 1.1 million , or 67.1 % , primarily due to the higher volume of shipments in the current fiscal year resulting from the economic recovery in the commercial and industrial markets . sales of laser-based surface measurement products increased $ 160,000 , or 32.3 % , primarily due to the sale of a casi scatterometer and the september 30 , 2009 acquisition of optical dimensions which resulted in product sales of $ 202,000 during fiscal 2011. during fiscal 2011 , we started to ship our xact ultrasonic measurement product which resulted in $ 102,000 of revenues . gross margin gross margin in fiscal 2012 decreased to 43.9 % compared to 48.8 % in fiscal 2011. this decrease was primarily due to higher inventory reserves associated with an end-of-life sbs balancer product , higher labor and overhead costs related to the increased sales volumes offset by a reduction in inventory component costs . gross margin in fiscal 2011 increased to 48.8 % compared to 44.7 % in fiscal 2010. this increase is primarily due to a shift in product sales mix with sales increasing in the measurement segment , which typically have higher gross margins than the balancer segment , and sales in the balancer segment rebounding positively in the north american market , which generally have slightly higher margins than asia due to the channel and distributor discounts required in asia . operating expenses operating expenses increased $ 484,000 , or 8.3 % , to $ 6.3 million for fiscal 2012 compared to $ 5.8 million in fiscal 2011. general , administrative and sales expenses increased $ 670,000 , or 12.7 % , to $ 6.0 million in fiscal 2012 compared to $ 5.3 million in the prior year . this increase is due primarily to higher personnel costs , higher commissions related to the increased sales and higher sales and marketing expenses . research and development expenses decreased $ 186,000 , or 36.9 % , to $ 318,000 in fiscal 2012 compared to $ 504,000 in fiscal 2011. the decrease in research and development expense is primarily due to lower material costs associated with new product development related to existing product lines . operating expenses increased $ 1.0 million , or 21.7 % , to $ 5.8 million for fiscal 2011 compared to $ 4.8 million in fiscal 2010. general , administrative and sales expenses increased $ 1.1 million , or 26.6 % , to $ 5.3 million in fiscal 2011 compared to $ 4.2 million in the prior year . this increase is due primarily to higher commissions related to the increase in sales , higher stock-based compensation and higher expenses associated with an international trade show that occurs every two years . research and development expenses decreased $ 80,000 , or 13.7 % , to $ 504,000 in fiscal 2011 as compared to $ 585,000 in fiscal 2010. research and development expenses decreased primarily due to lower material costs associated with new product development . other income other income consists of interest income , foreign currency exchange gain ( loss ) and other income ( expense ) . interest income was $ 2,000 , $ 4,000 and $ 11,000 in fiscal 2012 , 2011 and 2010 , respectively . interest income has decreased due to lower average cash and investment balances and lower interest rates . foreign currency exchange gain was $ 18,000 and $ 19,000 in fiscal 2012 and 2010 , respectively . foreign currency exchange loss was $ 10,000 in fiscal 2011. the foreign currency exchange gain ( loss ) fluctuated with the strength of foreign currencies against the u.s. dollar during the respective periods . other income consisted of an $ 18,000 gain on the sales of fixed assets for fiscal 2012. income tax provision the effective tax rate in fiscal 2012 was 18.1 % . the effective tax rate on consolidated net income in fiscal 2012 differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions , changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting offset by tax credits related to research and experimentation expenses . the effective tax rate on consolidated net loss was ( 0.8 ) % for fiscal 2011. the company 's effective tax rate on consolidated net loss differs from the federal statutory rate primarily due to the amount of income
| cash and cash equivalents $ 174,606 $ 227,441 cash held at clearing organizations , net of customer cash 52,414 19,636 total balance sheet cash $ 227,020 $ 247,077 we believe that , based on current levels of operations , our cash from operations , together with our current cash holdings and available borrowings under our credit agreement with bank of america n.a . and certain other lenders ( the `` credit agreement '' ) , will be sufficient to fund our operations for at least the next twelve months . poor financial results , unanticipated expenses or unanticipated acquisitions or strategic investments could give rise to additional financing requirements sooner than we expect . there can be no assurance that equity or debt financing will be available when needed or , if available , that the financing will be on terms satisfactory to us and not dilutive to our then-current stockholders . sources and uses of cash the following table sets forth our cash flows from operating activities , investing activities and financing activities for the indicated periods . replace_table_token_18_th net cash provided by operating activities was $ 19.0 million for the year ended december 31 , 2013 compared with net cash provided by operating activities of $ 48.7 million for the year ended december 31 , 2012 , a net decrease in cash provided by operating activities of $ 29.7 million . the decrease in cash provided by operating activities was primarily due to a $ 26.7 increase in cash used for working capital in the year ended december 31 , 2013. such items include changes in ( i ) payables to clearing service customers , ( ii ) accounts receivable , ( iii ) accrued compensation and accounts payable , ( iv ) receivables from/payables to brokers , dealers , and clearing organizations , and ( v ) other assets and liabilities , largely attributable to deferred tax assets and interest payable .
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allowance for doubtful accounts our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make required payments . credit limits for all customers are established based upon several factors , including but not limited to financial condition and stability , payment history , published credit reports and use of credit references . on a monthly basis , management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value . this review includes accounts receivable agings , other operating trends and relevant business conditions , including general economic factors , as they relate to the company 's domestic and international customers . when a customer 's account balance becomes past due , we initiate dialogue with the customer to determine the cause . if it is determined that the customer will be unable to meet its financial obligation to us , such as in the case of a bankruptcy filing , we record a specific allowance to reduce the related receivable to the amount we expect to recover given all of the information presently available . inventories as a designer and manufacturer of high technology systems , we are exposed to a number of economic and industry factors that could result in portions of our inventories becoming either obsolete or in excess of anticipated usage . these factors include , but are not limited to , technological changes in our markets , our ability to meet changing customer requirements , competitive pressures in products and prices , and the availability of key components from our suppliers . our policy is to record inventory write-downs when conditions exist that suggest our inventories may be in excess of anticipated demand for our products and market conditions . we regularly evaluate the ability to realize the value of our inventories based upon a combination of factors including the following : historical usage rates , forecasted sales or usage , product end of life dates , estimated current and future market values and new product introductions . purchasing requirements and alternative usage avenues are explored within these processes to mitigate inventory exposure . when recorded , our write-downs are intended to reduce the carrying value of our inventories to their net realizable value and establish a new cost basis . deferred taxes the company applies the asset and liability method in recording income taxes , under which deferred income tax assets and liabilities are determined , based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using currently enacted tax rates and laws . additionally , deferred tax assets are evaluated and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized . management continues to review the level of the valuation allowance on a quarterly basis . there can be no assurance that the company 's future operations will produce sufficient earnings so that the deferred tax assets can be fully utilized . intangible assets there is a periodic review of intangible and other long-lived assets for impairment . this review consists of the analysis of events or changes in circumstances that would indicate the carrying amount of the assets may not be recoverable . recoverability is determined by comparing the forecasted future undiscounted net cash flows from the operations to which the assets relate , based on management 's best estimates using the appropriate assumptions and projections at the time , to the carrying amount of the assets . if the carrying value is determined to be in excess of future operating cash flows , the asset is considered impaired and a loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the assets . recently issued accounting pronouncements refer to note 1 of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements . page 18 discussion of operating results replace_table_token_3_th sales sales in the balancer segment increased $ 1.3 million , or 15.7 % , to $ 9.3 million for fiscal 2012 compared to $ 8.0 million for fiscal 2011. this increase is primarily due to higher unit sales volumes in north america offset by decreases in unit sales volumes in asia and europe during the year . north american sales increased $ 1.5 million , or 45.9 % , in fiscal 2012 compared to fiscal 2011. sales into asia decreased $ 370,000 , or 9.7 % , in fiscal 2012 compared to the prior year . sales into europe decreased $ 14,000 , or 1.6 % , in fiscal 2012 compared to fiscal 2011. sales on other regions of the world increased $ 187,000 , or 162.3 % , during fiscal 2012 as compared to the prior year . the increases in north america and other regions of the world are primarily due to higher volumes of shipments as the worldwide automotive and industrial markets in these regions continue to recover from the global economic downturn . the decreases in asia and europe are due to a reduction in orders as economic growth in china is slowing and the uncertainty regarding the european economy continues to have a negative impact on manufacturing . the levels of demand for our balancer products in any of these geographic markets can not be forecasted with any certainty given current economic trends and the historical volatility experienced in this market . sales in the measurement segment increased $ 1.7 million , or 48.5 % , to $ 5.2 million in fiscal 2012 compared to $ 3.5 million in fiscal 2011. sales of laser-based distance measurement and dimensional-sizing products increased $ 772,000 , or 28.3 % , primarily due to a large , non-recurring sale during the fourth quarter of fiscal 2012. story_separator_special_tag sales of remote tank monitoring products increased $ 479,000 to $ 581,000 during fiscal 2012 due to the higher volume of shipments . sales of laser-based surface measurement products increased $ 439,000 , or 67.1 % , primarily due to the sale of two casi scatterometers . future sales of laser-based or ultrasonic measurement products can not be forecasted with any certainty given the historical volatility experienced in this market . sales in the balancer segment increased $ 3.3 million , or 71.5 % , to $ 8.0 million for fiscal 2011 compared to $ 4.7 million for fiscal 2010. this increase is primarily due to higher unit sales volumes in asia , north america and europe during the year . asia sales increased $ 1.8 million , or 93.5 % , in fiscal 2011 compared to fiscal 2010. north american sales increased $ 1.4 million , or 77.9 % , in fiscal 2011 compared to the prior year . european sales increased $ 108,000 , or 13.5 % , in fiscal 2011 compared to fiscal 2010. the increases across all geographies are primarily due to higher volumes of shipments as the worldwide automotive and industrial markets in these regions have begun to recover from the previous low levels due to the global economic downturn . page 19 sales in the measurement segment increased $ 1.3 million , or 63.1 % , to $ 3.5 million in fiscal 2011 compared to $ 2.1 million in fiscal 2010. sales of laser-based distance measurement and dimensional sizing products increased $ 1.1 million , or 67.1 % , primarily due to the higher volume of shipments in the current fiscal year resulting from the economic recovery in the commercial and industrial markets . sales of laser-based surface measurement products increased $ 160,000 , or 32.3 % , primarily due to the sale of a casi scatterometer and the september 30 , 2009 acquisition of optical dimensions which resulted in product sales of $ 202,000 during fiscal 2011. during fiscal 2011 , we started to ship our xact ultrasonic measurement product which resulted in $ 102,000 of revenues . gross margin gross margin in fiscal 2012 decreased to 43.9 % compared to 48.8 % in fiscal 2011. this decrease was primarily due to higher inventory reserves associated with an end-of-life sbs balancer product , higher labor and overhead costs related to the increased sales volumes offset by a reduction in inventory component costs . gross margin in fiscal 2011 increased to 48.8 % compared to 44.7 % in fiscal 2010. this increase is primarily due to a shift in product sales mix with sales increasing in the measurement segment , which typically have higher gross margins than the balancer segment , and sales in the balancer segment rebounding positively in the north american market , which generally have slightly higher margins than asia due to the channel and distributor discounts required in asia . operating expenses operating expenses increased $ 484,000 , or 8.3 % , to $ 6.3 million for fiscal 2012 compared to $ 5.8 million in fiscal 2011. general , administrative and sales expenses increased $ 670,000 , or 12.7 % , to $ 6.0 million in fiscal 2012 compared to $ 5.3 million in the prior year . this increase is due primarily to higher personnel costs , higher commissions related to the increased sales and higher sales and marketing expenses . research and development expenses decreased $ 186,000 , or 36.9 % , to $ 318,000 in fiscal 2012 compared to $ 504,000 in fiscal 2011. the decrease in research and development expense is primarily due to lower material costs associated with new product development related to existing product lines . operating expenses increased $ 1.0 million , or 21.7 % , to $ 5.8 million for fiscal 2011 compared to $ 4.8 million in fiscal 2010. general , administrative and sales expenses increased $ 1.1 million , or 26.6 % , to $ 5.3 million in fiscal 2011 compared to $ 4.2 million in the prior year . this increase is due primarily to higher commissions related to the increase in sales , higher stock-based compensation and higher expenses associated with an international trade show that occurs every two years . research and development expenses decreased $ 80,000 , or 13.7 % , to $ 504,000 in fiscal 2011 as compared to $ 585,000 in fiscal 2010. research and development expenses decreased primarily due to lower material costs associated with new product development . other income other income consists of interest income , foreign currency exchange gain ( loss ) and other income ( expense ) . interest income was $ 2,000 , $ 4,000 and $ 11,000 in fiscal 2012 , 2011 and 2010 , respectively . interest income has decreased due to lower average cash and investment balances and lower interest rates . foreign currency exchange gain was $ 18,000 and $ 19,000 in fiscal 2012 and 2010 , respectively . foreign currency exchange loss was $ 10,000 in fiscal 2011. the foreign currency exchange gain ( loss ) fluctuated with the strength of foreign currencies against the u.s. dollar during the respective periods . other income consisted of an $ 18,000 gain on the sales of fixed assets for fiscal 2012. income tax provision the effective tax rate in fiscal 2012 was 18.1 % . the effective tax rate on consolidated net income in fiscal 2012 differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions , changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting offset by tax credits related to research and experimentation expenses . the effective tax rate on consolidated net loss was ( 0.8 ) % for fiscal 2011. the company 's effective tax rate on consolidated net loss differs from the federal statutory rate primarily due to the amount of income
| liquidity and capital resources the company 's working capital increased $ 432,000 to $ 7.9 million as of may 31 , 2012 compared to $ 7.5 million as of may 31 , 2011. cash and cash equivalents increased $ 16,000 from may 31 , 2011 to $ 2.8 million as of may 31 , 2012. cash provided by operating activities was $ 163,000 in fiscal 2012 as compared to cash used in operations of $ 559,000 in fiscal 2011. the increase is primarily due to increases in net income , decrease in inventory and an increase in accrued liabilities , offset by increases in accounts receivable and prepaid expenses and decreases in accounts payable . at may 31 , 2012 , accounts receivable increased $ 662,000 to $ 2.5 million compared to $ 1.8 million as of may 31 , 2011. the increase in accounts receivable is due to the increase in sales during fiscal 2012. inventories decreased $ 171,000 to $ 4.0 million as of may 31 , 2012 compared to $ 4.1 million at may 31 , 2011 due to increased inventory reserves related to an end-of-life sbs product . at may 31 , 2012 , total current liabilities increased $ 103,000 to $ 1.5 million as compared to $ 1.4 million at may 31 , 2011. the increase is primarily due to an increase in other accrued liabilities associated with a customer deposit on a future order offsetby lower accounts payables as compared to the prior year .
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these actions included adjustments to workforce , reduced purchases of raw materials and reductions in selling , general , and administrative expenses . the company continues to review its internal processes to identify inefficiencies and cost reduction opportunities . the company will continue to scrutinize its relationships with external suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost . results of operations year ended september 30 , 2013 compared with the year ended september 30 , 2012 net revenues for the year ended september 30 , 2013 were $ 48.9 million , a decrease of 22.5 % or $ 14.3 million from $ 63.2 million for the year ended september 30 , 2012. the decrease in net revenues was the result of the successful completion of a large asphalt plant delivered in fiscal 2012 and continued weak domestic road-building activity . in addition , canadian sales declined as the canadian government 's infrastructure spend under the building canada plan nears completion . gross margins for fiscal 2013 were $ 11.0 million , or 22.5 % of net revenues , versus $ 12.0 million in 2012 , or 19.0 % of net revenues . the gross margin increase of 350 basis points in 2013 was due to reduced material costs and improved manufacturing efficiencies . 16 product engineering and development expenses decreased $ 626,000 or 26.8 % to $ 1,713,000 in 2013 in line with the decrease in revenues . selling , general and administrative expenses decreased $ 2,586,000 or 27.8 % to $ 6,712,000 as a result of reduced commissions and headcount reductions related to the lower revenues , and lower legal and advertising expenses . the company has historically participated in the construction industry 's triennial conexpo-con/agg show ( conexpo ) . the costs associated with the company 's full-scale conexpo exhibits have been significant . during fiscal 2013 , the company reduced its estimated advertising expenses for the 2014 conexpo show by $ 750,000 as management deemed it prudent to curtail such expenditures due to the current condition of the highway construction industry . fiscal 2013 had operating income of $ 2,578,000 versus $ 393,000 in fiscal 2012. operating margins for fiscal 2013 were 5.3 % compared with 0.6 % in fiscal 2012. the improved operating results in 2013 were due to continued improvements in production , lower purchasing costs , reduced product engineering and development expenses , and tight controls on selling , general and administrative expenses . as of september 30 , 2013 and 2012 , the cost basis of the investment portfolio was $ 81.2 million and $ 80.6 million , respectively . $ 2.5 million of cash from operations was transferred into the investment portfolio during fiscal 2012 while $ 2.0 million in cash was transferred from the investment portfolio back into operating cash in fiscal 2013. in each of years ended september 30 , 2013 and 2012 , net investment interest and dividend income ( investment income ) was $ 2.3 million . the net realized and unrealized gains on marketable securities were $ 1.5 million in 2013 versus $ 4.1 million in 2012. total cash and investment balance at september 30 , 2013 was $ 92.7 million compared to the september 30 , 2012 cash and investment balance of $ 84.7 million . the effective income tax rate for fiscal 2013 was a benefit of ( 6.2 % ) versus expense of 34.7 % in fiscal 2012. the company received favorable irs rulings on its research and development tax credits ( r & d credits ) on amended returns filed for tax years 2006 through 2010 ( fiscal years 2007 through 2011 ) . in total , the company received tax refunds of $ 827,000 related to r & d credits for tax years 2006 through 2008 and recorded additional r & d credits of $ 1,302,000 related to tax years 2009 through 2012 ( fiscal years 2010 through 2013 ) . r & d credits of $ 2,129,000 are included in the company 's income tax benefit of ( $ 392,000 ) in the consolidated statement of operations for the year ended september 30 , 2013. of the $ 1,302,000 in r & d credits , $ 497,000 reduced the company 's current federal income taxes payable for the year ended september 30 , 2013 and $ 805,000 is included as r & d credits carry-forwards in the net deferred income and other tax liabilities of ( $ 484,000 ) in the consolidated balance sheet as of september 30 , 2013. the change in the effective income tax rate between years is primarily due to the r & d credits recorded in fiscal 2013 ( see note 6 to consolidated financial statements ) . net income for the year ended september 30 , 2013 was $ 6,725,000 or $ .71 per share versus $ 4,472,000 or $ .47 per share for the year ended september 30 , 2012. story_separator_special_tag reduced by 75 % , and the cost basis of inventories greater than five years old are reduced to zero . inventory is typically reviewed for obsolescence on an annual basis computed as of september 30th , the company 's fiscal year end . if significant known changes in trends , technology or other specific circumstances that warrant consideration occur during the year , then the impact on obsolescence is considered at that time . investments marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value . fair value is determined using the quoted closing or latest bid prices for level 1 investments and market standard valuation methodologies for level 2 investments . realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations . net unrealized gains and losses are reported in the consolidated statements of operations in the current story_separator_special_tag these actions included adjustments to workforce , reduced purchases of raw materials and reductions in selling , general , and administrative expenses . the company continues to review its internal processes to identify inefficiencies and cost reduction opportunities . the company will continue to scrutinize its relationships with external suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost . results of operations year ended september 30 , 2013 compared with the year ended september 30 , 2012 net revenues for the year ended september 30 , 2013 were $ 48.9 million , a decrease of 22.5 % or $ 14.3 million from $ 63.2 million for the year ended september 30 , 2012. the decrease in net revenues was the result of the successful completion of a large asphalt plant delivered in fiscal 2012 and continued weak domestic road-building activity . in addition , canadian sales declined as the canadian government 's infrastructure spend under the building canada plan nears completion . gross margins for fiscal 2013 were $ 11.0 million , or 22.5 % of net revenues , versus $ 12.0 million in 2012 , or 19.0 % of net revenues . the gross margin increase of 350 basis points in 2013 was due to reduced material costs and improved manufacturing efficiencies . 16 product engineering and development expenses decreased $ 626,000 or 26.8 % to $ 1,713,000 in 2013 in line with the decrease in revenues . selling , general and administrative expenses decreased $ 2,586,000 or 27.8 % to $ 6,712,000 as a result of reduced commissions and headcount reductions related to the lower revenues , and lower legal and advertising expenses . the company has historically participated in the construction industry 's triennial conexpo-con/agg show ( conexpo ) . the costs associated with the company 's full-scale conexpo exhibits have been significant . during fiscal 2013 , the company reduced its estimated advertising expenses for the 2014 conexpo show by $ 750,000 as management deemed it prudent to curtail such expenditures due to the current condition of the highway construction industry . fiscal 2013 had operating income of $ 2,578,000 versus $ 393,000 in fiscal 2012. operating margins for fiscal 2013 were 5.3 % compared with 0.6 % in fiscal 2012. the improved operating results in 2013 were due to continued improvements in production , lower purchasing costs , reduced product engineering and development expenses , and tight controls on selling , general and administrative expenses . as of september 30 , 2013 and 2012 , the cost basis of the investment portfolio was $ 81.2 million and $ 80.6 million , respectively . $ 2.5 million of cash from operations was transferred into the investment portfolio during fiscal 2012 while $ 2.0 million in cash was transferred from the investment portfolio back into operating cash in fiscal 2013. in each of years ended september 30 , 2013 and 2012 , net investment interest and dividend income ( investment income ) was $ 2.3 million . the net realized and unrealized gains on marketable securities were $ 1.5 million in 2013 versus $ 4.1 million in 2012. total cash and investment balance at september 30 , 2013 was $ 92.7 million compared to the september 30 , 2012 cash and investment balance of $ 84.7 million . the effective income tax rate for fiscal 2013 was a benefit of ( 6.2 % ) versus expense of 34.7 % in fiscal 2012. the company received favorable irs rulings on its research and development tax credits ( r & d credits ) on amended returns filed for tax years 2006 through 2010 ( fiscal years 2007 through 2011 ) . in total , the company received tax refunds of $ 827,000 related to r & d credits for tax years 2006 through 2008 and recorded additional r & d credits of $ 1,302,000 related to tax years 2009 through 2012 ( fiscal years 2010 through 2013 ) . r & d credits of $ 2,129,000 are included in the company 's income tax benefit of ( $ 392,000 ) in the consolidated statement of operations for the year ended september 30 , 2013. of the $ 1,302,000 in r & d credits , $ 497,000 reduced the company 's current federal income taxes payable for the year ended september 30 , 2013 and $ 805,000 is included as r & d credits carry-forwards in the net deferred income and other tax liabilities of ( $ 484,000 ) in the consolidated balance sheet as of september 30 , 2013. the change in the effective income tax rate between years is primarily due to the r & d credits recorded in fiscal 2013 ( see note 6 to consolidated financial statements ) . net income for the year ended september 30 , 2013 was $ 6,725,000 or $ .71 per share versus $ 4,472,000 or $ .47 per share for the year ended september 30 , 2012. story_separator_special_tag reduced by 75 % , and the cost basis of inventories greater than five years old are reduced to zero . inventory is typically reviewed for obsolescence on an annual basis computed as of september 30th , the company 's fiscal year end . if significant known changes in trends , technology or other specific circumstances that warrant consideration occur during the year , then the impact on obsolescence is considered at that time . investments marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value . fair value is determined using the quoted closing or latest bid prices for level 1 investments and market standard valuation methodologies for level 2 investments . realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations . net unrealized gains and losses are reported in the consolidated statements of operations in the current
| liquidity and capital resources the company 's working capital increased $ 432,000 to $ 7.9 million as of may 31 , 2012 compared to $ 7.5 million as of may 31 , 2011. cash and cash equivalents increased $ 16,000 from may 31 , 2011 to $ 2.8 million as of may 31 , 2012. cash provided by operating activities was $ 163,000 in fiscal 2012 as compared to cash used in operations of $ 559,000 in fiscal 2011. the increase is primarily due to increases in net income , decrease in inventory and an increase in accrued liabilities , offset by increases in accounts receivable and prepaid expenses and decreases in accounts payable . at may 31 , 2012 , accounts receivable increased $ 662,000 to $ 2.5 million compared to $ 1.8 million as of may 31 , 2011. the increase in accounts receivable is due to the increase in sales during fiscal 2012. inventories decreased $ 171,000 to $ 4.0 million as of may 31 , 2012 compared to $ 4.1 million at may 31 , 2011 due to increased inventory reserves related to an end-of-life sbs product . at may 31 , 2012 , total current liabilities increased $ 103,000 to $ 1.5 million as compared to $ 1.4 million at may 31 , 2011. the increase is primarily due to an increase in other accrued liabilities associated with a customer deposit on a future order offsetby lower accounts payables as compared to the prior year .
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these actions included adjustments to workforce , reduced purchases of raw materials and reductions in selling , general , and administrative expenses . the company continues to review its internal processes to identify inefficiencies and cost reduction opportunities . the company will continue to scrutinize its relationships with external suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost . results of operations year ended september 30 , 2013 compared with the year ended september 30 , 2012 net revenues for the year ended september 30 , 2013 were $ 48.9 million , a decrease of 22.5 % or $ 14.3 million from $ 63.2 million for the year ended september 30 , 2012. the decrease in net revenues was the result of the successful completion of a large asphalt plant delivered in fiscal 2012 and continued weak domestic road-building activity . in addition , canadian sales declined as the canadian government 's infrastructure spend under the building canada plan nears completion . gross margins for fiscal 2013 were $ 11.0 million , or 22.5 % of net revenues , versus $ 12.0 million in 2012 , or 19.0 % of net revenues . the gross margin increase of 350 basis points in 2013 was due to reduced material costs and improved manufacturing efficiencies . 16 product engineering and development expenses decreased $ 626,000 or 26.8 % to $ 1,713,000 in 2013 in line with the decrease in revenues . selling , general and administrative expenses decreased $ 2,586,000 or 27.8 % to $ 6,712,000 as a result of reduced commissions and headcount reductions related to the lower revenues , and lower legal and advertising expenses . the company has historically participated in the construction industry 's triennial conexpo-con/agg show ( conexpo ) . the costs associated with the company 's full-scale conexpo exhibits have been significant . during fiscal 2013 , the company reduced its estimated advertising expenses for the 2014 conexpo show by $ 750,000 as management deemed it prudent to curtail such expenditures due to the current condition of the highway construction industry . fiscal 2013 had operating income of $ 2,578,000 versus $ 393,000 in fiscal 2012. operating margins for fiscal 2013 were 5.3 % compared with 0.6 % in fiscal 2012. the improved operating results in 2013 were due to continued improvements in production , lower purchasing costs , reduced product engineering and development expenses , and tight controls on selling , general and administrative expenses . as of september 30 , 2013 and 2012 , the cost basis of the investment portfolio was $ 81.2 million and $ 80.6 million , respectively . $ 2.5 million of cash from operations was transferred into the investment portfolio during fiscal 2012 while $ 2.0 million in cash was transferred from the investment portfolio back into operating cash in fiscal 2013. in each of years ended september 30 , 2013 and 2012 , net investment interest and dividend income ( investment income ) was $ 2.3 million . the net realized and unrealized gains on marketable securities were $ 1.5 million in 2013 versus $ 4.1 million in 2012. total cash and investment balance at september 30 , 2013 was $ 92.7 million compared to the september 30 , 2012 cash and investment balance of $ 84.7 million . the effective income tax rate for fiscal 2013 was a benefit of ( 6.2 % ) versus expense of 34.7 % in fiscal 2012. the company received favorable irs rulings on its research and development tax credits ( r & d credits ) on amended returns filed for tax years 2006 through 2010 ( fiscal years 2007 through 2011 ) . in total , the company received tax refunds of $ 827,000 related to r & d credits for tax years 2006 through 2008 and recorded additional r & d credits of $ 1,302,000 related to tax years 2009 through 2012 ( fiscal years 2010 through 2013 ) . r & d credits of $ 2,129,000 are included in the company 's income tax benefit of ( $ 392,000 ) in the consolidated statement of operations for the year ended september 30 , 2013. of the $ 1,302,000 in r & d credits , $ 497,000 reduced the company 's current federal income taxes payable for the year ended september 30 , 2013 and $ 805,000 is included as r & d credits carry-forwards in the net deferred income and other tax liabilities of ( $ 484,000 ) in the consolidated balance sheet as of september 30 , 2013. the change in the effective income tax rate between years is primarily due to the r & d credits recorded in fiscal 2013 ( see note 6 to consolidated financial statements ) . net income for the year ended september 30 , 2013 was $ 6,725,000 or $ .71 per share versus $ 4,472,000 or $ .47 per share for the year ended september 30 , 2012. story_separator_special_tag reduced by 75 % , and the cost basis of inventories greater than five years old are reduced to zero . inventory is typically reviewed for obsolescence on an annual basis computed as of september 30th , the company 's fiscal year end . if significant known changes in trends , technology or other specific circumstances that warrant consideration occur during the year , then the impact on obsolescence is considered at that time . investments marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value . fair value is determined using the quoted closing or latest bid prices for level 1 investments and market standard valuation methodologies for level 2 investments . realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations . net unrealized gains and losses are reported in the consolidated statements of operations in the current story_separator_special_tag these actions included adjustments to workforce , reduced purchases of raw materials and reductions in selling , general , and administrative expenses . the company continues to review its internal processes to identify inefficiencies and cost reduction opportunities . the company will continue to scrutinize its relationships with external suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost . results of operations year ended september 30 , 2013 compared with the year ended september 30 , 2012 net revenues for the year ended september 30 , 2013 were $ 48.9 million , a decrease of 22.5 % or $ 14.3 million from $ 63.2 million for the year ended september 30 , 2012. the decrease in net revenues was the result of the successful completion of a large asphalt plant delivered in fiscal 2012 and continued weak domestic road-building activity . in addition , canadian sales declined as the canadian government 's infrastructure spend under the building canada plan nears completion . gross margins for fiscal 2013 were $ 11.0 million , or 22.5 % of net revenues , versus $ 12.0 million in 2012 , or 19.0 % of net revenues . the gross margin increase of 350 basis points in 2013 was due to reduced material costs and improved manufacturing efficiencies . 16 product engineering and development expenses decreased $ 626,000 or 26.8 % to $ 1,713,000 in 2013 in line with the decrease in revenues . selling , general and administrative expenses decreased $ 2,586,000 or 27.8 % to $ 6,712,000 as a result of reduced commissions and headcount reductions related to the lower revenues , and lower legal and advertising expenses . the company has historically participated in the construction industry 's triennial conexpo-con/agg show ( conexpo ) . the costs associated with the company 's full-scale conexpo exhibits have been significant . during fiscal 2013 , the company reduced its estimated advertising expenses for the 2014 conexpo show by $ 750,000 as management deemed it prudent to curtail such expenditures due to the current condition of the highway construction industry . fiscal 2013 had operating income of $ 2,578,000 versus $ 393,000 in fiscal 2012. operating margins for fiscal 2013 were 5.3 % compared with 0.6 % in fiscal 2012. the improved operating results in 2013 were due to continued improvements in production , lower purchasing costs , reduced product engineering and development expenses , and tight controls on selling , general and administrative expenses . as of september 30 , 2013 and 2012 , the cost basis of the investment portfolio was $ 81.2 million and $ 80.6 million , respectively . $ 2.5 million of cash from operations was transferred into the investment portfolio during fiscal 2012 while $ 2.0 million in cash was transferred from the investment portfolio back into operating cash in fiscal 2013. in each of years ended september 30 , 2013 and 2012 , net investment interest and dividend income ( investment income ) was $ 2.3 million . the net realized and unrealized gains on marketable securities were $ 1.5 million in 2013 versus $ 4.1 million in 2012. total cash and investment balance at september 30 , 2013 was $ 92.7 million compared to the september 30 , 2012 cash and investment balance of $ 84.7 million . the effective income tax rate for fiscal 2013 was a benefit of ( 6.2 % ) versus expense of 34.7 % in fiscal 2012. the company received favorable irs rulings on its research and development tax credits ( r & d credits ) on amended returns filed for tax years 2006 through 2010 ( fiscal years 2007 through 2011 ) . in total , the company received tax refunds of $ 827,000 related to r & d credits for tax years 2006 through 2008 and recorded additional r & d credits of $ 1,302,000 related to tax years 2009 through 2012 ( fiscal years 2010 through 2013 ) . r & d credits of $ 2,129,000 are included in the company 's income tax benefit of ( $ 392,000 ) in the consolidated statement of operations for the year ended september 30 , 2013. of the $ 1,302,000 in r & d credits , $ 497,000 reduced the company 's current federal income taxes payable for the year ended september 30 , 2013 and $ 805,000 is included as r & d credits carry-forwards in the net deferred income and other tax liabilities of ( $ 484,000 ) in the consolidated balance sheet as of september 30 , 2013. the change in the effective income tax rate between years is primarily due to the r & d credits recorded in fiscal 2013 ( see note 6 to consolidated financial statements ) . net income for the year ended september 30 , 2013 was $ 6,725,000 or $ .71 per share versus $ 4,472,000 or $ .47 per share for the year ended september 30 , 2012. story_separator_special_tag reduced by 75 % , and the cost basis of inventories greater than five years old are reduced to zero . inventory is typically reviewed for obsolescence on an annual basis computed as of september 30th , the company 's fiscal year end . if significant known changes in trends , technology or other specific circumstances that warrant consideration occur during the year , then the impact on obsolescence is considered at that time . investments marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value . fair value is determined using the quoted closing or latest bid prices for level 1 investments and market standard valuation methodologies for level 2 investments . realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated statements of operations . net unrealized gains and losses are reported in the consolidated statements of operations in the current
| liquidity and capital resources the company generates capital resources through operations and returns on its investments . the company had no long-term debt outstanding at september 30 , 2013 or 2012. the company does not currently require a credit facility but continues to review and evaluate its needs and options for such a facility . as of september 30 , 2013 , the company has funded $ 352,000 in cash deposits at insurance companies to cover collateral needs . as of september 30 , 2013 , the company had $ 9.6 million in cash and cash equivalents , and $ 83.1 million in marketable securities . the marketable securities are invested through a professional investment management firm . the securities may be liquidated at any time into cash and cash equivalents . the company 's backlog was $ 5.4 million at september 30 , 2013 versus $ 3.4 million at september 30 , 2012. the company 's working capital ( defined as current assets less current liabilities ) was $ 102.8 million at september 30 , 2013 versus $ 96.2 million at september 30 , 2012. the net deferred income and other tax liability decreased $ 490,000 due primarily to an increase in deferred tax assets related to the r & d credits ( refer to note 6 to 17 consolidated financial statements ) . costs and estimated earnings in excess of billings decreased $ 3.4 million as all open percentage-of-completion jobs as of september 30 , 2012 were completed during fiscal 2013 and there were no percentage-of-completion jobs qualifying for revenue recognition as of september 30 , 2013. inventories increased $ 2,208,000 as the company built stock for new orders and anticipated demand in the first and second quarters of fiscal 2014. customer deposits increased $ 1,463,000 on new orders . accrued expenses decreased $ 707,000 primarily due to the reduction in estimated conexpo expenses . cash provided by operations during the year ended september 30 , 2013 was $ 7,394,000. the cash used for investing activities during the year ended september 30 , 2013 of $ 1,198,000 was related to capital expenditures , primarily manufacturing equipment .
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accounts receivable related to consigned inventory is recognized when the customer takes title to such inventory from its consigned location , at which point inventory is relieved , title transfers , and we have a legally enforceable right to collection under the terms of our agreement with the related customers . we estimate potential future returns and sales allowances related to current period product revenue . management analyzes historical returns , changes in customer demand and acceptance of products when evaluating the adequacy of returns and sales allowances . estimates made by us may differ from actual returns and sales allowances . these differences may materially impact reported revenue and amounts ultimately collected on accounts receivable . historically , such differences have not been material . an allowance for distributor credits covering price adjustments is estimated based on our historical experience rates and also considering economic conditions and contractual terms . to date , actual distributor claims activity has been materially consistent with the provisions we have made based on our historical experience rates . the company had historically recognized a portion of revenue through certain distributors at the time the distributor resold the product to its end customer ( also referred to as the sell-through basis of revenue recognition ) given the difficulty in estimating the ultimate price of these product shipments and amount of potential returns . the company continuously reassesses its ability to 24 reliably estimate the ultimate price of these products and the amount of potential returns and , over the past several years , has made investments in its systems and updates to processes around its distribution channel to improve the quality of the information for preparing such estimates . as a result of this continuous reassessment , the company recognizes all revenue from distributors upon shipment to the distributor ( also referred to as the sell-in basis of revenue recognition ) as of second quarter of fiscal year 2018. inventories inventories are stated at the lower of ( i ) standard cost , which approximates actual cost on a first-in-first-out basis , or ( ii ) net realizable value . our standard cost revision policy is to monitor manufacturing variances and revise standard costs on a quarterly basis . because of the cyclical nature of the market , inventory levels , obsolescence of technology , and product life cycles , we generally write-down inventories to net realizable value based on forecasted product demand . actual demand and market conditions may be lower than those projected by us . this difference could have a material adverse effect on our gross margin should inventory write-downs beyond those initially recorded become necessary . alternatively , should actual demand and market conditions be more favorable than those estimated by us , gross margin could be favorably impacted as we release these reserves upon the ultimate product shipment . during fiscal years 2018 , 2017 and 2016 , we had net inventory write-downs of $ 21.4 million , $ 19.0 million and $ 26.2 million , respectively . when the company records a write-down on inventory , it establishes a new , lower cost basis for that inventory , and subsequent changes in facts and circumstances will not result in the restoration or increase in that newly established cost basis . long-lived assets we evaluate the recoverability of property , plant and equipment in accordance with accounting standards codification ( “ asc ” ) no . 360 , property , plant , and equipment ( “ asc 360 ” ) . we perform periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property , plant and equipment might not be fully recoverable . if facts and circumstances indicate that the carrying amount of property , plant and equipment might not be fully recoverable , we compare projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives against their respective carrying amounts . in the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets , the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets . evaluation of impairment of property , plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows . actual future operating results and the remaining economic lives of our property , plant and equipment could differ from our estimates used in assessing the recoverability of these assets . these differences could result in impairment charges , which could have a material adverse impact on our results of operations . intangible assets and goodwill we account for intangible assets in accordance with asc no . 350 , intangibles-goodwill and other ( “ asc 350 ” ) . we review goodwill and purchased intangible assets for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable , such as when reductions in demand or significant economic slowdowns in the semiconductor industry are present . intangible asset reviews are performed when indicators exist that could indicate the carrying value may not be recoverable based on comparisons to undiscounted expected future cash flows . if this comparison indicates that there is impairment , the impaired asset is written down to fair value , which is typically calculated using : ( i ) quoted market prices or ( ii ) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in fasb concepts statement no . 7 , using cash flow information and present value in accounting measurements . impairment is based on the excess of the carrying amount over the fair value of those assets . story_separator_special_tag fiscal year 2017 , which represented ( 0.3 ) % and ( 0.7 ) % of net revenues , respectively . the decrease in interest and other expense of $ 6.6 million was primarily attributable to increased interest income on cash equivalents and short-term investments as well as net gains from derivatives hedging due to increased strength of the u.s. dollar . interest and other income ( expense ) , net was $ ( 15.2 ) million in fiscal year 2017 and $ ( 28.8 ) million in fiscal year 2016 , which represented ( 0.7 ) % and ( 1.3 ) % of net revenues , respectively . the decrease in interest and other expense of $ 13.6 million was primarily attributable to increased interest income on cash equivalents and short-term investments . provision for income taxes our annual income tax expense was $ 357.6 million , $ 108.0 million and $ 57.6 million in fiscal years 2018 , 2017 and 2016 , respectively . the effective tax rate was 43.3 % , 15.9 % and 20.2 % for fiscal years 2018 , 2017 and 2016 , respectively . our federal statutory tax rate is 28.1 % for fiscal year 2018 and 35.0 % for fiscal years 2017 and 2016 . on december 22 , 2017 legislation commonly referred to as the tax cuts and jobs act ( the “ act ” ) was enacted . the primary impacts of the act in fiscal year 2018 are taxation of accumulated unremitted earnings of our foreign subsidiaries ( “ transition tax ” ) and a reduction of our federal statutory tax rate from 35.0 % to 28.1 % ( average of a 35.0 % rate for the first half of fiscal year 2018 and a 21.0 % rate for the second half of fiscal year 2018 ) . the act allows us to pay the transition tax in eight annual interest-free installments beginning in september 2018 , although for accounting purposes the transition tax was recorded in the second quarter of fiscal year 2018. the act has other provisions that will significantly impact us beginning in fiscal year 2019 , including a further reduction of the federal statutory tax rate to 21.0 % and provisions that impact taxation of our international earnings . securities and exchange commission staff accounting bulletin no . 118 allowed the use of provisional amounts ( reasonable estimates ) if accounting for the income tax effects of the act were not completed when our financial statements for the second quarter of fiscal year 2018 were issued . provisional amounts must be adjusted during the measurement period as accounting for income tax effects of the act is completed . the measurement period began on december 22 , 2017 , the enactment date of the act , and lasts no longer than one year . to compute the transition tax , we must calculate accumulated unremitted earnings of the company 's foreign subsidiaries and the amount of foreign income taxes paid on those earnings . the company made a reasonable estimate of the transition tax and in the second quarter of fiscal year 2018 recorded a provisional transition tax charge of $ 236.9 million , which consists of a $ 248.0 million transition tax liability less $ 11.1 million of deferred tax liabilities established in prior years for u.s. tax on unremitted foreign earnings . no adjustment to the provisional transition tax charge has been made as of the end of fiscal year 2018 as the company continues to gather information and analyze available guidance to more precisely compute the transition tax . our fiscal year 2018 effective tax rate was higher than the statutory rate primarily due to a $ 236.9 million provisional charge for the transition tax , a $ 13.7 million charge to remeasure deferred taxes at the enactment date of the act to reflect the federal statutory rate reduction , and $ 17.1 million of interest accruals for unrecognized tax benefits , partially offset by earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , and $ 11.1 million of excess tax benefits generated by the settlement of share-based awards . our fiscal year 2017 effective tax rate was lower than the statutory tax rate primarily due to earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , and $ 14.4 million of excess tax benefits generated by the settlement of share-based awards , partially offset by stock-based compensation for which no tax benefit is expected and $ 14.3 million of interest accruals for unrecognized tax benefits . our fiscal year 2016 effective tax rate was lower than the statutory tax rate primarily due to earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , partially offset by stock-based compensation for which no tax benefit is expected , $ 9.1 million of interest accruals for unrecognized tax benefits and $ 20.4 million of non-deductible goodwill included in the sale of the energy metering business . we have various entities domiciled within and outside the united states . the following is a breakout of our u.s. and foreign income ( loss ) before income taxes : 30 replace_table_token_7_th a relative increase in earnings in lower tax jurisdictions , such as ireland , may lower our consolidated effective tax rate , while a relative increase in earnings in higher tax jurisdictions , such as the united states , may increase our consolidated effective tax rate . in fiscal year 2018 the percentage of pre-tax income from our foreign operations increased , which was primarily due a fiscal year 2017 gain from the sale of the company 's micro-electromechanical systems ( mems ) business line that increased domestic pre-tax income . the impact of pre-tax income from foreign operations reduced our
| liquidity and capital resources the company generates capital resources through operations and returns on its investments . the company had no long-term debt outstanding at september 30 , 2013 or 2012. the company does not currently require a credit facility but continues to review and evaluate its needs and options for such a facility . as of september 30 , 2013 , the company has funded $ 352,000 in cash deposits at insurance companies to cover collateral needs . as of september 30 , 2013 , the company had $ 9.6 million in cash and cash equivalents , and $ 83.1 million in marketable securities . the marketable securities are invested through a professional investment management firm . the securities may be liquidated at any time into cash and cash equivalents . the company 's backlog was $ 5.4 million at september 30 , 2013 versus $ 3.4 million at september 30 , 2012. the company 's working capital ( defined as current assets less current liabilities ) was $ 102.8 million at september 30 , 2013 versus $ 96.2 million at september 30 , 2012. the net deferred income and other tax liability decreased $ 490,000 due primarily to an increase in deferred tax assets related to the r & d credits ( refer to note 6 to 17 consolidated financial statements ) . costs and estimated earnings in excess of billings decreased $ 3.4 million as all open percentage-of-completion jobs as of september 30 , 2012 were completed during fiscal 2013 and there were no percentage-of-completion jobs qualifying for revenue recognition as of september 30 , 2013. inventories increased $ 2,208,000 as the company built stock for new orders and anticipated demand in the first and second quarters of fiscal 2014. customer deposits increased $ 1,463,000 on new orders . accrued expenses decreased $ 707,000 primarily due to the reduction in estimated conexpo expenses . cash provided by operations during the year ended september 30 , 2013 was $ 7,394,000. the cash used for investing activities during the year ended september 30 , 2013 of $ 1,198,000 was related to capital expenditures , primarily manufacturing equipment .
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accounts receivable related to consigned inventory is recognized when the customer takes title to such inventory from its consigned location , at which point inventory is relieved , title transfers , and we have a legally enforceable right to collection under the terms of our agreement with the related customers . we estimate potential future returns and sales allowances related to current period product revenue . management analyzes historical returns , changes in customer demand and acceptance of products when evaluating the adequacy of returns and sales allowances . estimates made by us may differ from actual returns and sales allowances . these differences may materially impact reported revenue and amounts ultimately collected on accounts receivable . historically , such differences have not been material . an allowance for distributor credits covering price adjustments is estimated based on our historical experience rates and also considering economic conditions and contractual terms . to date , actual distributor claims activity has been materially consistent with the provisions we have made based on our historical experience rates . the company had historically recognized a portion of revenue through certain distributors at the time the distributor resold the product to its end customer ( also referred to as the sell-through basis of revenue recognition ) given the difficulty in estimating the ultimate price of these product shipments and amount of potential returns . the company continuously reassesses its ability to 24 reliably estimate the ultimate price of these products and the amount of potential returns and , over the past several years , has made investments in its systems and updates to processes around its distribution channel to improve the quality of the information for preparing such estimates . as a result of this continuous reassessment , the company recognizes all revenue from distributors upon shipment to the distributor ( also referred to as the sell-in basis of revenue recognition ) as of second quarter of fiscal year 2018. inventories inventories are stated at the lower of ( i ) standard cost , which approximates actual cost on a first-in-first-out basis , or ( ii ) net realizable value . our standard cost revision policy is to monitor manufacturing variances and revise standard costs on a quarterly basis . because of the cyclical nature of the market , inventory levels , obsolescence of technology , and product life cycles , we generally write-down inventories to net realizable value based on forecasted product demand . actual demand and market conditions may be lower than those projected by us . this difference could have a material adverse effect on our gross margin should inventory write-downs beyond those initially recorded become necessary . alternatively , should actual demand and market conditions be more favorable than those estimated by us , gross margin could be favorably impacted as we release these reserves upon the ultimate product shipment . during fiscal years 2018 , 2017 and 2016 , we had net inventory write-downs of $ 21.4 million , $ 19.0 million and $ 26.2 million , respectively . when the company records a write-down on inventory , it establishes a new , lower cost basis for that inventory , and subsequent changes in facts and circumstances will not result in the restoration or increase in that newly established cost basis . long-lived assets we evaluate the recoverability of property , plant and equipment in accordance with accounting standards codification ( “ asc ” ) no . 360 , property , plant , and equipment ( “ asc 360 ” ) . we perform periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property , plant and equipment might not be fully recoverable . if facts and circumstances indicate that the carrying amount of property , plant and equipment might not be fully recoverable , we compare projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives against their respective carrying amounts . in the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets , the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets . evaluation of impairment of property , plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows . actual future operating results and the remaining economic lives of our property , plant and equipment could differ from our estimates used in assessing the recoverability of these assets . these differences could result in impairment charges , which could have a material adverse impact on our results of operations . intangible assets and goodwill we account for intangible assets in accordance with asc no . 350 , intangibles-goodwill and other ( “ asc 350 ” ) . we review goodwill and purchased intangible assets for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable , such as when reductions in demand or significant economic slowdowns in the semiconductor industry are present . intangible asset reviews are performed when indicators exist that could indicate the carrying value may not be recoverable based on comparisons to undiscounted expected future cash flows . if this comparison indicates that there is impairment , the impaired asset is written down to fair value , which is typically calculated using : ( i ) quoted market prices or ( ii ) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in fasb concepts statement no . 7 , using cash flow information and present value in accounting measurements . impairment is based on the excess of the carrying amount over the fair value of those assets . story_separator_special_tag fiscal year 2017 , which represented ( 0.3 ) % and ( 0.7 ) % of net revenues , respectively . the decrease in interest and other expense of $ 6.6 million was primarily attributable to increased interest income on cash equivalents and short-term investments as well as net gains from derivatives hedging due to increased strength of the u.s. dollar . interest and other income ( expense ) , net was $ ( 15.2 ) million in fiscal year 2017 and $ ( 28.8 ) million in fiscal year 2016 , which represented ( 0.7 ) % and ( 1.3 ) % of net revenues , respectively . the decrease in interest and other expense of $ 13.6 million was primarily attributable to increased interest income on cash equivalents and short-term investments . provision for income taxes our annual income tax expense was $ 357.6 million , $ 108.0 million and $ 57.6 million in fiscal years 2018 , 2017 and 2016 , respectively . the effective tax rate was 43.3 % , 15.9 % and 20.2 % for fiscal years 2018 , 2017 and 2016 , respectively . our federal statutory tax rate is 28.1 % for fiscal year 2018 and 35.0 % for fiscal years 2017 and 2016 . on december 22 , 2017 legislation commonly referred to as the tax cuts and jobs act ( the “ act ” ) was enacted . the primary impacts of the act in fiscal year 2018 are taxation of accumulated unremitted earnings of our foreign subsidiaries ( “ transition tax ” ) and a reduction of our federal statutory tax rate from 35.0 % to 28.1 % ( average of a 35.0 % rate for the first half of fiscal year 2018 and a 21.0 % rate for the second half of fiscal year 2018 ) . the act allows us to pay the transition tax in eight annual interest-free installments beginning in september 2018 , although for accounting purposes the transition tax was recorded in the second quarter of fiscal year 2018. the act has other provisions that will significantly impact us beginning in fiscal year 2019 , including a further reduction of the federal statutory tax rate to 21.0 % and provisions that impact taxation of our international earnings . securities and exchange commission staff accounting bulletin no . 118 allowed the use of provisional amounts ( reasonable estimates ) if accounting for the income tax effects of the act were not completed when our financial statements for the second quarter of fiscal year 2018 were issued . provisional amounts must be adjusted during the measurement period as accounting for income tax effects of the act is completed . the measurement period began on december 22 , 2017 , the enactment date of the act , and lasts no longer than one year . to compute the transition tax , we must calculate accumulated unremitted earnings of the company 's foreign subsidiaries and the amount of foreign income taxes paid on those earnings . the company made a reasonable estimate of the transition tax and in the second quarter of fiscal year 2018 recorded a provisional transition tax charge of $ 236.9 million , which consists of a $ 248.0 million transition tax liability less $ 11.1 million of deferred tax liabilities established in prior years for u.s. tax on unremitted foreign earnings . no adjustment to the provisional transition tax charge has been made as of the end of fiscal year 2018 as the company continues to gather information and analyze available guidance to more precisely compute the transition tax . our fiscal year 2018 effective tax rate was higher than the statutory rate primarily due to a $ 236.9 million provisional charge for the transition tax , a $ 13.7 million charge to remeasure deferred taxes at the enactment date of the act to reflect the federal statutory rate reduction , and $ 17.1 million of interest accruals for unrecognized tax benefits , partially offset by earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , and $ 11.1 million of excess tax benefits generated by the settlement of share-based awards . our fiscal year 2017 effective tax rate was lower than the statutory tax rate primarily due to earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , and $ 14.4 million of excess tax benefits generated by the settlement of share-based awards , partially offset by stock-based compensation for which no tax benefit is expected and $ 14.3 million of interest accruals for unrecognized tax benefits . our fiscal year 2016 effective tax rate was lower than the statutory tax rate primarily due to earnings of foreign subsidiaries , generated primarily by our international operations managed in ireland , that were taxed at lower rates , partially offset by stock-based compensation for which no tax benefit is expected , $ 9.1 million of interest accruals for unrecognized tax benefits and $ 20.4 million of non-deductible goodwill included in the sale of the energy metering business . we have various entities domiciled within and outside the united states . the following is a breakout of our u.s. and foreign income ( loss ) before income taxes : 30 replace_table_token_7_th a relative increase in earnings in lower tax jurisdictions , such as ireland , may lower our consolidated effective tax rate , while a relative increase in earnings in higher tax jurisdictions , such as the united states , may increase our consolidated effective tax rate . in fiscal year 2018 the percentage of pre-tax income from our foreign operations increased , which was primarily due a fiscal year 2017 gain from the sale of the company 's micro-electromechanical systems ( mems ) business line that increased domestic pre-tax income . the impact of pre-tax income from foreign operations reduced our
| cash flows were as follows : replace_table_token_8_th operating activities cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities . 31 cash provided by operating activities was $ 819.5 million in fiscal year 2018 , an increase of $ 45.8 million compared with fiscal year 2017 . this increase was primarily caused by an increase in income before provision for income taxes which resulted from higher revenue and improved gross margin . cash provided by operating activities was $ 773.7 million in fiscal year 2017 , an increase of $ 51.8 million compared with fiscal year 2016 . this increase was primarily driven by an increase in net income of $ 344.1 million driven by improved gross margin . this increase was offset by lower non-cash adjustments of $ 158.7 million of impairment of long-lived assets primarily related to the company 's wafer manufacturing facility in san antonio , texas in fiscal year 2016 and by lower non-cash adjustments of $ 80.3 million of depreciation and amortization charges . investing activities investing cash flows consist primarily of capital expenditures , net investment purchases and maturities and acquisitions . cash used in investing activities was $ 710.1 million in fiscal year 2018 , an increase of $ 384.7 million compared with fiscal year 2017 . the change was primarily due to a $ 997.2 million increase in purchases of available-for-sale securities , partially offset by a $ 678.2 million increase in proceeds from maturity of available-for-sale securities . cash used in investing activities was $ 325.4 million in fiscal year 2017 , an increase of $ 388.1 million compared with fiscal year 2016 . the change was primarily due to a $ 350.2 million increase in purchases of available-for-sale securities .
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replace_table_token_5_th 1 yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 net interest income divided by average interest-earning assets 26 rate/volume analysis the following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated . the change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each . rate/volume analysis of net interest income twelve months ended december 31 , 2015 vs. december 31 , 2014 due to changes in twelve months ended december 31 , 2014 vs. december 31 , 2013 due to changes in ( amounts in thousands ) volume rate net volume rate net interest income loans , including loans held-for-sale $ 9,624 $ ( 450 ) $ 9,174 $ 8,750 $ ( 1,718 ) $ 7,032 securities – taxable 417 275 692 301 ( 156 ) 145 securities – non-taxable 258 ( 4 ) 254 ( 1,381 ) ( 172 ) ( 1,553 ) other earning assets ( 71 ) 183 112 84 ( 29 ) 55 total 10,228 4 10,232 7,754 ( 2,075 ) 5,679 interest expense interest-bearing deposits 1,390 ( 288 ) 1,102 1,803 ( 1,011 ) 792 other borrowed funds 1,571 ( 907 ) 664 450 ( 402 ) 48 total 2,961 ( 1,195 ) 1,766 2,253 ( 1,413 ) 840 increase in net interest income $ 7,267 $ 1,199 $ 8,466 $ 5,501 $ ( 662 ) $ 4,839 2015 v. 2014 net interest income for the twelve months ended december 31 , 2015 was $ 30.8 million , an increase of $ 8.5 million , or 38.0 % , compared to $ 22.3 million for the twelve months ended december 31 , 2014 . net interest margin was 2.85 % for the twelve months ended december 31 , 2015 compared to 2.65 % for the twelve months ended december 31 , 2014 . the increases in net interest income and net interest margin were primarily driven by an increase in average interest-earning assets of $ 236.6 million , or 28.1 % , for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , as well as changes in the composition of the company 's balance sheet , which resulted in an increase in the yield earned on interest-earning assets and a decrease in the cost of funds related to interest-bearing liabilities . the increase in net interest income for the twelve months ended december 31 , 2015 , compared to the twelve months ended december 31 , 2014 , was also due to a $ 10.2 million , or 32.8 % , increase in total interest income to $ 41.4 million for the twelve months ended december 31 , 2015 compared to $ 31.2 million for the twelve months ended december 31 , 2014 . the increase in total interest income was partially offset by a $ 1.8 million , or 19.8 % , increase in total interest expense to $ 10.7 million for the twelve months ended december 31 , 2015 compared to $ 8.9 million for the twelve months ended december 31 , 2014 . the increase in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of $ 222.3 million , or 35.2 % , in the average balance of loans , including loans held-for-sale , as well as an increase in interest earned on securities resulting from an increase of $ 28.1 million , or 18.3 % , in the average balance of securities for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 . the increase in total interest income was also due to a 21 basis point ( “ bp ” ) increase in the yield earned on the securities portfolio , partially offset by a decline in the yield earned on loans , including loans held-for-sale , of 7 bps . the increase in total interest expense was driven primarily by an increase in interest expense related to interest-bearing deposits as a result of a $ 131.1 million , or 18.5 % , increase in the average balance of interest-bearing deposits for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , partially offset by a decline of 4 bps in the cost of funds related to these deposits . interest expense related to other borrowed funds also contributed to the increase in total interest expense , due to a $ 94.3 million , or 207.5 % , increase in the average balance of other borrowed funds for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , partially offset by a decline of 142 bps in the cost of other borrowed funds . 27 2014 v. 2013 net interest income for the twelve months ended december 31 , 2014 was $ 22.3 million , an increase of $ 4.8 million , or 27.7 % , compared to $ 17.4 million for the twelve months ended december 31 , 2013 . net interest margin was 2.65 % for the twelve months ended december 31 , 2014 compared to 2.67 % for the twelve months ended december 31 , 2013 . the increase in net interest income was primarily driven by an increase in average interest-earning assets of $ 187.2 million , or 28.6 % , for the twelve months ended december 31 , 2014 compared to the twelve months ended december 31 , 2013 . story_separator_special_tag as of december 31 , 2015 and 2014 , all of the company 's investment securities were classified as available-for-sale . the carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income ( loss ) . the company periodically evaluates each available-for-sale security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary . as of december 31 , 2015 , the unrealized losses in the company 's investment securities portfolio were due solely to interest rate changes . the company has the ability and intent to hold all investment securities with identified impairments resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security . as of december 31 , 2015 , the company did not have any investment securities of a single issuer , which were not governmental or government-sponsored , that exceeded 10 % of shareholders ' equity . the following tables present the amortized cost and approximate fair value of the company 's investment securities portfolio by security type as of the end of the last five years . replace_table_token_14_th 34 the approximate fair value of investment securities available-for-sale increased $ 76.2 million , or 55.4 % , to $ 213.7 million as of december 31 , 2015 compared to $ 137.5 million as of december 31 , 2014 . the increase was due primarily to increases of $ 24.2 million in u.s. government-sponsored agencies , $ 21.5 million in municipal securities , $ 14.4 million in asset-backed securities and $ 19.1 million in corporate securities , partially offset by a decrease of $ 4.0 million in mortgage-backed securities . during the twelve months ended december 31 , 2015 , the company deployed funds generated through deposit growth to purchase additional securities to further diversify the securities portfolio and enhance net interest income , while supporting liquidity and interest rate risk management . investment maturities the following table summarizes the contractual maturity schedule of the company 's investment securities at their amortized cost and their weighted average yields at december 31 , 2015 . 1 year or less more than 1 year to 5 years more than 5 years to 10 years more than 10 years total ( dollars in thousands ) amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield securities available for sale : u.s. government-sponsored agencies $ — — % $ 487 3.75 % $ 14,198 2.18 % $ 23,408 2.34 % $ 38,093 2.30 % municipal securities — — % — — % 1,160 2.50 % 19,931 3.10 % 21,091 3.07 % mortgage-backed securities — — % — — % 44,433 1.60 % 69,515 2.14 % 113,948 1.93 % asset-backed securities — — % — — % 5,083 2.27 % 14,361 2.60 % 19,444 2.51 % corporate securities — — % — — % 10,000 3.50 % 10,000 4.00 % 20,000 3.75 % total securities available for sale 1 $ — — % $ 487 3.75 % $ 74,874 2.02 % $ 137,215 2.50 % $ 212,576 2.33 % _ 1 a $ 3.0 million investment security has been excluded from this table because the security does not have a maturity date . deposits the following table presents the composition of the company 's deposit base as of the end of the last five years . replace_table_token_15_th total deposits increased $ 197.5 million , or 26.0 % , to $ 956.1 million as of december 31 , 2015 as compared to $ 758.6 million as of december 31 , 2014 . this increase was due primarily to increases of $ 109.5 million , or 30.3 % , in certificates of deposit , $ 74.7 million , or 28.0 % , in money market accounts , $ 10.0 million , or 13.5 % , in interest-bearing demand deposits , $ 2.0 million , or 9.8 % , in regular savings accounts , and $ 1.9 million , or 8.8 % , in noninterest-bearing deposits . 35 the following tables present contractual interest rates paid on time deposits , their scheduled maturities , and the scheduled maturities for time deposits $ 100,000 or greater . time deposits replace_table_token_16_th time deposit maturities at december 31 , 2015 replace_table_token_17_th time deposit maturities of $ 100,000 or greater replace_table_token_18_th federal home loan bank advances although deposits are the primary source of funds for our lending and investment activities and for general business purposes , we may obtain advances from the fhlb as an alternative to retail and commercial deposits . the following table is a summary of fhlb borrowings for the periods indicated . replace_table_token_19_th 36 story_separator_special_tag critical accounting policies and estimates allowance for loan losses . we believe the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of our consolidated financial statements . an estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates , expected cash flows , and estimated collateral values . the allowance for loan losses represents management 's best estimate of losses inherent in the existing loan portfolio . the allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off , net of recoveries . management evaluates the allowance for loan losses quarterly . if the underlying assumptions later prove to be inaccurate based on subsequent loss evaluations , the allowance for loan losses is adjusted . 38 management estimates the appropriate level of allowance for loan losses by separately evaluating impaired and non-impaired loans . a specific
| cash flows were as follows : replace_table_token_8_th operating activities cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities . 31 cash provided by operating activities was $ 819.5 million in fiscal year 2018 , an increase of $ 45.8 million compared with fiscal year 2017 . this increase was primarily caused by an increase in income before provision for income taxes which resulted from higher revenue and improved gross margin . cash provided by operating activities was $ 773.7 million in fiscal year 2017 , an increase of $ 51.8 million compared with fiscal year 2016 . this increase was primarily driven by an increase in net income of $ 344.1 million driven by improved gross margin . this increase was offset by lower non-cash adjustments of $ 158.7 million of impairment of long-lived assets primarily related to the company 's wafer manufacturing facility in san antonio , texas in fiscal year 2016 and by lower non-cash adjustments of $ 80.3 million of depreciation and amortization charges . investing activities investing cash flows consist primarily of capital expenditures , net investment purchases and maturities and acquisitions . cash used in investing activities was $ 710.1 million in fiscal year 2018 , an increase of $ 384.7 million compared with fiscal year 2017 . the change was primarily due to a $ 997.2 million increase in purchases of available-for-sale securities , partially offset by a $ 678.2 million increase in proceeds from maturity of available-for-sale securities . cash used in investing activities was $ 325.4 million in fiscal year 2017 , an increase of $ 388.1 million compared with fiscal year 2016 . the change was primarily due to a $ 350.2 million increase in purchases of available-for-sale securities .
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replace_table_token_5_th 1 yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 net interest income divided by average interest-earning assets 26 rate/volume analysis the following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated . the change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each . rate/volume analysis of net interest income twelve months ended december 31 , 2015 vs. december 31 , 2014 due to changes in twelve months ended december 31 , 2014 vs. december 31 , 2013 due to changes in ( amounts in thousands ) volume rate net volume rate net interest income loans , including loans held-for-sale $ 9,624 $ ( 450 ) $ 9,174 $ 8,750 $ ( 1,718 ) $ 7,032 securities – taxable 417 275 692 301 ( 156 ) 145 securities – non-taxable 258 ( 4 ) 254 ( 1,381 ) ( 172 ) ( 1,553 ) other earning assets ( 71 ) 183 112 84 ( 29 ) 55 total 10,228 4 10,232 7,754 ( 2,075 ) 5,679 interest expense interest-bearing deposits 1,390 ( 288 ) 1,102 1,803 ( 1,011 ) 792 other borrowed funds 1,571 ( 907 ) 664 450 ( 402 ) 48 total 2,961 ( 1,195 ) 1,766 2,253 ( 1,413 ) 840 increase in net interest income $ 7,267 $ 1,199 $ 8,466 $ 5,501 $ ( 662 ) $ 4,839 2015 v. 2014 net interest income for the twelve months ended december 31 , 2015 was $ 30.8 million , an increase of $ 8.5 million , or 38.0 % , compared to $ 22.3 million for the twelve months ended december 31 , 2014 . net interest margin was 2.85 % for the twelve months ended december 31 , 2015 compared to 2.65 % for the twelve months ended december 31 , 2014 . the increases in net interest income and net interest margin were primarily driven by an increase in average interest-earning assets of $ 236.6 million , or 28.1 % , for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , as well as changes in the composition of the company 's balance sheet , which resulted in an increase in the yield earned on interest-earning assets and a decrease in the cost of funds related to interest-bearing liabilities . the increase in net interest income for the twelve months ended december 31 , 2015 , compared to the twelve months ended december 31 , 2014 , was also due to a $ 10.2 million , or 32.8 % , increase in total interest income to $ 41.4 million for the twelve months ended december 31 , 2015 compared to $ 31.2 million for the twelve months ended december 31 , 2014 . the increase in total interest income was partially offset by a $ 1.8 million , or 19.8 % , increase in total interest expense to $ 10.7 million for the twelve months ended december 31 , 2015 compared to $ 8.9 million for the twelve months ended december 31 , 2014 . the increase in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of $ 222.3 million , or 35.2 % , in the average balance of loans , including loans held-for-sale , as well as an increase in interest earned on securities resulting from an increase of $ 28.1 million , or 18.3 % , in the average balance of securities for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 . the increase in total interest income was also due to a 21 basis point ( “ bp ” ) increase in the yield earned on the securities portfolio , partially offset by a decline in the yield earned on loans , including loans held-for-sale , of 7 bps . the increase in total interest expense was driven primarily by an increase in interest expense related to interest-bearing deposits as a result of a $ 131.1 million , or 18.5 % , increase in the average balance of interest-bearing deposits for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , partially offset by a decline of 4 bps in the cost of funds related to these deposits . interest expense related to other borrowed funds also contributed to the increase in total interest expense , due to a $ 94.3 million , or 207.5 % , increase in the average balance of other borrowed funds for the twelve months ended december 31 , 2015 compared to the twelve months ended december 31 , 2014 , partially offset by a decline of 142 bps in the cost of other borrowed funds . 27 2014 v. 2013 net interest income for the twelve months ended december 31 , 2014 was $ 22.3 million , an increase of $ 4.8 million , or 27.7 % , compared to $ 17.4 million for the twelve months ended december 31 , 2013 . net interest margin was 2.65 % for the twelve months ended december 31 , 2014 compared to 2.67 % for the twelve months ended december 31 , 2013 . the increase in net interest income was primarily driven by an increase in average interest-earning assets of $ 187.2 million , or 28.6 % , for the twelve months ended december 31 , 2014 compared to the twelve months ended december 31 , 2013 . story_separator_special_tag as of december 31 , 2015 and 2014 , all of the company 's investment securities were classified as available-for-sale . the carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income ( loss ) . the company periodically evaluates each available-for-sale security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary . as of december 31 , 2015 , the unrealized losses in the company 's investment securities portfolio were due solely to interest rate changes . the company has the ability and intent to hold all investment securities with identified impairments resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security . as of december 31 , 2015 , the company did not have any investment securities of a single issuer , which were not governmental or government-sponsored , that exceeded 10 % of shareholders ' equity . the following tables present the amortized cost and approximate fair value of the company 's investment securities portfolio by security type as of the end of the last five years . replace_table_token_14_th 34 the approximate fair value of investment securities available-for-sale increased $ 76.2 million , or 55.4 % , to $ 213.7 million as of december 31 , 2015 compared to $ 137.5 million as of december 31 , 2014 . the increase was due primarily to increases of $ 24.2 million in u.s. government-sponsored agencies , $ 21.5 million in municipal securities , $ 14.4 million in asset-backed securities and $ 19.1 million in corporate securities , partially offset by a decrease of $ 4.0 million in mortgage-backed securities . during the twelve months ended december 31 , 2015 , the company deployed funds generated through deposit growth to purchase additional securities to further diversify the securities portfolio and enhance net interest income , while supporting liquidity and interest rate risk management . investment maturities the following table summarizes the contractual maturity schedule of the company 's investment securities at their amortized cost and their weighted average yields at december 31 , 2015 . 1 year or less more than 1 year to 5 years more than 5 years to 10 years more than 10 years total ( dollars in thousands ) amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield amortized cost wtd . avg . yield securities available for sale : u.s. government-sponsored agencies $ — — % $ 487 3.75 % $ 14,198 2.18 % $ 23,408 2.34 % $ 38,093 2.30 % municipal securities — — % — — % 1,160 2.50 % 19,931 3.10 % 21,091 3.07 % mortgage-backed securities — — % — — % 44,433 1.60 % 69,515 2.14 % 113,948 1.93 % asset-backed securities — — % — — % 5,083 2.27 % 14,361 2.60 % 19,444 2.51 % corporate securities — — % — — % 10,000 3.50 % 10,000 4.00 % 20,000 3.75 % total securities available for sale 1 $ — — % $ 487 3.75 % $ 74,874 2.02 % $ 137,215 2.50 % $ 212,576 2.33 % _ 1 a $ 3.0 million investment security has been excluded from this table because the security does not have a maturity date . deposits the following table presents the composition of the company 's deposit base as of the end of the last five years . replace_table_token_15_th total deposits increased $ 197.5 million , or 26.0 % , to $ 956.1 million as of december 31 , 2015 as compared to $ 758.6 million as of december 31 , 2014 . this increase was due primarily to increases of $ 109.5 million , or 30.3 % , in certificates of deposit , $ 74.7 million , or 28.0 % , in money market accounts , $ 10.0 million , or 13.5 % , in interest-bearing demand deposits , $ 2.0 million , or 9.8 % , in regular savings accounts , and $ 1.9 million , or 8.8 % , in noninterest-bearing deposits . 35 the following tables present contractual interest rates paid on time deposits , their scheduled maturities , and the scheduled maturities for time deposits $ 100,000 or greater . time deposits replace_table_token_16_th time deposit maturities at december 31 , 2015 replace_table_token_17_th time deposit maturities of $ 100,000 or greater replace_table_token_18_th federal home loan bank advances although deposits are the primary source of funds for our lending and investment activities and for general business purposes , we may obtain advances from the fhlb as an alternative to retail and commercial deposits . the following table is a summary of fhlb borrowings for the periods indicated . replace_table_token_19_th 36 story_separator_special_tag critical accounting policies and estimates allowance for loan losses . we believe the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of our consolidated financial statements . an estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates , expected cash flows , and estimated collateral values . the allowance for loan losses represents management 's best estimate of losses inherent in the existing loan portfolio . the allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off , net of recoveries . management evaluates the allowance for loan losses quarterly . if the underlying assumptions later prove to be inaccurate based on subsequent loss evaluations , the allowance for loan losses is adjusted . 38 management estimates the appropriate level of allowance for loan losses by separately evaluating impaired and non-impaired loans . a specific
| liquidity and capital resources while the company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for at least the next twelve months , including any cash dividends it may pay , the company intends to continue pursuing its growth strategy , which may require additional capital . if the company is unable to secure such capital at favorable terms , its ability to execute its growth strategy could be adversely affected . liquidity management is the process used by the company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations . liquidity , represented by cash and investment securities , is a product of the company 's operating , investing and financing activities . the primary sources of funds are deposits , principal and interest payments on loans and investment securities , maturing loans and investment securities , access to wholesale funding sources and collateralized borrowings . while scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds , deposit flows are greatly influenced by interest rates , general economic conditions and competition . therefore , the company supplements deposit growth and enhances interest rate risk management through borrowings , which are generally advances from the fhlb . the company maintains cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments . at december 31 , 2015 , on a consolidated basis , the company had $ 239.9 million in cash and cash equivalents , interest-bearing time deposits and investment securities available-for-sale and $ 36.5 million in loans held-for-sale that were generally available for its cash needs . the company can also generate funds from wholesale funding sources and collateralized borrowings .
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cib marine recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used to estimate loan losses . if different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses , an additional provision for loan losses would be made , which amount may be material to the consolidated financial statements . 28 measurement of fair value a portion of cib marine 's assets and liabilities are carried at fair value on the consolidated balance sheets , with changes in fair value recorded either through earnings or other comprehensive income in accordance with applicable gaap . these include cib marine 's available for sale securities , interest-rate derivatives related to mortgage loan originations , and other equity securities . the estimation of fair value also affects certain other loans held for sale , which are not recorded at fair value but at the lower of cost or market . the determination of fair value is important for certain other assets , including impaired loans , and other real estate owned that are periodically evaluated for impairment using fair value estimates . fair value is generally defined as the amount at which an asset or liability could be exchanged in a current transaction between willing , unrelated parties , other than in a forced or liquidation sale . fair value is based on quoted market prices in an active market , or if market prices are not available , is estimated using models employing techniques such as matrix pricing or discounting expected cash flows . the significant assumptions used in the models , which include assumptions for interest rates , discount rates , prepayments and credit losses , are independently verified against observable market data where possible . where observable market data is not available , the estimate of fair value becomes more subjective and involves a high degree of judgment . in this circumstance , fair value is estimated based on management 's judgment regarding the value that market participants would assign to the asset or liability . this valuation process takes into consideration factors such as market illiquidity . imprecision in estimating these factors can impact the amount recorded on the balance sheet for a particular asset or liability with related impacts to earnings or other comprehensive income . see note 22 to the consolidated financial statements appearing in item 8 of part ii of this form 10-k. securities available for sale available for sale securities are carried at fair value with unrealized net gains and losses reported in other comprehensive income ( loss ) in stockholders ' equity . management evaluates securities for otti at least on a quarterly basis and more frequently when economic or market conditions warrant . declines in the fair value of securities available for sale that are deemed to be other-than-temporary are charged to earnings as a realized loss , and a new cost basis for the securities is established . in evaluating otti , cib marine 's management considers the length of time and extent to which the fair value has been less than cost , the financial condition and near-term prospects of the issuer , whether or not cib marine intends to sell or it is more likely than not cib marine will be required to sell the security prior to a period of time sufficient to allow for any anticipated recovery of fair value , and other factors as detailed in note 4 to the consolidated financial statements appearing in item 8 of part ii of this form 10-k. income taxes cib marine recognizes expense for federal and state income taxes currently payable as well as for deferred federal and state taxes for estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated balance sheets , as well as loss carryforwards and tax credit carryforwards . realization of deferred tax assets is dependent upon cib marine generating sufficient taxable income in either the carryforward or carryback periods to cover net operating losses generated by the reversal of temporary differences . a valuation allowance is provided by way of a charge to income tax expense if it is determined that it is not more likely than not that some portion or all of the deferred tax asset will be realized . if different assumptions and conditions were to prevail , the valuation allowance may not be adequate to absorb unrealized deferred taxes and the amount of income taxes payable may need to be adjusted by way of a charge or credit to expense . furthermore , income tax returns are subject to audit by the internal revenue service ( “ irs ” ) , state taxing authorities , and foreign government taxing authorities . income tax expense for current and prior periods is subject to adjustment based upon the outcome of such audits . cib marine believes it has adequately accrued for all probable income taxes payable and provided valuation allowances for deferred tax assets where it has been determined to be not more likely than not that such assets are realizable . accrual of income taxes payable and valuation allowances against deferred tax assets are estimates subject to change based upon the outcome of future events . 29 cib marine has entered into tax allocation agreements with its subsidiary entities included in the consolidated u.s. federal and unitary and combined state income tax returns , including u.s. operations of companies held for sale or disposal . these agreements govern the timing and amount of income tax payments required by the various entities . due to the significant losses incurred in 2006 through 2008 , as well as the operating losses from continuing operations in 2009 , management has determined that it is not more likely than not that the entire net deferred tax asset of $ 67.6 story_separator_special_tag cib marine 's net interest margin decreased by 20 basis points during 2008 compared to 2007 and its net interest spread increased by 7 basis points during the same period . the net interest margin decrease was primarily due to the increased reliance on interest bearing liabilities to fund the interest earning assets and the decline in the average yield on interest earning assets funded by non-interest bearing liabilities and capital . provision for loan losses the provision for loan losses represents charges made to earnings in order to maintain an allowance for loan losses and losses on unfunded commitments and standby letters of credit . the provision for loan losses increased $ 5.3 million from $ 22.1 million for the year ended december 31 , 2008 to $ 27.4 million for the year ended december 31 , 2009 and increased $ 15.7 million during 2008 from $ 6.4 million for the year ended december 31 , 2007. the provision for loan losses has been adversely affected by the economic environment and in particular for the following loan portfolio segments : home equity loan pools , construction and development loans , and commercial real estate loans . during 2009 , real estate markets continued to show signs of stress and deterioration , contributing to increased charge-offs and provisions . in particular , provisions during 2009 of $ 10.8 million , $ 6.2 million and $ 7.2 million were made due to deterioration in the credit quality of the home equity loan pools , construction and development loans , and commercial real estate loans , respectively . the provisions made for the year 2008 in each of these loan portfolio segments was $ 11.3 million , $ 11.0 million and a reversal of $ 2.2 million , respectively ; and provisions made for the year 2007 in each of these loan portfolio segments was $ 6.2 million , $ 2.2 million and a reversal of $ 1.4 million , respectively . 33 the $ 6.2 million provision allocated to the home equity pools in 2007 was primarily due to the purchase of the second pool of home equity loans in february 2007 and a sharp deterioration in credit quality beginning in the second quarter of 2007 ; while the $ 10.8 million and $ 11.3 million provision recorded in 2009 and 2008 , respectively , related to deterioration in the credit quality of these pools and the decision by cib marine to change its policy to charge-off 100 % of the outstanding principal balance of each loan in the pool when the loan is classified as 90 days past due on the servicer report received during the period . during 2009 , $ 11.7 million of these loans were charged-off compared to $ 12.4 million and $ 2.0 million during 2008 and 2007 , respectively . at december 31 , 2009 and 2008 , the remaining balance of these two purchased pools was $ 35.1 million and $ 52.2 million , respectively , with an allocated allowance of $ 3.9 million and $ 4.5 million , respectively . noninterest income noninterest income decreased $ 2.9 million from $ 4.4 million for the year ended december 31 , 2008 to $ 1.5 million for the year ended december 31 , 2009. the decrease was primarily due to a $ 4.1 million gain cib marine recognized during 2008 primarily from the sale of all of the branches and substantially all of the loans and deposits of its florida banking subsidiary with no comparable gain recognized in 2009. this was partially offset by a decrease of $ 1.4 million in otti from december 31 , 2008 to december 31 , 2009. noninterest income increased $ 1.3 million , or 43.1 % , from $ 3.1 million for the year ended december 31 , 2007 to $ 4.4 million for the year ended december 31 , 2008. the increase was mainly due to gain on sale of branches , offset partially by otti of $ 1.8 million for the year ended december 31 , 2008 compared to no otti in 2007. see securities available for sale section in item 7 of this form 10-k for further information regarding such adjustments . cib marine recognized a $ 4.1 million gain primarily from the sale of all of the branches and substantially all of the loans and deposits of its florida banking subsidiary in 2008. this compares to a $ 1.3 million gain recognized in 2007 primarily from the sale of two branches owned by marine bank . noninterest expense total noninterest expense decreased $ 8.9 million , or 22.2 % , from $ 39.9 million in 2008 , to $ 31.0 million in 2009. the decrease was primarily the result of the following : · compensation and employee benefits decreased $ 3.4 million , or 20.9 % , during 2009 compared to 2008 , primarily due to staff reductions due to the sale of cib marine 's florida banking subsidiary during the third quarter of 2008 and a reduction in force in the first quarter of 2009. the total number of full-time equivalent employees decreased from 197 at december 31 , 2008 to 165 at december 31 , 2009 . · equipment and occupancy expense together decreased $ 1.0 million , or 22.3 % , during 2009 compared to 2008 primarily due to the sale of cib marine 's florida banking subsidiary during the third quarter of 2008 . · a litigation reserve of $ 3.4 million was recorded and paid in 2008. there was no litigation reserve in 2009 . · fdic deposit insurance expense was $ 1.8 million for 2009 compared to $ 0.7 million for 2008. the increase of $ 1.1 million was the result of an effort by the fdic to replenish the deposit insurance fund in the wake of the recent increase in bank failures in the u.s. the fdic changed its rate structure in december 2008 to generally increase premiums
| liquidity and capital resources while the company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for at least the next twelve months , including any cash dividends it may pay , the company intends to continue pursuing its growth strategy , which may require additional capital . if the company is unable to secure such capital at favorable terms , its ability to execute its growth strategy could be adversely affected . liquidity management is the process used by the company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations . liquidity , represented by cash and investment securities , is a product of the company 's operating , investing and financing activities . the primary sources of funds are deposits , principal and interest payments on loans and investment securities , maturing loans and investment securities , access to wholesale funding sources and collateralized borrowings . while scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds , deposit flows are greatly influenced by interest rates , general economic conditions and competition . therefore , the company supplements deposit growth and enhances interest rate risk management through borrowings , which are generally advances from the fhlb . the company maintains cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments . at december 31 , 2015 , on a consolidated basis , the company had $ 239.9 million in cash and cash equivalents , interest-bearing time deposits and investment securities available-for-sale and $ 36.5 million in loans held-for-sale that were generally available for its cash needs . the company can also generate funds from wholesale funding sources and collateralized borrowings .
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cib marine recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used to estimate loan losses . if different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses , an additional provision for loan losses would be made , which amount may be material to the consolidated financial statements . 28 measurement of fair value a portion of cib marine 's assets and liabilities are carried at fair value on the consolidated balance sheets , with changes in fair value recorded either through earnings or other comprehensive income in accordance with applicable gaap . these include cib marine 's available for sale securities , interest-rate derivatives related to mortgage loan originations , and other equity securities . the estimation of fair value also affects certain other loans held for sale , which are not recorded at fair value but at the lower of cost or market . the determination of fair value is important for certain other assets , including impaired loans , and other real estate owned that are periodically evaluated for impairment using fair value estimates . fair value is generally defined as the amount at which an asset or liability could be exchanged in a current transaction between willing , unrelated parties , other than in a forced or liquidation sale . fair value is based on quoted market prices in an active market , or if market prices are not available , is estimated using models employing techniques such as matrix pricing or discounting expected cash flows . the significant assumptions used in the models , which include assumptions for interest rates , discount rates , prepayments and credit losses , are independently verified against observable market data where possible . where observable market data is not available , the estimate of fair value becomes more subjective and involves a high degree of judgment . in this circumstance , fair value is estimated based on management 's judgment regarding the value that market participants would assign to the asset or liability . this valuation process takes into consideration factors such as market illiquidity . imprecision in estimating these factors can impact the amount recorded on the balance sheet for a particular asset or liability with related impacts to earnings or other comprehensive income . see note 22 to the consolidated financial statements appearing in item 8 of part ii of this form 10-k. securities available for sale available for sale securities are carried at fair value with unrealized net gains and losses reported in other comprehensive income ( loss ) in stockholders ' equity . management evaluates securities for otti at least on a quarterly basis and more frequently when economic or market conditions warrant . declines in the fair value of securities available for sale that are deemed to be other-than-temporary are charged to earnings as a realized loss , and a new cost basis for the securities is established . in evaluating otti , cib marine 's management considers the length of time and extent to which the fair value has been less than cost , the financial condition and near-term prospects of the issuer , whether or not cib marine intends to sell or it is more likely than not cib marine will be required to sell the security prior to a period of time sufficient to allow for any anticipated recovery of fair value , and other factors as detailed in note 4 to the consolidated financial statements appearing in item 8 of part ii of this form 10-k. income taxes cib marine recognizes expense for federal and state income taxes currently payable as well as for deferred federal and state taxes for estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated balance sheets , as well as loss carryforwards and tax credit carryforwards . realization of deferred tax assets is dependent upon cib marine generating sufficient taxable income in either the carryforward or carryback periods to cover net operating losses generated by the reversal of temporary differences . a valuation allowance is provided by way of a charge to income tax expense if it is determined that it is not more likely than not that some portion or all of the deferred tax asset will be realized . if different assumptions and conditions were to prevail , the valuation allowance may not be adequate to absorb unrealized deferred taxes and the amount of income taxes payable may need to be adjusted by way of a charge or credit to expense . furthermore , income tax returns are subject to audit by the internal revenue service ( “ irs ” ) , state taxing authorities , and foreign government taxing authorities . income tax expense for current and prior periods is subject to adjustment based upon the outcome of such audits . cib marine believes it has adequately accrued for all probable income taxes payable and provided valuation allowances for deferred tax assets where it has been determined to be not more likely than not that such assets are realizable . accrual of income taxes payable and valuation allowances against deferred tax assets are estimates subject to change based upon the outcome of future events . 29 cib marine has entered into tax allocation agreements with its subsidiary entities included in the consolidated u.s. federal and unitary and combined state income tax returns , including u.s. operations of companies held for sale or disposal . these agreements govern the timing and amount of income tax payments required by the various entities . due to the significant losses incurred in 2006 through 2008 , as well as the operating losses from continuing operations in 2009 , management has determined that it is not more likely than not that the entire net deferred tax asset of $ 67.6 story_separator_special_tag cib marine 's net interest margin decreased by 20 basis points during 2008 compared to 2007 and its net interest spread increased by 7 basis points during the same period . the net interest margin decrease was primarily due to the increased reliance on interest bearing liabilities to fund the interest earning assets and the decline in the average yield on interest earning assets funded by non-interest bearing liabilities and capital . provision for loan losses the provision for loan losses represents charges made to earnings in order to maintain an allowance for loan losses and losses on unfunded commitments and standby letters of credit . the provision for loan losses increased $ 5.3 million from $ 22.1 million for the year ended december 31 , 2008 to $ 27.4 million for the year ended december 31 , 2009 and increased $ 15.7 million during 2008 from $ 6.4 million for the year ended december 31 , 2007. the provision for loan losses has been adversely affected by the economic environment and in particular for the following loan portfolio segments : home equity loan pools , construction and development loans , and commercial real estate loans . during 2009 , real estate markets continued to show signs of stress and deterioration , contributing to increased charge-offs and provisions . in particular , provisions during 2009 of $ 10.8 million , $ 6.2 million and $ 7.2 million were made due to deterioration in the credit quality of the home equity loan pools , construction and development loans , and commercial real estate loans , respectively . the provisions made for the year 2008 in each of these loan portfolio segments was $ 11.3 million , $ 11.0 million and a reversal of $ 2.2 million , respectively ; and provisions made for the year 2007 in each of these loan portfolio segments was $ 6.2 million , $ 2.2 million and a reversal of $ 1.4 million , respectively . 33 the $ 6.2 million provision allocated to the home equity pools in 2007 was primarily due to the purchase of the second pool of home equity loans in february 2007 and a sharp deterioration in credit quality beginning in the second quarter of 2007 ; while the $ 10.8 million and $ 11.3 million provision recorded in 2009 and 2008 , respectively , related to deterioration in the credit quality of these pools and the decision by cib marine to change its policy to charge-off 100 % of the outstanding principal balance of each loan in the pool when the loan is classified as 90 days past due on the servicer report received during the period . during 2009 , $ 11.7 million of these loans were charged-off compared to $ 12.4 million and $ 2.0 million during 2008 and 2007 , respectively . at december 31 , 2009 and 2008 , the remaining balance of these two purchased pools was $ 35.1 million and $ 52.2 million , respectively , with an allocated allowance of $ 3.9 million and $ 4.5 million , respectively . noninterest income noninterest income decreased $ 2.9 million from $ 4.4 million for the year ended december 31 , 2008 to $ 1.5 million for the year ended december 31 , 2009. the decrease was primarily due to a $ 4.1 million gain cib marine recognized during 2008 primarily from the sale of all of the branches and substantially all of the loans and deposits of its florida banking subsidiary with no comparable gain recognized in 2009. this was partially offset by a decrease of $ 1.4 million in otti from december 31 , 2008 to december 31 , 2009. noninterest income increased $ 1.3 million , or 43.1 % , from $ 3.1 million for the year ended december 31 , 2007 to $ 4.4 million for the year ended december 31 , 2008. the increase was mainly due to gain on sale of branches , offset partially by otti of $ 1.8 million for the year ended december 31 , 2008 compared to no otti in 2007. see securities available for sale section in item 7 of this form 10-k for further information regarding such adjustments . cib marine recognized a $ 4.1 million gain primarily from the sale of all of the branches and substantially all of the loans and deposits of its florida banking subsidiary in 2008. this compares to a $ 1.3 million gain recognized in 2007 primarily from the sale of two branches owned by marine bank . noninterest expense total noninterest expense decreased $ 8.9 million , or 22.2 % , from $ 39.9 million in 2008 , to $ 31.0 million in 2009. the decrease was primarily the result of the following : · compensation and employee benefits decreased $ 3.4 million , or 20.9 % , during 2009 compared to 2008 , primarily due to staff reductions due to the sale of cib marine 's florida banking subsidiary during the third quarter of 2008 and a reduction in force in the first quarter of 2009. the total number of full-time equivalent employees decreased from 197 at december 31 , 2008 to 165 at december 31 , 2009 . · equipment and occupancy expense together decreased $ 1.0 million , or 22.3 % , during 2009 compared to 2008 primarily due to the sale of cib marine 's florida banking subsidiary during the third quarter of 2008 . · a litigation reserve of $ 3.4 million was recorded and paid in 2008. there was no litigation reserve in 2009 . · fdic deposit insurance expense was $ 1.8 million for 2009 compared to $ 0.7 million for 2008. the increase of $ 1.1 million was the result of an effort by the fdic to replenish the deposit insurance fund in the wake of the recent increase in bank failures in the u.s. the fdic changed its rate structure in december 2008 to generally increase premiums
| liquidity cib marine monitors and manages its liquidity position so that funds will be available at a reasonable cost to meet financial commitments , to finance business expansion and to take advantage of unforeseen opportunities . liquidity management involves projecting funding requirements and maintaining sufficient capacity to meet those needs and accommodate fluctuations in asset and liability levels due to changes in business operations or unanticipated events . sources of liquidity include deposits and other customer-based funding , and wholesale market funding . cib marine manages liquidity at two levels , the cib marine parent company and cibm bank . the management of liquidity at both levels is essential because the parent company and the bank have different funding needs and sources , and are subject to certain regulatory guidelines and requirements . the asset-liability management committee is responsible for establishing a liquidity policy , approving operating and contingency procedures and monitoring liquidity on an ongoing basis . in order to maintain adequate liquidity through a wide range of potential operating environments and market conditions , cib marine conducts liquidity management and business activities in a manner designed to preserve and enhance funding stability , flexibility and diversity of funding sources . key components of this operating strategy include a strong focus on customer-based funding , maximizing secured borrowing capacity , maintaining relationships with wholesale market funding providers , and maintaining the ability to liquidate certain assets if conditions warrant . the objective of liquidity risk management at cibm bank is to ensure that it has adequate funding capacity for commitments to extend credit , deposit account withdrawals , maturities of borrowings and other obligations in a timely manner . the liquidity position of cibm bank is actively managed by estimating , measuring and monitoring its sources and uses of funds . cibm bank 's funding requirements are primarily met by the inflow from deposits , loan repayments and investment debt service payments and maturities . cibm bank also makes use of noncore funding sources in a manner consistent with its liquidity , funding and market risk policies .
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59 payments by these passengers for our services have provided , and we expect will continue to provide , a significant portion of our revenue . our failure to realize the anticipated benefits from these agreements on a timely basis or to renew any existing agreements upon expiration or termination could have a material adverse effect on our financial condition and results of operations. japan transocean air , a member of japan airlines group , selected us to provide 2ku in-flight connectivity and in-flight entertainment services for its new boeing 737-800 aircraft . we are currently negotiating a definitive agreement with japan transocean air . factors and trends affecting our results of operations we believe that our operating and business performance is driven by various factors that affect the commercial airline and business aviation industries , including trends affecting the travel industry and trends affecting the customer bases that we target , as well as factors that affect wireless internet service providers and general macroeconomic factors . key factors that may affect our future performance include : costs associated with implementing , and our ability to implement on a timely basis , our technology roadmap , upgrades and installation of our atg-4 and ku technologies , the roll-out of our satellite services , the potential licensing of additional spectrum , the implementation of 2ku and other new technologies including failures or delays on the part of antenna and other single source providers , and the implementation of improvements to our network and operations as technology changes and we experience increased network capacity constraints ; costs associated with and our ability to execute our international expansion , including modification to our network to accommodate satellite technology , development and implementation of new satellite-based technologies , the availability of satellite capacity , costs of satellite capacity to which we may have to commit well in advance , and compliance with applicable foreign regulations and expanded operations outside of the u.s. ; costs associated with managing a rapidly growing company ; the pace and extent of adoption of the gogo service for use on international commercial aircraft by our current north american airline partners and new international airline partners ; the number of aircraft in service in our markets , including consolidation of the airline industry or changes in fleet size by one or more of our commercial airline partners or ba fractional ownership customers ; the economic environment and other trends that affect both business and leisure travel ; the extent of passengers ' , airline partners ' and other aircraft owners ' and operators ' adoption of our products and services , which is affected by , among other things , willingness to pay for the services that we provide , changes in technology and competition from current competitors and new market entrants ; our ability to enter into and maintain long-term connectivity arrangements with airline partners , which depends on numerous factors including the real or perceived availability , quality and price of our services and product offerings as compared to those offered by our competitors ; continued demand for connectivity and proliferation of wi-fi enabled devices , including smartphones , tablets and laptops ; changes in laws , regulations and interpretations affecting telecommunications services , including those affecting our ability to maintain our licenses for atg spectrum in the u.s. , obtain sufficient rights to use additional atg spectrum and or other sources of broadband connectivity to deliver our services , and expand our service offerings ; 60 changes in laws , regulations and interpretations affecting aviation , including , in particular , changes that impact the design of our equipment and our ability to obtain required certifications for our equipment ; and our ability to obtain required foreign telecommunications , aviation and other licenses and approvals necessary for our international operations . summary financial information consolidated revenue was $ 500.9 million , $ 408.5 million and $ 328.1 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . as of december 31 , 2015 , the ca-na segment had 2,387 commercial aircraft online as compared with 2,098 as of december 31 , 2014. as of december 31 , 2015 , the ba segment had 5,334 aircraft online with iridium satellite communications systems and 3,477 gogo biz systems online as compared with 5,339 and 2,797 , respectively , as of december 31 , 2014. the ba segment became a reseller of inmarsat swiftbroadband satellite service in 2013 and had 120 systems online as of december 31 , 2015 as compared with 38 systems online as of december 31 , 2014. our ca-row segment began providing connectivity service in march 2014 and had 202 aircraft online as of december 31 , 2015 as compared with 85 aircraft online as of december 31 , 2014. key business metrics our management regularly reviews a number of financial and operating metrics , including the following key operating metrics for the ca-na and ba segments , to evaluate the performance of our business and our success in executing our business plan , make decisions regarding resource allocation and corporate strategies , and evaluate forward-looking projections . we have not presented ca-row financial and operating metrics as we do not believe they would be meaningful for the periods presented . replace_table_token_4_th aircraft online . we define aircraft online as the total number of commercial aircraft on which our equipment is installed and service has been made commercially available as of the last day of each period presented . average monthly service revenue per aircraft online ( arpa ) . story_separator_special_tag the impairment loss is calculated by comparing the long-lived asset 's carrying value with its estimated fair value , which may be based on estimated future discounted cash flows . we would recognize an impairment loss by the amount the long-lived asset 's carrying value exceeds its estimated fair value . if we recognize an impairment loss , the adjusted balance becomes the new cost basis and is depreciated ( amortized ) over the remaining useful life of the asset . we also periodically reassess the useful lives of our long-lived assets due to advances and changes in our technologies . our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and long-lived asset fair values , including forecasting useful lives of the long-lived assets and selecting discount rates . we do not believe there is a reasonable likelihood that there will be a material change in the nature of the estimates or assumptions we use to calculate our potential long-lived asset impairment losses . however , if actual results are not consistent with our assumptions used , we could experience an impairment triggering event and be exposed to losses that could be material . 66 indefinite-lived assets : our indefinite-lived intangible assets consist of our fcc spectrum licenses . indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually or whenever events indicate that the carrying amount of such assets may not be recoverable . we perform our annual impairment test during the fourth quarter of each fiscal year . we assess qualitative factors to determine the likelihood of impairment . our qualitative analysis includes , but is not limited to , assessing the changes in macroeconomic conditions , regulatory environment , industry and market conditions , financial performance versus budget and any other events or circumstances specific to the fcc licenses . if it is more likely than not that the fair value of the fcc licenses is greater than the carrying value , no further testing is required . otherwise , we apply the quantitative impairment test method . in determining which quantitative approach is most appropriate , we consider the cost approach , market approach and income approach . we determined that the income approach , utilizing the greenfield method , is the most appropriate way to value our indefinite-lived assets . for the greenfield method we estimate the value of our fcc spectrum licenses by calculating the present value of the cash flows of a hypothetical new market participant whose only assets are such licenses to determine the enterprise value of the entire company . it includes all necessary costs and expenses to build the company 's infrastructure during the start-up period , projected revenue , and cash flows once the infrastructure is completed . since there is no corroborating data available in the market place that would demonstrate a market participant 's experience in establishing an air-to-ground business , we utilize our historic results and future projections as the underlying basis for the application of the greenfield method . we follow the traditional discounted cash flow method , calculating the present value of a new market participant 's estimated debt free cash flows . our impairment calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future projected cash flows and estimated growth rates and discount rates , as well as new market participant assumptions . estimates of future projected cash flows used in connection with the discounted cash flow analysis were consistent with the plans and estimates that we used to manage the business , although there was inherent uncertainty in these estimates . the discount rate used in the calculation was based on our weighted average cost of capital . the beta used in the calculation is based on the weighted average betas of peer companies we do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to determine the fair value of our indefinite-lived intangible assets . however , if actual results are not consistent with our assumptions used , we could be exposed to losses that could be material . stock-based compensation expense : we account for stock-based compensation expense based on the grant date fair value of the award . we recognize this cost as an expense , net of estimated forfeitures , over the requisite service period , which is generally the vesting period of the respective award . we do not have a long history of option grants and are thus unable to measure forfeitures over the entire option term . forfeitures are estimated based on our historical analysis of attrition levels , and such estimates are generally updated annually for actual forfeitures or when any significant changes to attrition levels occur . we use the black-scholes option-pricing model to determine the estimated fair value of stock options . critical inputs into the black-scholes option-pricing model include : the annualized volatility of our common stock ; the expected term of the option in years ; the estimated grant date fair value of our common stock ; the option exercise price ; the risk-free interest rate ; and the annual rate of quarterly dividends on the stock , which are estimated as follows : volatility . as we have not been a public company long enough to calculate volatility based on our own common stock , the expected volatility is calculated as of each grant date based on reported data for a peer group of publicly traded companies for which historical information is available . while we are not aware of any news or disclosure by our peers that may impact their respective volatilities , there is a risk that peer group volatility may increase , thereby increasing the future compensation expense resulting 67 from future option grants . we intend to continue to
| liquidity cib marine monitors and manages its liquidity position so that funds will be available at a reasonable cost to meet financial commitments , to finance business expansion and to take advantage of unforeseen opportunities . liquidity management involves projecting funding requirements and maintaining sufficient capacity to meet those needs and accommodate fluctuations in asset and liability levels due to changes in business operations or unanticipated events . sources of liquidity include deposits and other customer-based funding , and wholesale market funding . cib marine manages liquidity at two levels , the cib marine parent company and cibm bank . the management of liquidity at both levels is essential because the parent company and the bank have different funding needs and sources , and are subject to certain regulatory guidelines and requirements . the asset-liability management committee is responsible for establishing a liquidity policy , approving operating and contingency procedures and monitoring liquidity on an ongoing basis . in order to maintain adequate liquidity through a wide range of potential operating environments and market conditions , cib marine conducts liquidity management and business activities in a manner designed to preserve and enhance funding stability , flexibility and diversity of funding sources . key components of this operating strategy include a strong focus on customer-based funding , maximizing secured borrowing capacity , maintaining relationships with wholesale market funding providers , and maintaining the ability to liquidate certain assets if conditions warrant . the objective of liquidity risk management at cibm bank is to ensure that it has adequate funding capacity for commitments to extend credit , deposit account withdrawals , maturities of borrowings and other obligations in a timely manner . the liquidity position of cibm bank is actively managed by estimating , measuring and monitoring its sources and uses of funds . cibm bank 's funding requirements are primarily met by the inflow from deposits , loan repayments and investment debt service payments and maturities . cibm bank also makes use of noncore funding sources in a manner consistent with its liquidity , funding and market risk policies .
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59 payments by these passengers for our services have provided , and we expect will continue to provide , a significant portion of our revenue . our failure to realize the anticipated benefits from these agreements on a timely basis or to renew any existing agreements upon expiration or termination could have a material adverse effect on our financial condition and results of operations. japan transocean air , a member of japan airlines group , selected us to provide 2ku in-flight connectivity and in-flight entertainment services for its new boeing 737-800 aircraft . we are currently negotiating a definitive agreement with japan transocean air . factors and trends affecting our results of operations we believe that our operating and business performance is driven by various factors that affect the commercial airline and business aviation industries , including trends affecting the travel industry and trends affecting the customer bases that we target , as well as factors that affect wireless internet service providers and general macroeconomic factors . key factors that may affect our future performance include : costs associated with implementing , and our ability to implement on a timely basis , our technology roadmap , upgrades and installation of our atg-4 and ku technologies , the roll-out of our satellite services , the potential licensing of additional spectrum , the implementation of 2ku and other new technologies including failures or delays on the part of antenna and other single source providers , and the implementation of improvements to our network and operations as technology changes and we experience increased network capacity constraints ; costs associated with and our ability to execute our international expansion , including modification to our network to accommodate satellite technology , development and implementation of new satellite-based technologies , the availability of satellite capacity , costs of satellite capacity to which we may have to commit well in advance , and compliance with applicable foreign regulations and expanded operations outside of the u.s. ; costs associated with managing a rapidly growing company ; the pace and extent of adoption of the gogo service for use on international commercial aircraft by our current north american airline partners and new international airline partners ; the number of aircraft in service in our markets , including consolidation of the airline industry or changes in fleet size by one or more of our commercial airline partners or ba fractional ownership customers ; the economic environment and other trends that affect both business and leisure travel ; the extent of passengers ' , airline partners ' and other aircraft owners ' and operators ' adoption of our products and services , which is affected by , among other things , willingness to pay for the services that we provide , changes in technology and competition from current competitors and new market entrants ; our ability to enter into and maintain long-term connectivity arrangements with airline partners , which depends on numerous factors including the real or perceived availability , quality and price of our services and product offerings as compared to those offered by our competitors ; continued demand for connectivity and proliferation of wi-fi enabled devices , including smartphones , tablets and laptops ; changes in laws , regulations and interpretations affecting telecommunications services , including those affecting our ability to maintain our licenses for atg spectrum in the u.s. , obtain sufficient rights to use additional atg spectrum and or other sources of broadband connectivity to deliver our services , and expand our service offerings ; 60 changes in laws , regulations and interpretations affecting aviation , including , in particular , changes that impact the design of our equipment and our ability to obtain required certifications for our equipment ; and our ability to obtain required foreign telecommunications , aviation and other licenses and approvals necessary for our international operations . summary financial information consolidated revenue was $ 500.9 million , $ 408.5 million and $ 328.1 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . as of december 31 , 2015 , the ca-na segment had 2,387 commercial aircraft online as compared with 2,098 as of december 31 , 2014. as of december 31 , 2015 , the ba segment had 5,334 aircraft online with iridium satellite communications systems and 3,477 gogo biz systems online as compared with 5,339 and 2,797 , respectively , as of december 31 , 2014. the ba segment became a reseller of inmarsat swiftbroadband satellite service in 2013 and had 120 systems online as of december 31 , 2015 as compared with 38 systems online as of december 31 , 2014. our ca-row segment began providing connectivity service in march 2014 and had 202 aircraft online as of december 31 , 2015 as compared with 85 aircraft online as of december 31 , 2014. key business metrics our management regularly reviews a number of financial and operating metrics , including the following key operating metrics for the ca-na and ba segments , to evaluate the performance of our business and our success in executing our business plan , make decisions regarding resource allocation and corporate strategies , and evaluate forward-looking projections . we have not presented ca-row financial and operating metrics as we do not believe they would be meaningful for the periods presented . replace_table_token_4_th aircraft online . we define aircraft online as the total number of commercial aircraft on which our equipment is installed and service has been made commercially available as of the last day of each period presented . average monthly service revenue per aircraft online ( arpa ) . story_separator_special_tag the impairment loss is calculated by comparing the long-lived asset 's carrying value with its estimated fair value , which may be based on estimated future discounted cash flows . we would recognize an impairment loss by the amount the long-lived asset 's carrying value exceeds its estimated fair value . if we recognize an impairment loss , the adjusted balance becomes the new cost basis and is depreciated ( amortized ) over the remaining useful life of the asset . we also periodically reassess the useful lives of our long-lived assets due to advances and changes in our technologies . our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and long-lived asset fair values , including forecasting useful lives of the long-lived assets and selecting discount rates . we do not believe there is a reasonable likelihood that there will be a material change in the nature of the estimates or assumptions we use to calculate our potential long-lived asset impairment losses . however , if actual results are not consistent with our assumptions used , we could experience an impairment triggering event and be exposed to losses that could be material . 66 indefinite-lived assets : our indefinite-lived intangible assets consist of our fcc spectrum licenses . indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually or whenever events indicate that the carrying amount of such assets may not be recoverable . we perform our annual impairment test during the fourth quarter of each fiscal year . we assess qualitative factors to determine the likelihood of impairment . our qualitative analysis includes , but is not limited to , assessing the changes in macroeconomic conditions , regulatory environment , industry and market conditions , financial performance versus budget and any other events or circumstances specific to the fcc licenses . if it is more likely than not that the fair value of the fcc licenses is greater than the carrying value , no further testing is required . otherwise , we apply the quantitative impairment test method . in determining which quantitative approach is most appropriate , we consider the cost approach , market approach and income approach . we determined that the income approach , utilizing the greenfield method , is the most appropriate way to value our indefinite-lived assets . for the greenfield method we estimate the value of our fcc spectrum licenses by calculating the present value of the cash flows of a hypothetical new market participant whose only assets are such licenses to determine the enterprise value of the entire company . it includes all necessary costs and expenses to build the company 's infrastructure during the start-up period , projected revenue , and cash flows once the infrastructure is completed . since there is no corroborating data available in the market place that would demonstrate a market participant 's experience in establishing an air-to-ground business , we utilize our historic results and future projections as the underlying basis for the application of the greenfield method . we follow the traditional discounted cash flow method , calculating the present value of a new market participant 's estimated debt free cash flows . our impairment calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future projected cash flows and estimated growth rates and discount rates , as well as new market participant assumptions . estimates of future projected cash flows used in connection with the discounted cash flow analysis were consistent with the plans and estimates that we used to manage the business , although there was inherent uncertainty in these estimates . the discount rate used in the calculation was based on our weighted average cost of capital . the beta used in the calculation is based on the weighted average betas of peer companies we do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to determine the fair value of our indefinite-lived intangible assets . however , if actual results are not consistent with our assumptions used , we could be exposed to losses that could be material . stock-based compensation expense : we account for stock-based compensation expense based on the grant date fair value of the award . we recognize this cost as an expense , net of estimated forfeitures , over the requisite service period , which is generally the vesting period of the respective award . we do not have a long history of option grants and are thus unable to measure forfeitures over the entire option term . forfeitures are estimated based on our historical analysis of attrition levels , and such estimates are generally updated annually for actual forfeitures or when any significant changes to attrition levels occur . we use the black-scholes option-pricing model to determine the estimated fair value of stock options . critical inputs into the black-scholes option-pricing model include : the annualized volatility of our common stock ; the expected term of the option in years ; the estimated grant date fair value of our common stock ; the option exercise price ; the risk-free interest rate ; and the annual rate of quarterly dividends on the stock , which are estimated as follows : volatility . as we have not been a public company long enough to calculate volatility based on our own common stock , the expected volatility is calculated as of each grant date based on reported data for a peer group of publicly traded companies for which historical information is available . while we are not aware of any news or disclosure by our peers that may impact their respective volatilities , there is a risk that peer group volatility may increase , thereby increasing the future compensation expense resulting 67 from future option grants . we intend to continue to
| cash capex represents capital expenditures net of airborne equipment proceeds received from the airlines and incentives paid to us by landlords under certain facilities leases . we believe cash capex provides a more representative indication of our liquidity requirements with respect to capital expenditures , as under certain agreements with our airline partners , we are reimbursed for all or a substantial portion of the cost of our airborne equipment , thereby reducing our cash capital requirements . 83 gogo inc. and subsidiaries reconciliation of gaap to non-gaap measures ( in thousands , except per share amounts ) ( unaudited ) replace_table_token_18_th ( 1 ) see consolidated statements of cash flows . ( 2 ) excludes deferred airborne lease incentives associated with stcs for the years ended december 31 , 2015 , 2014 and 2013 as stc costs are expensed as incurred as part of engineering , design and development . material limitations of non-gaap measures although ebitda , adjusted ebitda , adjusted net loss , adjusted net loss per share and cash capex are measurements frequently used by investors and securities analysts in their evaluations of companies , ebitda , adjusted ebitda , adjusted net loss , adjusted net loss per share and cash capex each have limitations as an analytical tool , and you should not consider them in isolation or as a substitute for , or more meaningful than , amounts determined in accordance with gaap .
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expanded we begin with a small amount of bone marrow from the patient ( up to 60 ml ) and significantly expand the number of certain cell types , primarily cd90+ ( mesenchymal stromal cells or mscs ) and cd14 + auto+ ( alternatively activated macrophages ) to far more than are present in the patient 's own bone marrow ( up to 200 times the number of certain cell types compared with the starting bone marrow aspirate ) . ixmyelocel-t is derived from the patient 's own bone marrow but it is significantly enhanced compared with the starting bone marrow . multicellular we believe the multiple cell types in ixmyelocel-t , which are normally only found in bone marrow but in smaller quantities , possess the key functions required for tissue remodeling , immuno-modulation and the promotion of angiogenesis . 28 minimally invasive our procedure for taking bone marrow ( an aspirate ) can be performed in an out-patient setting and takes approximately 15 minutes . for diseases such as cli , the administration of ixmyelocel-t is performed in an out-patient setting ( e.g . a physician 's office ) in a one-time , approximately 20 minute procedure . safe bone marrow and bone marrow-derived therapies have been used safely and efficaciously in medicine for over three decades . our product , ixmyelocel-t , a bone marrow-derived , patient specific , expanded multicellular therapy leverages this body of scientific study and medical experience . our therapy is produced at our cell manufacturing facility in the united states , located at our headquarters in ann arbor , michigan . clinical development programs our clinical development programs are focused on addressing areas of high unmet medical needs in severe , chronic ischemic cardiovascular diseases . we have completed a successful phase 2b clinical trial in cli . we have reached agreement with the fda on cmc which has allowed us to launch our pivotal phase 3 revive clinical trial in the first quarter of 2012 with a protocol approved by fda through the special protocol assessment ( spa ) process . our cli development program has also received fast track designation from the fda . we have completed our phase 1/2 clinical trials in dcm and plan to begin a randomized , placebo-controlled , double-blinded phase 2b trial in mid-2012 . our dcm development program has received orphan disease designation from the fda . results to date in our clinical trials may not be indicative of results obtained from subsequent patients enrolled in those trials or from future clinical trials . further , our future clinical trials may not be successful or we may not be able to obtain the required biologic license application ( bla ) approval to commercialize our products in the united states in a timely fashion , or at all . see risk factors . critical limb ischemia background cli is the most serious and advanced stage of peripheral arterial disease ( pad ) . pad is a chronic atherosclerotic disease that progressively restricts blood flow in the limbs and can lead to serious medical complications . this disease is often associated with other serious clinical conditions including hypertension , cardiovascular disease , hyperlipidemia , diabetes , obesity and stroke . cli is used to describe patients with the most severe forms of pad : those with chronic ischemia-induced pain ( even at rest ) or tissue loss ( ulcers or gangrene ) in the limbs , often leading to amputation and death . many cli patients are considered no option patients as they have exhausted all other treatment options with the exception of amputation . the one-year and four-year mortality rates for no option cli patients that progress to amputation are approximately 25 % and 70 % , respectively . ixmyelocel-t , our disease modifying therapy with multiple functions , has shown significant promise in the treatment of cli patients with existing tissue loss and no option for revascularization . currently , there are an estimated 250,000 no option cli patients in the u.s. phase 2b clinical program restore cli our u.s. phase 2b restore-cli program was a multi-center , randomized , double-blind , placebo-controlled clinical trial . this clinical trial was designed to evaluate the safety and efficacy of ixmyelocel-t in the treatment of patients with cli and no option for revascularization . it was the largest multi-center , randomized , double-blind , placebo-controlled cellular therapy study ever conducted in no option cli patients . we completed enrollment of this trial in february 2010 with a total of 86 patients at 18 sites across the united states , with the last patient treated in march 2010. these patients were followed for a period of 12 months after treatment . in addition to assessing the safety of our product , efficacy endpoints included time to first occurrence of treatment failure the trial 's primary efficacy end-point ( defined as major amputation , all-cause mortality , doubling in wound surface area and de novo gangrene ) , amputation-free survival ( defined as major amputation and all-cause mortality ) , major amputation rates , level of amputation , wound healing , patient quality of life and pain scores . the primary purpose of the trial was to assess performance of our therapy and , if positive , prepare for a phase 3 program . 29 results to date of the restore-cli trial have included two planned interim analyses and a final 12-month report : · in june 2010 , we reported interim results at the society of vascular surgery meeting . the interim analysis included the six-month results for the first 46 patients enrolled in the trial and twelve-month results for the first 30 patients enrolled in the trial . results of this analysis demonstrated that the study achieved both its primary safety endpoint and primary efficacy endpoint of time to first occurrence of treatment failure . story_separator_special_tag stock-based compensation included in selling , general and administrative expenses increased to $ 1,753,000 for the year ended december 31 , 2011 from $ 730,000 for the twelve months ended december 31 , 2010. selling , general and administrative expenses increased to $ 3,626,000 for the six months ended december 31 , 2011 from $ 3,265,000 for the six months ended december 31 , 2010. stock-based compensation included in selling , general and administrative expenses 33 increased to $ 933,000 for the six months ended december 31 , 2011 from $ 494,000 for the six months ended december 31 , 2010. selling , general and administrative expenses increased to $ 3,265,000 for the six months ended december 31 , 2010 from $ 2,262,000 for the six months ended december 31 , 2009 due to an increase in non-cash stock-based compensation and consulting costs . stock-based compensation included in selling , general and administrative expenses increased to $ 494,000 for the six months ended december 31 , 2010 from a net reversal of expense of $ 11,000 for the six months ended december 31 , 2009. in fiscal 2010 , selling , general and administrative expenses increased to $ 5,201,000 from $ 4,950,000 in fiscal 2009 due to increased cash compensation costs and increased legal and consulting costs offset by lower non-cash stock-based compensation expense . stock-based compensation expense included in selling , general and administrative expenses decreased to $ 225,000 in fiscal 2010 from $ 783,000 in fiscal 2009. stock-based compensation expense for the six months ended december 31 , 2009 and for fiscal 2010 was impacted by the reversal of previously recognized expense for options that were forfeited in excess of our estimated rate of forfeiture . approximately $ 279,000 of the reversal was for certain options held by george w. dunbar that were forfeited when he stepped down as chief executive officer , president and chief financial officer in december 2009. non-cash income ( expense ) from the change in fair value of warrants was $ 9,329,000 for the year ended december 31 , 2011 compared to ( $ 4,593,000 ) for the twelve months ended december 31 , 2010. non-cash income ( expense ) from the change in fair value of warrants was $ 10,540,000 for the six months ended december 31 , 2011 compared to ( $ 7,500,000 ) for the six months ended december 31 , 2010. the fluctuations in both periods are due to changes in fair value of our stock price . non-cash income ( expense ) from the change in fair value of warrants was ( $ 7,500,000 ) for the six months ended december 31 , 2010 compared to $ 264,000 for the six months ended december 31 , 2009. for fiscal 2010 , warrant income ( expense ) was $ 3,171,000 compared to ( $ 115,000 ) in fiscal 2009. the fluctuations are due to the issuance of warrants in the january 2010 and december 2010 financings , as well as changes in the fair value of our warrant liability resulting from changes in the fair value of our common stock . fluctuations in the fair value of warrants in future periods could result in significant non-cash adjustments to the consolidated financial statements , however any income or expense recorded will not impact our cash and cash equivalents , operating expenses or cash flows . interest income was $ 53,000 in the year ended december 31 , 2011 compared to $ 106,000 for the twelve months ended december 31 , 2010. interest income was $ 16,000 in the six months ended december 31 , 2011 compared to $ 40,000 for the six months ended december 31 , 2010. interest income was $ 40,000 in the six months ended december 31 , 2010 compared to $ 49,000 for the six months ended december 31 , 2009. in fiscal 2010 , interest income was $ 115,000 compared to $ 296,000 in fiscal 2009. the fluctuations in interest income are due primarily to corresponding changes in the levels of cash , cash equivalents and short-term investments combined with interest rate changes during the periods . our net loss was $ 19,668,000 , or $ 0.51 per share for the year ended december 31 , 2011 compared to $ 25,534,000 , or $ 0.90 per share for the twelve months ended december 31 , 2010. the net loss for the six months ended december 31 , 2011 was $ 4,723,000 , or $ 0.12 per share , compared to $ 19,088,000 , or $ 0.65 per share for the six months ended december 31 , 2010. our net loss was $ 19,088,000 , or $ 0.65 per share for the six months ended december 31 , 2010 compared to $ 8,112,000 , or $ 0.38 per share for the six months ended december 31 , 2009. in fiscal 2010 , our net loss was $ 14,558,000 , or $ 0.59 per share , compared to $ 16,061,000 , or $ 0.90 per share in fiscal 2009. the changes in net loss are primarily due to the non-cash fluctuations in the fair value of warrants , in addition to the changes in research and development expenses and selling , general and administrative expense as described in more detail above . loss per share comparisons were also impacted by the issuance of 10,000,000 shares of common stock in december 2010 and 6,510,000 shares of common stock in january 2010. because of the uncertainties of clinical trials and the evolving regulatory requirements applicable to our products , estimating the completion dates or cost to complete our major research and development programs would be highly speculative and subjective . the risks and uncertainties associated with developing our products , including significant and changing governmental regulation and the uncertainty of future clinical study results , are discussed in greater detail in the any changes in the governmental regulatory classifications of our products could prevent , limit or delay our
| cash capex represents capital expenditures net of airborne equipment proceeds received from the airlines and incentives paid to us by landlords under certain facilities leases . we believe cash capex provides a more representative indication of our liquidity requirements with respect to capital expenditures , as under certain agreements with our airline partners , we are reimbursed for all or a substantial portion of the cost of our airborne equipment , thereby reducing our cash capital requirements . 83 gogo inc. and subsidiaries reconciliation of gaap to non-gaap measures ( in thousands , except per share amounts ) ( unaudited ) replace_table_token_18_th ( 1 ) see consolidated statements of cash flows . ( 2 ) excludes deferred airborne lease incentives associated with stcs for the years ended december 31 , 2015 , 2014 and 2013 as stc costs are expensed as incurred as part of engineering , design and development . material limitations of non-gaap measures although ebitda , adjusted ebitda , adjusted net loss , adjusted net loss per share and cash capex are measurements frequently used by investors and securities analysts in their evaluations of companies , ebitda , adjusted ebitda , adjusted net loss , adjusted net loss per share and cash capex each have limitations as an analytical tool , and you should not consider them in isolation or as a substitute for , or more meaningful than , amounts determined in accordance with gaap .
| 0 |
expanded we begin with a small amount of bone marrow from the patient ( up to 60 ml ) and significantly expand the number of certain cell types , primarily cd90+ ( mesenchymal stromal cells or mscs ) and cd14 + auto+ ( alternatively activated macrophages ) to far more than are present in the patient 's own bone marrow ( up to 200 times the number of certain cell types compared with the starting bone marrow aspirate ) . ixmyelocel-t is derived from the patient 's own bone marrow but it is significantly enhanced compared with the starting bone marrow . multicellular we believe the multiple cell types in ixmyelocel-t , which are normally only found in bone marrow but in smaller quantities , possess the key functions required for tissue remodeling , immuno-modulation and the promotion of angiogenesis . 28 minimally invasive our procedure for taking bone marrow ( an aspirate ) can be performed in an out-patient setting and takes approximately 15 minutes . for diseases such as cli , the administration of ixmyelocel-t is performed in an out-patient setting ( e.g . a physician 's office ) in a one-time , approximately 20 minute procedure . safe bone marrow and bone marrow-derived therapies have been used safely and efficaciously in medicine for over three decades . our product , ixmyelocel-t , a bone marrow-derived , patient specific , expanded multicellular therapy leverages this body of scientific study and medical experience . our therapy is produced at our cell manufacturing facility in the united states , located at our headquarters in ann arbor , michigan . clinical development programs our clinical development programs are focused on addressing areas of high unmet medical needs in severe , chronic ischemic cardiovascular diseases . we have completed a successful phase 2b clinical trial in cli . we have reached agreement with the fda on cmc which has allowed us to launch our pivotal phase 3 revive clinical trial in the first quarter of 2012 with a protocol approved by fda through the special protocol assessment ( spa ) process . our cli development program has also received fast track designation from the fda . we have completed our phase 1/2 clinical trials in dcm and plan to begin a randomized , placebo-controlled , double-blinded phase 2b trial in mid-2012 . our dcm development program has received orphan disease designation from the fda . results to date in our clinical trials may not be indicative of results obtained from subsequent patients enrolled in those trials or from future clinical trials . further , our future clinical trials may not be successful or we may not be able to obtain the required biologic license application ( bla ) approval to commercialize our products in the united states in a timely fashion , or at all . see risk factors . critical limb ischemia background cli is the most serious and advanced stage of peripheral arterial disease ( pad ) . pad is a chronic atherosclerotic disease that progressively restricts blood flow in the limbs and can lead to serious medical complications . this disease is often associated with other serious clinical conditions including hypertension , cardiovascular disease , hyperlipidemia , diabetes , obesity and stroke . cli is used to describe patients with the most severe forms of pad : those with chronic ischemia-induced pain ( even at rest ) or tissue loss ( ulcers or gangrene ) in the limbs , often leading to amputation and death . many cli patients are considered no option patients as they have exhausted all other treatment options with the exception of amputation . the one-year and four-year mortality rates for no option cli patients that progress to amputation are approximately 25 % and 70 % , respectively . ixmyelocel-t , our disease modifying therapy with multiple functions , has shown significant promise in the treatment of cli patients with existing tissue loss and no option for revascularization . currently , there are an estimated 250,000 no option cli patients in the u.s. phase 2b clinical program restore cli our u.s. phase 2b restore-cli program was a multi-center , randomized , double-blind , placebo-controlled clinical trial . this clinical trial was designed to evaluate the safety and efficacy of ixmyelocel-t in the treatment of patients with cli and no option for revascularization . it was the largest multi-center , randomized , double-blind , placebo-controlled cellular therapy study ever conducted in no option cli patients . we completed enrollment of this trial in february 2010 with a total of 86 patients at 18 sites across the united states , with the last patient treated in march 2010. these patients were followed for a period of 12 months after treatment . in addition to assessing the safety of our product , efficacy endpoints included time to first occurrence of treatment failure the trial 's primary efficacy end-point ( defined as major amputation , all-cause mortality , doubling in wound surface area and de novo gangrene ) , amputation-free survival ( defined as major amputation and all-cause mortality ) , major amputation rates , level of amputation , wound healing , patient quality of life and pain scores . the primary purpose of the trial was to assess performance of our therapy and , if positive , prepare for a phase 3 program . 29 results to date of the restore-cli trial have included two planned interim analyses and a final 12-month report : · in june 2010 , we reported interim results at the society of vascular surgery meeting . the interim analysis included the six-month results for the first 46 patients enrolled in the trial and twelve-month results for the first 30 patients enrolled in the trial . results of this analysis demonstrated that the study achieved both its primary safety endpoint and primary efficacy endpoint of time to first occurrence of treatment failure . story_separator_special_tag stock-based compensation included in selling , general and administrative expenses increased to $ 1,753,000 for the year ended december 31 , 2011 from $ 730,000 for the twelve months ended december 31 , 2010. selling , general and administrative expenses increased to $ 3,626,000 for the six months ended december 31 , 2011 from $ 3,265,000 for the six months ended december 31 , 2010. stock-based compensation included in selling , general and administrative expenses 33 increased to $ 933,000 for the six months ended december 31 , 2011 from $ 494,000 for the six months ended december 31 , 2010. selling , general and administrative expenses increased to $ 3,265,000 for the six months ended december 31 , 2010 from $ 2,262,000 for the six months ended december 31 , 2009 due to an increase in non-cash stock-based compensation and consulting costs . stock-based compensation included in selling , general and administrative expenses increased to $ 494,000 for the six months ended december 31 , 2010 from a net reversal of expense of $ 11,000 for the six months ended december 31 , 2009. in fiscal 2010 , selling , general and administrative expenses increased to $ 5,201,000 from $ 4,950,000 in fiscal 2009 due to increased cash compensation costs and increased legal and consulting costs offset by lower non-cash stock-based compensation expense . stock-based compensation expense included in selling , general and administrative expenses decreased to $ 225,000 in fiscal 2010 from $ 783,000 in fiscal 2009. stock-based compensation expense for the six months ended december 31 , 2009 and for fiscal 2010 was impacted by the reversal of previously recognized expense for options that were forfeited in excess of our estimated rate of forfeiture . approximately $ 279,000 of the reversal was for certain options held by george w. dunbar that were forfeited when he stepped down as chief executive officer , president and chief financial officer in december 2009. non-cash income ( expense ) from the change in fair value of warrants was $ 9,329,000 for the year ended december 31 , 2011 compared to ( $ 4,593,000 ) for the twelve months ended december 31 , 2010. non-cash income ( expense ) from the change in fair value of warrants was $ 10,540,000 for the six months ended december 31 , 2011 compared to ( $ 7,500,000 ) for the six months ended december 31 , 2010. the fluctuations in both periods are due to changes in fair value of our stock price . non-cash income ( expense ) from the change in fair value of warrants was ( $ 7,500,000 ) for the six months ended december 31 , 2010 compared to $ 264,000 for the six months ended december 31 , 2009. for fiscal 2010 , warrant income ( expense ) was $ 3,171,000 compared to ( $ 115,000 ) in fiscal 2009. the fluctuations are due to the issuance of warrants in the january 2010 and december 2010 financings , as well as changes in the fair value of our warrant liability resulting from changes in the fair value of our common stock . fluctuations in the fair value of warrants in future periods could result in significant non-cash adjustments to the consolidated financial statements , however any income or expense recorded will not impact our cash and cash equivalents , operating expenses or cash flows . interest income was $ 53,000 in the year ended december 31 , 2011 compared to $ 106,000 for the twelve months ended december 31 , 2010. interest income was $ 16,000 in the six months ended december 31 , 2011 compared to $ 40,000 for the six months ended december 31 , 2010. interest income was $ 40,000 in the six months ended december 31 , 2010 compared to $ 49,000 for the six months ended december 31 , 2009. in fiscal 2010 , interest income was $ 115,000 compared to $ 296,000 in fiscal 2009. the fluctuations in interest income are due primarily to corresponding changes in the levels of cash , cash equivalents and short-term investments combined with interest rate changes during the periods . our net loss was $ 19,668,000 , or $ 0.51 per share for the year ended december 31 , 2011 compared to $ 25,534,000 , or $ 0.90 per share for the twelve months ended december 31 , 2010. the net loss for the six months ended december 31 , 2011 was $ 4,723,000 , or $ 0.12 per share , compared to $ 19,088,000 , or $ 0.65 per share for the six months ended december 31 , 2010. our net loss was $ 19,088,000 , or $ 0.65 per share for the six months ended december 31 , 2010 compared to $ 8,112,000 , or $ 0.38 per share for the six months ended december 31 , 2009. in fiscal 2010 , our net loss was $ 14,558,000 , or $ 0.59 per share , compared to $ 16,061,000 , or $ 0.90 per share in fiscal 2009. the changes in net loss are primarily due to the non-cash fluctuations in the fair value of warrants , in addition to the changes in research and development expenses and selling , general and administrative expense as described in more detail above . loss per share comparisons were also impacted by the issuance of 10,000,000 shares of common stock in december 2010 and 6,510,000 shares of common stock in january 2010. because of the uncertainties of clinical trials and the evolving regulatory requirements applicable to our products , estimating the completion dates or cost to complete our major research and development programs would be highly speculative and subjective . the risks and uncertainties associated with developing our products , including significant and changing governmental regulation and the uncertainty of future clinical study results , are discussed in greater detail in the any changes in the governmental regulatory classifications of our products could prevent , limit or delay our
| liquidity and capital resources we are currently focused on utilizing our technology to produce patient specific cell-based products for use in regenerative medicine applications . at such time as we satisfy applicable regulatory approval requirements , we expect the sales of our cell-based products to constitute nearly all of our product sales revenues . we do not expect to generate positive cash flows from our consolidated operations for at least the next several years and then only if we achieve significant product sales . until that time , we expect that our revenue sources from our current activities will consist of only minor sales of our cell products and manufacturing supplies to our academic collaborators , grant revenue , research funding and potential licensing fees or other financial support from potential future corporate collaborators . we expect that we will need to raise significant additional funds or pursue strategic transactions or other strategic alternatives in order to complete our product development programs , complete clinical trials needed to market our products , and commercialize our products . to date , we have financed our operations primarily through public and private sales of our equity securities , and we expect to continue to seek to obtain the required capital in a similar manner . as a development stage company , we have never been profitable and do not anticipate having net income unless and until significant product sales commence . with respect to our current activities , this is not likely to occur until we obtain significant additional funding , complete the required clinical trials for regulatory approvals , and receive the necessary approvals to market our products . through december 31 , 2011 , we had accumulated a net loss of approximately $ 240,880,000. we can not provide any assurance that we will be able to achieve profitability on a sustained basis , if at all , obtain the required funding , obtain the required regulatory approvals , or complete additional corporate partnering or acquisition transactions .
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hybrid cloud computing our overarching cloud strategy contains three key components : ( i ) continue to expand beyond compute virtualization in the private cloud , ( ii ) extend the private cloud into the public cloud and ( iii ) connect and secure endpoints across a range of public clouds . during fiscal 2018 , hybrid cloud computing was comprised of vmware cloud provider program ( “ vcpp ” ) ( previously referred to as vmware vcloud air network ) and vmware cloud services , which enable customers to run , manage , connect and secure their applications across private and public clouds , including amazon web services ( “ aws ” ) , azure , google cloud platform and ibm cloud . during fiscal 2018 , revenue growth in our hybrid cloud computing offerings was primarily driven by our vcpp offerings . vmware cloud on aws is currently available in certain geographies , and we expect to continue expanding into additional regions in fiscal 2019. during the second quarter of fiscal 2018 , we completed the sale of our vcloud air business ( “ vcloud air ” ) to ovh us llc ( “ ovh ” ) . end-user computing our euc solution consists of vmware workspace one ( “ workspace one ” ) , our digital workspace platform , which includes vmware airwatch ( “ airwatch ” ) and vmware horizon . our airwatch business model includes an on-premises solution that we offer through the sale of perpetual licenses and an off-premises solution that we offer as software-as-a-service ( “ saas ” ) . workspace one continued to be our primary growth driver within our euc product group during fiscal 2018 . 37 dell synergies during fiscal 2018 , we continued joint marketing , sales , branding and product development efforts with dell technologies inc. ( “ dell ” ) and other dell technologies companies to enhance the collective value we deliver to our mutual customers . as a result of our collective business built with dell , we have experienced significant synergies benefiting our sales during fiscal 2018. change in fiscal year end as a result of the change to our fiscal year from a fiscal year ending on december 31 of each calendar year to a fiscal year ending on the friday nearest to january 31 of each year , the period that began on january 1 , 2017 and ended on february 3 , 2017 was a transition period ( the “ transition period ” ) . our first full fiscal year 2018 is a 52-week year that began on february 4 , 2017 and ended on february 2 , 2018. prior-period financial statements have not been recast as we believe ( i ) the year ended december 31 , 2016 is comparable to the year ended february 2 , 2018 and ( ii ) recasting prior-period results was not practicable or cost justified . we have included audited consolidated financial statements for the transition period in part ii , item 8 of this annual report on form 10-k. results of operations approximately 70 % of our sales are denominated in the united states ( “ u.s. ” ) dollar , however , in certain countries we also invoice and collect in the following currencies : euro ; british pound ; japanese yen ; australian dollar ; and chinese renminbi . in addition , we incur and pay operating expenses in currencies other than the u.s. dollar . as a result , our financial statements , including our revenue , operating expenses , unearned revenue and the resulting cash flows derived from the u.s. dollar equivalent of foreign currency transactions , are affected by foreign exchange fluctuations . revenue our revenue during the periods presented was as follows ( dollars in millions ) : replace_table_token_6_th revenue from our hybrid cloud computing offerings consisted primarily of vcpp , and revenue from our saas offerings consisted primarily of our airwatch mobile solution within workspace one . vcpp revenue is included in license revenue and saas revenue is included in both license and services revenue . hybrid cloud computing , together with our saas offerings , accounted for approximately 8 % of our total revenue during fiscal years 2018 and 2016. license revenue relating to the sale of perpetual licenses that are part of a multi-year arrangement is generally recognized upon delivery of the underlying license , whereas revenue derived from our hybrid cloud computing and saas offerings is recognized on a consumption basis or over a period of time . license revenue during fiscal 2018 , license revenue benefited from broad-based growth across our diverse portfolio and solid performance in all geographies . drivers of license revenue growth during fiscal 2018 compared to fiscal 2016 included continued scale and 38 growth of our nsx and vsan offerings . euc growth driven in part by sales of workspace one and continued strength of our vcpp offerings were also key factors contributing to license growth . strength in our renewal business , including eas , also contributed to license revenue growth during fiscal 2018 compared to fiscal 2016 . license revenue growth in fiscal 2016 compared to fiscal 2015 was largely driven by license sales of nsx , vsan and airwatch mobile solutions , as well as growth in our vcpp offering . we experienced stronger than expected sales of our compute products , in part due to strong renewals of our eas , which also contributed to the license revenue growth in fiscal 2016 compared to fiscal 2015 . services revenue during fiscal 2018 and fiscal 2016 , software maintenance revenue benefited from strong renewals of our eas , maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with new software license sales . story_separator_special_tag key components of the tax expense relating to the 2017 tax act included provisional estimates for the mandatory one-time transition tax on accumulated earnings of foreign subsidiaries of approximately $ 800 million , and the remeasurement of our deferred tax assets and liabilities of approximately $ 170 million resulting from the reduction in the u.s. statutory corporate tax rate from 35 % to 21 % , effective january 1 , 2018. the reduction in the u.s. statutory corporate tax rate resulted in a blended u.s. statutory corporate tax rate of 34 % during fiscal 2018. our tax expense in fiscal 2018 benefited from the recognition of excess tax benefits of $ 106 million , in connection with our adoption of accounting standards update ( “ asu ” ) no . 2016-09 , compensation-stock compensation ( topic 718 ) during the first quarter of fiscal 2018. previously , the excess tax benefits were recognized in additional paid-in capital on the consolidated balance sheets . our effective income tax rate in fiscal 2016 was higher than in fiscal 2015 primarily as a result of a shift in mix of earnings from our lower tax non-u.s. jurisdictions to the u.s. this impact from the shift in mix of earnings was partially offset by the favorable impact of lower unrecognized tax benefit additions recorded in fiscal 2016 as compared to fiscal 2015. for the periods presented , our rate of taxation in non-u.s. jurisdictions was lower than our u.s. tax rate . our non-u.s. earnings are primarily earned by our subsidiaries organized in ireland , and as such , our annual effective tax rate can be significantly affected by the composition of our earnings in the u.s. and non-u.s. jurisdictions . we are included in dell 's consolidated tax group for u.s. federal income tax purposes and will continue to be included in dell 's consolidated group for periods in which dell beneficially owns at least 80 % of the total voting power and value of our combined outstanding class a and class b common stock as calculated for u.s. federal income tax purposes . the percentage of voting power and value calculated for u.s. federal income tax purposes may differ from the percentage of outstanding shares beneficially owned by dell due to the greater voting power of our class b common stock as compared to our class a common stock and other factors . each member of a consolidated group during any part of a consolidated return year is jointly and severally liable for tax on the consolidated return of such year and for any subsequently determined deficiency thereon . should dell 's ownership fall below 80 % of the total voting power or value of our outstanding stock in any period , then we would no longer be included in the dell consolidated group for u.s. federal income tax purposes , and our u.s. federal income tax would be reported separately from that of the dell consolidated group . 44 although our results are included in the dell consolidated return for u.s. federal income tax purposes , our income tax provision , including provisional estimates of taxes relating to the 2017 tax act , is calculated primarily as though we were a separate taxpayer . however , under certain circumstances , transactions between us and dell are assessed using consolidated tax return rules . our future effective tax rate will benefit significantly from certain provisions of the 2017 tax act , including the reduction in the u.s. statutory corporate tax rate . however , the effect of the global intangible low-taxed income tax and the base erosion tax , as well as changes to our provisional accounting for the effects of the 2017 tax act during the measurement period , on our future effective tax rate is uncertain . our future effective tax rate may also be affected by such factors as changes in tax laws , changes in our business or statutory rates , changing interpretation of existing laws or regulations , the impact of accounting for stock-based compensation and the recognition of excess tax benefits and tax deficiencies within the income tax provision in the period in which they occur , the impact of accounting for business combinations , changes in the composition of earnings in the u.s. compared with other regions in the world and overall levels of income before tax , changes in our international organization , as well as the expiration of statute of limitations and settlements of audits . our relationship with dell as of february 2 , 2018 , dell controlled 31 million shares of class a common stock and all 300 million shares of class b common stock , representing 81.9 % of our total outstanding shares of common stock and 97.6 % of the combined voting power of our outstanding common stock . for a description of related risks , refer to “ risks related to our relationship with dell ” in part i , item 1a of this annual report on form 10-k. the information provided below includes a summary of the transactions entered into with dell and dell 's consolidated subsidiaries , including emc ( collectively , “ dell ” ) from the effective date of the dell acquisition through february 2 , 2018 . transactions prior to the effective date of the dell acquisition reflect transactions only with emc and its consolidated subsidiaries . transactions with dell we engaged with dell in the following ongoing intercompany transactions , which resulted in revenue and receipts and unearned revenue for us : pursuant to oem and reseller arrangements , dell integrates or bundles our products and services with dell 's products and sells them to end users . dell also acts as a distributor , purchasing our standalone products and services for resale to end-user customers through vmware-authorized resellers . revenue under these arrangements is presented net of related marketing development funds and rebates paid to dell . dell purchases products and
| liquidity and capital resources we are currently focused on utilizing our technology to produce patient specific cell-based products for use in regenerative medicine applications . at such time as we satisfy applicable regulatory approval requirements , we expect the sales of our cell-based products to constitute nearly all of our product sales revenues . we do not expect to generate positive cash flows from our consolidated operations for at least the next several years and then only if we achieve significant product sales . until that time , we expect that our revenue sources from our current activities will consist of only minor sales of our cell products and manufacturing supplies to our academic collaborators , grant revenue , research funding and potential licensing fees or other financial support from potential future corporate collaborators . we expect that we will need to raise significant additional funds or pursue strategic transactions or other strategic alternatives in order to complete our product development programs , complete clinical trials needed to market our products , and commercialize our products . to date , we have financed our operations primarily through public and private sales of our equity securities , and we expect to continue to seek to obtain the required capital in a similar manner . as a development stage company , we have never been profitable and do not anticipate having net income unless and until significant product sales commence . with respect to our current activities , this is not likely to occur until we obtain significant additional funding , complete the required clinical trials for regulatory approvals , and receive the necessary approvals to market our products . through december 31 , 2011 , we had accumulated a net loss of approximately $ 240,880,000. we can not provide any assurance that we will be able to achieve profitability on a sustained basis , if at all , obtain the required funding , obtain the required regulatory approvals , or complete additional corporate partnering or acquisition transactions .
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hybrid cloud computing our overarching cloud strategy contains three key components : ( i ) continue to expand beyond compute virtualization in the private cloud , ( ii ) extend the private cloud into the public cloud and ( iii ) connect and secure endpoints across a range of public clouds . during fiscal 2018 , hybrid cloud computing was comprised of vmware cloud provider program ( “ vcpp ” ) ( previously referred to as vmware vcloud air network ) and vmware cloud services , which enable customers to run , manage , connect and secure their applications across private and public clouds , including amazon web services ( “ aws ” ) , azure , google cloud platform and ibm cloud . during fiscal 2018 , revenue growth in our hybrid cloud computing offerings was primarily driven by our vcpp offerings . vmware cloud on aws is currently available in certain geographies , and we expect to continue expanding into additional regions in fiscal 2019. during the second quarter of fiscal 2018 , we completed the sale of our vcloud air business ( “ vcloud air ” ) to ovh us llc ( “ ovh ” ) . end-user computing our euc solution consists of vmware workspace one ( “ workspace one ” ) , our digital workspace platform , which includes vmware airwatch ( “ airwatch ” ) and vmware horizon . our airwatch business model includes an on-premises solution that we offer through the sale of perpetual licenses and an off-premises solution that we offer as software-as-a-service ( “ saas ” ) . workspace one continued to be our primary growth driver within our euc product group during fiscal 2018 . 37 dell synergies during fiscal 2018 , we continued joint marketing , sales , branding and product development efforts with dell technologies inc. ( “ dell ” ) and other dell technologies companies to enhance the collective value we deliver to our mutual customers . as a result of our collective business built with dell , we have experienced significant synergies benefiting our sales during fiscal 2018. change in fiscal year end as a result of the change to our fiscal year from a fiscal year ending on december 31 of each calendar year to a fiscal year ending on the friday nearest to january 31 of each year , the period that began on january 1 , 2017 and ended on february 3 , 2017 was a transition period ( the “ transition period ” ) . our first full fiscal year 2018 is a 52-week year that began on february 4 , 2017 and ended on february 2 , 2018. prior-period financial statements have not been recast as we believe ( i ) the year ended december 31 , 2016 is comparable to the year ended february 2 , 2018 and ( ii ) recasting prior-period results was not practicable or cost justified . we have included audited consolidated financial statements for the transition period in part ii , item 8 of this annual report on form 10-k. results of operations approximately 70 % of our sales are denominated in the united states ( “ u.s. ” ) dollar , however , in certain countries we also invoice and collect in the following currencies : euro ; british pound ; japanese yen ; australian dollar ; and chinese renminbi . in addition , we incur and pay operating expenses in currencies other than the u.s. dollar . as a result , our financial statements , including our revenue , operating expenses , unearned revenue and the resulting cash flows derived from the u.s. dollar equivalent of foreign currency transactions , are affected by foreign exchange fluctuations . revenue our revenue during the periods presented was as follows ( dollars in millions ) : replace_table_token_6_th revenue from our hybrid cloud computing offerings consisted primarily of vcpp , and revenue from our saas offerings consisted primarily of our airwatch mobile solution within workspace one . vcpp revenue is included in license revenue and saas revenue is included in both license and services revenue . hybrid cloud computing , together with our saas offerings , accounted for approximately 8 % of our total revenue during fiscal years 2018 and 2016. license revenue relating to the sale of perpetual licenses that are part of a multi-year arrangement is generally recognized upon delivery of the underlying license , whereas revenue derived from our hybrid cloud computing and saas offerings is recognized on a consumption basis or over a period of time . license revenue during fiscal 2018 , license revenue benefited from broad-based growth across our diverse portfolio and solid performance in all geographies . drivers of license revenue growth during fiscal 2018 compared to fiscal 2016 included continued scale and 38 growth of our nsx and vsan offerings . euc growth driven in part by sales of workspace one and continued strength of our vcpp offerings were also key factors contributing to license growth . strength in our renewal business , including eas , also contributed to license revenue growth during fiscal 2018 compared to fiscal 2016 . license revenue growth in fiscal 2016 compared to fiscal 2015 was largely driven by license sales of nsx , vsan and airwatch mobile solutions , as well as growth in our vcpp offering . we experienced stronger than expected sales of our compute products , in part due to strong renewals of our eas , which also contributed to the license revenue growth in fiscal 2016 compared to fiscal 2015 . services revenue during fiscal 2018 and fiscal 2016 , software maintenance revenue benefited from strong renewals of our eas , maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with new software license sales . story_separator_special_tag key components of the tax expense relating to the 2017 tax act included provisional estimates for the mandatory one-time transition tax on accumulated earnings of foreign subsidiaries of approximately $ 800 million , and the remeasurement of our deferred tax assets and liabilities of approximately $ 170 million resulting from the reduction in the u.s. statutory corporate tax rate from 35 % to 21 % , effective january 1 , 2018. the reduction in the u.s. statutory corporate tax rate resulted in a blended u.s. statutory corporate tax rate of 34 % during fiscal 2018. our tax expense in fiscal 2018 benefited from the recognition of excess tax benefits of $ 106 million , in connection with our adoption of accounting standards update ( “ asu ” ) no . 2016-09 , compensation-stock compensation ( topic 718 ) during the first quarter of fiscal 2018. previously , the excess tax benefits were recognized in additional paid-in capital on the consolidated balance sheets . our effective income tax rate in fiscal 2016 was higher than in fiscal 2015 primarily as a result of a shift in mix of earnings from our lower tax non-u.s. jurisdictions to the u.s. this impact from the shift in mix of earnings was partially offset by the favorable impact of lower unrecognized tax benefit additions recorded in fiscal 2016 as compared to fiscal 2015. for the periods presented , our rate of taxation in non-u.s. jurisdictions was lower than our u.s. tax rate . our non-u.s. earnings are primarily earned by our subsidiaries organized in ireland , and as such , our annual effective tax rate can be significantly affected by the composition of our earnings in the u.s. and non-u.s. jurisdictions . we are included in dell 's consolidated tax group for u.s. federal income tax purposes and will continue to be included in dell 's consolidated group for periods in which dell beneficially owns at least 80 % of the total voting power and value of our combined outstanding class a and class b common stock as calculated for u.s. federal income tax purposes . the percentage of voting power and value calculated for u.s. federal income tax purposes may differ from the percentage of outstanding shares beneficially owned by dell due to the greater voting power of our class b common stock as compared to our class a common stock and other factors . each member of a consolidated group during any part of a consolidated return year is jointly and severally liable for tax on the consolidated return of such year and for any subsequently determined deficiency thereon . should dell 's ownership fall below 80 % of the total voting power or value of our outstanding stock in any period , then we would no longer be included in the dell consolidated group for u.s. federal income tax purposes , and our u.s. federal income tax would be reported separately from that of the dell consolidated group . 44 although our results are included in the dell consolidated return for u.s. federal income tax purposes , our income tax provision , including provisional estimates of taxes relating to the 2017 tax act , is calculated primarily as though we were a separate taxpayer . however , under certain circumstances , transactions between us and dell are assessed using consolidated tax return rules . our future effective tax rate will benefit significantly from certain provisions of the 2017 tax act , including the reduction in the u.s. statutory corporate tax rate . however , the effect of the global intangible low-taxed income tax and the base erosion tax , as well as changes to our provisional accounting for the effects of the 2017 tax act during the measurement period , on our future effective tax rate is uncertain . our future effective tax rate may also be affected by such factors as changes in tax laws , changes in our business or statutory rates , changing interpretation of existing laws or regulations , the impact of accounting for stock-based compensation and the recognition of excess tax benefits and tax deficiencies within the income tax provision in the period in which they occur , the impact of accounting for business combinations , changes in the composition of earnings in the u.s. compared with other regions in the world and overall levels of income before tax , changes in our international organization , as well as the expiration of statute of limitations and settlements of audits . our relationship with dell as of february 2 , 2018 , dell controlled 31 million shares of class a common stock and all 300 million shares of class b common stock , representing 81.9 % of our total outstanding shares of common stock and 97.6 % of the combined voting power of our outstanding common stock . for a description of related risks , refer to “ risks related to our relationship with dell ” in part i , item 1a of this annual report on form 10-k. the information provided below includes a summary of the transactions entered into with dell and dell 's consolidated subsidiaries , including emc ( collectively , “ dell ” ) from the effective date of the dell acquisition through february 2 , 2018 . transactions prior to the effective date of the dell acquisition reflect transactions only with emc and its consolidated subsidiaries . transactions with dell we engaged with dell in the following ongoing intercompany transactions , which resulted in revenue and receipts and unearned revenue for us : pursuant to oem and reseller arrangements , dell integrates or bundles our products and services with dell 's products and sells them to end users . dell also acts as a distributor , purchasing our standalone products and services for resale to end-user customers through vmware-authorized resellers . revenue under these arrangements is presented net of related marketing development funds and rebates paid to dell . dell purchases products and
| cash provided by operating activities increased $ 830 million in fiscal 2018 compared to fiscal 2016 . cash provided by operating activities benefited from increased cash collections due to increased sales and improved linearity due to the fiscal year change in fiscal 2018 , and a decrease in tax payments as a result of significant tax payments made during fiscal 2016. these positive impacts were partially offset by higher cash outflows related to operating expenses , as well as increased cash payments for employee-related expenses , including salaries , bonuses and commissions , resulting primarily from growth in headcount . 48 cash provided by operating activities of $ 361 million during the transition period primarily reflected cash provided by cash collections , partially offset by cash payments for employee-related expenses . cash provided by operating activities increased $ 482 million in fiscal 2016 compared to fiscal 2015 , driven primarily by increased cash collections due to growth in sales during fiscal 2016. additionally , cash provided by operating activities in fiscal 2015 reflects payments for legal settlements , including $ 76 million for the gsa settlement , and approximately $ 185 million of installment payments made to certain key employees of airwatch , with the final installment payment of $ 29 million paid during the first quarter of fiscal 2016. cash provided by operating activities was partially offset by increases in cash payments for employee-related expenses including salaries , bonuses and commissions due to incremental growth in headcount and salaries .
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when a range is expressed above , the company is currently unable story_separator_special_tag in management 's discussion and analysis , we explain the general financial condition and the results of operations for our company , including : what factors affect our business ; what our net sales , earnings , gross margins and costs were in 2013 , 2012 and 2011 ; why those net sales , earnings , gross margins and costs were different from the year before ; how all of this affects our overall financial condition ; what our expenditures for capital projects were in 2013 and 2012 and what we expect them to be in 2014 ; and where funds will come from to pay for future expenditures . as you read management 's discussion and analysis , please refer to our consolidated financial statements , included in item 8 of this form 10-k , which present the results of operations for the fiscal years ended february 1 , 2014 , february 2 , 2013 and january 28 , 2012 . in management 's discussion and analysis , we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal year 2013 compared to fiscal year 2012 and for fiscal year 2012 compared to fiscal year 2011 . 18 key events and recent developments several key events have had or are expected to have a significant effect on our operations . you should keep in mind that : on september 17 , 2013 , we entered into agreements with jp morgan chase bank to repurchase $ 1.0 billion of our common stock under a variable maturity accelerated share repurchase program , 50 % of which is collared and 50 % of which is uncollared . on september 16 , 2013 , we completed a private placement with institutional investors of $ 750 million aggregate principal amount of senior notes . the senior notes include three tranches with $ 300 million of 4.03 % senior notes due in september 2020 , $ 350 million of 4.63 % senior notes due in september 2023 and $ 100 million of 4.78 % senior notes due in september 2025. on september 13 , 2013 , our board of directors authorized the repurchase of an additional $ 2.0 billion of our common stock . this authorization replaced all previous authorizations . at february 1 , 2014 , we had $ 1.0 billion remaining under board repurchase authorization . in august 2013 , we completed a 401,000 square foot expansion of our distribution center in marietta , oklahoma . the marietta distribution center is now a 1,004,000 square foot , fully automated facility . in june 2013 , we completed construction on a new 1.0 million square foot distribution center in windsor , connecticut . in march 2013 , we leased an additional 0.4 million square feet at our distribution center in san bernardino , california . the san bernardino distribution center is now an 802,000 square foot facility . on june 6 , 2012 , we entered into a five-year $ 750.0 million unsecured credit agreement which provides for a $ 750.0 million revolving line of credit , including up to $ 150.0 million in available letters of credit . the interest rate on the facility is based , at our option , on a libor rate , plus a margin , or an alternate base rate , plus a margin . in october 2011 , we completed a 410,000 square foot expansion of our distribution center in savannah , georgia . the savannah distribution center is now a 1,014,000 square foot , fully automated facility . overview our net sales are derived from the sale of merchandise . two major factors tend to affect our net sales trends . first is our success at opening new stores or adding new stores through acquisitions . second , sales vary at our existing stores from one year to the next . we refer to this change as a change in comparable store net sales , because we compare only those stores that are open throughout both of the periods being compared . we include sales from stores expanded during the year in the calculation of comparable store net sales , which has the effect of increasing our comparable store net sales . the term 'expanded ' also includes stores that are relocated . at february 1 , 2014 , we operated 4,992 stores in 48 states and the district of columbia , and five canadian provinces , with 43.2 million selling square feet compared to 4,671 stores with 40.5 million selling square feet at february 2 , 2013 . during fiscal 2013 , we opened 343 stores , expanded 71 stores and closed 22 stores , compared to 345 new stores opened , 87 stores expanded and 25 stores closed during fiscal 2012 . in the current year we increased our selling square footage by 6.9 % . of the 2.7 million selling square foot increase in 2013 , 0.2 million was added by expanding existing stores . the average size of our stores opened in 2013 was approximately 8,020 selling square feet ( or about 9,800 gross square feet ) . for 2014 , we continue to plan to open stores that are approximately 8,000 - 10,000 selling square feet ( or about 10,000 - 12,000 gross square feet ) . we believe that this store size is our optimal size operationally and that this size also gives our customers an ideal shopping environment that invites them to shop longer and buy more . story_separator_special_tag we have not experienced significant fluctuations in historical shrink rates beyond approximately 10-20 basis points in our dollar tree stores for the last few years . however , we have sometimes experienced higher than typical shrink in acquired stores in the year following an acquisition . we periodically adjust our shrink estimates to address these factors as they become apparent . our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis . accrued expenses on a monthly basis , we estimate certain expenses in an effort to record those expenses in the period incurred . certain expenses , such as legal reserves , require a high degree of judgment and our most material estimates include domestic freight expenses , self-insurance costs , store-level operating expenses , such as property taxes and utilities , and certain other expenses . we are involved in numerous legal proceedings and claims . our accruals , if any , related to these proceedings and claims are based on a determination of whether or not the loss is both probable and estimable . we review outstanding matters with external counsel to assess the probability of an unfavorable outcome and estimates of loss . we re-evaluate outstanding proceedings and claims each quarter or as new and significant information becomes available , and we adjust or establish accruals , if necessary . our legal proceedings are described in `` note 4 - commitments and contingencies `` under the caption `` contingencies `` beginning on page 42 of this form 10-k included in `` part ii . item 8. financial statements and supplementary data . our freight and store-level operating expenses are estimated based on current activity and historical trends and results . our workers ' compensation and general liability insurance accruals are recorded based on actuarial valuations which are adjusted at least annually based on a review performed by a third-party actuary . these actuarial valuations are estimates based on our historical loss development factors . certain other expenses are estimated and recorded in the periods that management becomes aware of them . the related accruals are adjusted as management 's estimates change . differences in management 's estimates and assumptions could result in accruals which are materially different from the calculated accruals . our experience has been that some of our estimates are too high and others are too low . historically , the net total of these differences has not had a material effect on our financial condition or results of operations . income taxes on a quarterly basis , we estimate our required income tax liability and assess the recoverability of our deferred tax assets . our income taxes payable are estimated based on enacted tax rates , including estimated tax rates in states where our store base is growing , applied to the income expected to be taxed currently . management assesses the recoverability of deferred tax assets based on the availability of carrybacks of future deductible amounts and management 's projections for future taxable income . we can not guarantee that we will generate taxable income in future years . historically , we have not experienced significant differences in our estimates of our tax accrual . in addition , we have a recorded liability for our estimate of uncertain tax positions taken or expected to be taken in our tax returns . judgment is required in evaluating the application of federal and state tax laws , including relevant case law , and assessing whether it is more likely than not that a tax position will be sustained on examination and , if so , judgment is also required as to the measurement of the amount of tax benefit that will be realized upon settlement with the taxing authority . income tax expense is adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amounts recorded . we believe that our liability for uncertain tax positions is adequate . for further discussion of our changes in reserves during 2013 , see item 8 “ financial statements and supplementary data - note 3 to the consolidated financial statements ” beginning on page 39 of this form 10-k. 25 seasonality and quarterly fluctuations we experience seasonal fluctuations in our net sales , comparable store net sales , operating income and net income and expect this trend to continue . our results of operations may also fluctuate significantly as a result of a variety of factors , including : shifts in the timing of certain holidays , especially easter ; the timing of new store openings ; the net sales contributed by new stores ; changes in our merchandise mix ; and competition . our highest sales periods are the christmas and easter seasons . easter was observed on april 8 , 2012 , march 31 , 2013 , and will be observed on april 20 , 2014. we believe that the later easter in 2014 could result in a $ 8.0 million increase in sales in the first quarter of 2014 as compared to the first quarter of 2013. we generally realize a disproportionate amount of our net sales and of our operating and net income during the fourth quarter . in anticipation of increased sales activity during these months , we purchase substantial amounts of inventory and hire a significant number of temporary employees to supplement our continuing store staff . our operating results , particularly operating and net income , could suffer if our net sales were below seasonal norms during the fourth quarter or during the easter season for any reason , including merchandise delivery delays due to receiving or distribution problems , changes in consumer sentiment or inclement weather . our unaudited results of operations for the eight most recent quarters are shown
| cash provided by operating activities increased $ 830 million in fiscal 2018 compared to fiscal 2016 . cash provided by operating activities benefited from increased cash collections due to increased sales and improved linearity due to the fiscal year change in fiscal 2018 , and a decrease in tax payments as a result of significant tax payments made during fiscal 2016. these positive impacts were partially offset by higher cash outflows related to operating expenses , as well as increased cash payments for employee-related expenses , including salaries , bonuses and commissions , resulting primarily from growth in headcount . 48 cash provided by operating activities of $ 361 million during the transition period primarily reflected cash provided by cash collections , partially offset by cash payments for employee-related expenses . cash provided by operating activities increased $ 482 million in fiscal 2016 compared to fiscal 2015 , driven primarily by increased cash collections due to growth in sales during fiscal 2016. additionally , cash provided by operating activities in fiscal 2015 reflects payments for legal settlements , including $ 76 million for the gsa settlement , and approximately $ 185 million of installment payments made to certain key employees of airwatch , with the final installment payment of $ 29 million paid during the first quarter of fiscal 2016. cash provided by operating activities was partially offset by increases in cash payments for employee-related expenses including salaries , bonuses and commissions due to incremental growth in headcount and salaries .
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when a range is expressed above , the company is currently unable story_separator_special_tag in management 's discussion and analysis , we explain the general financial condition and the results of operations for our company , including : what factors affect our business ; what our net sales , earnings , gross margins and costs were in 2013 , 2012 and 2011 ; why those net sales , earnings , gross margins and costs were different from the year before ; how all of this affects our overall financial condition ; what our expenditures for capital projects were in 2013 and 2012 and what we expect them to be in 2014 ; and where funds will come from to pay for future expenditures . as you read management 's discussion and analysis , please refer to our consolidated financial statements , included in item 8 of this form 10-k , which present the results of operations for the fiscal years ended february 1 , 2014 , february 2 , 2013 and january 28 , 2012 . in management 's discussion and analysis , we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal year 2013 compared to fiscal year 2012 and for fiscal year 2012 compared to fiscal year 2011 . 18 key events and recent developments several key events have had or are expected to have a significant effect on our operations . you should keep in mind that : on september 17 , 2013 , we entered into agreements with jp morgan chase bank to repurchase $ 1.0 billion of our common stock under a variable maturity accelerated share repurchase program , 50 % of which is collared and 50 % of which is uncollared . on september 16 , 2013 , we completed a private placement with institutional investors of $ 750 million aggregate principal amount of senior notes . the senior notes include three tranches with $ 300 million of 4.03 % senior notes due in september 2020 , $ 350 million of 4.63 % senior notes due in september 2023 and $ 100 million of 4.78 % senior notes due in september 2025. on september 13 , 2013 , our board of directors authorized the repurchase of an additional $ 2.0 billion of our common stock . this authorization replaced all previous authorizations . at february 1 , 2014 , we had $ 1.0 billion remaining under board repurchase authorization . in august 2013 , we completed a 401,000 square foot expansion of our distribution center in marietta , oklahoma . the marietta distribution center is now a 1,004,000 square foot , fully automated facility . in june 2013 , we completed construction on a new 1.0 million square foot distribution center in windsor , connecticut . in march 2013 , we leased an additional 0.4 million square feet at our distribution center in san bernardino , california . the san bernardino distribution center is now an 802,000 square foot facility . on june 6 , 2012 , we entered into a five-year $ 750.0 million unsecured credit agreement which provides for a $ 750.0 million revolving line of credit , including up to $ 150.0 million in available letters of credit . the interest rate on the facility is based , at our option , on a libor rate , plus a margin , or an alternate base rate , plus a margin . in october 2011 , we completed a 410,000 square foot expansion of our distribution center in savannah , georgia . the savannah distribution center is now a 1,014,000 square foot , fully automated facility . overview our net sales are derived from the sale of merchandise . two major factors tend to affect our net sales trends . first is our success at opening new stores or adding new stores through acquisitions . second , sales vary at our existing stores from one year to the next . we refer to this change as a change in comparable store net sales , because we compare only those stores that are open throughout both of the periods being compared . we include sales from stores expanded during the year in the calculation of comparable store net sales , which has the effect of increasing our comparable store net sales . the term 'expanded ' also includes stores that are relocated . at february 1 , 2014 , we operated 4,992 stores in 48 states and the district of columbia , and five canadian provinces , with 43.2 million selling square feet compared to 4,671 stores with 40.5 million selling square feet at february 2 , 2013 . during fiscal 2013 , we opened 343 stores , expanded 71 stores and closed 22 stores , compared to 345 new stores opened , 87 stores expanded and 25 stores closed during fiscal 2012 . in the current year we increased our selling square footage by 6.9 % . of the 2.7 million selling square foot increase in 2013 , 0.2 million was added by expanding existing stores . the average size of our stores opened in 2013 was approximately 8,020 selling square feet ( or about 9,800 gross square feet ) . for 2014 , we continue to plan to open stores that are approximately 8,000 - 10,000 selling square feet ( or about 10,000 - 12,000 gross square feet ) . we believe that this store size is our optimal size operationally and that this size also gives our customers an ideal shopping environment that invites them to shop longer and buy more . story_separator_special_tag we have not experienced significant fluctuations in historical shrink rates beyond approximately 10-20 basis points in our dollar tree stores for the last few years . however , we have sometimes experienced higher than typical shrink in acquired stores in the year following an acquisition . we periodically adjust our shrink estimates to address these factors as they become apparent . our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis . accrued expenses on a monthly basis , we estimate certain expenses in an effort to record those expenses in the period incurred . certain expenses , such as legal reserves , require a high degree of judgment and our most material estimates include domestic freight expenses , self-insurance costs , store-level operating expenses , such as property taxes and utilities , and certain other expenses . we are involved in numerous legal proceedings and claims . our accruals , if any , related to these proceedings and claims are based on a determination of whether or not the loss is both probable and estimable . we review outstanding matters with external counsel to assess the probability of an unfavorable outcome and estimates of loss . we re-evaluate outstanding proceedings and claims each quarter or as new and significant information becomes available , and we adjust or establish accruals , if necessary . our legal proceedings are described in `` note 4 - commitments and contingencies `` under the caption `` contingencies `` beginning on page 42 of this form 10-k included in `` part ii . item 8. financial statements and supplementary data . our freight and store-level operating expenses are estimated based on current activity and historical trends and results . our workers ' compensation and general liability insurance accruals are recorded based on actuarial valuations which are adjusted at least annually based on a review performed by a third-party actuary . these actuarial valuations are estimates based on our historical loss development factors . certain other expenses are estimated and recorded in the periods that management becomes aware of them . the related accruals are adjusted as management 's estimates change . differences in management 's estimates and assumptions could result in accruals which are materially different from the calculated accruals . our experience has been that some of our estimates are too high and others are too low . historically , the net total of these differences has not had a material effect on our financial condition or results of operations . income taxes on a quarterly basis , we estimate our required income tax liability and assess the recoverability of our deferred tax assets . our income taxes payable are estimated based on enacted tax rates , including estimated tax rates in states where our store base is growing , applied to the income expected to be taxed currently . management assesses the recoverability of deferred tax assets based on the availability of carrybacks of future deductible amounts and management 's projections for future taxable income . we can not guarantee that we will generate taxable income in future years . historically , we have not experienced significant differences in our estimates of our tax accrual . in addition , we have a recorded liability for our estimate of uncertain tax positions taken or expected to be taken in our tax returns . judgment is required in evaluating the application of federal and state tax laws , including relevant case law , and assessing whether it is more likely than not that a tax position will be sustained on examination and , if so , judgment is also required as to the measurement of the amount of tax benefit that will be realized upon settlement with the taxing authority . income tax expense is adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amounts recorded . we believe that our liability for uncertain tax positions is adequate . for further discussion of our changes in reserves during 2013 , see item 8 “ financial statements and supplementary data - note 3 to the consolidated financial statements ” beginning on page 39 of this form 10-k. 25 seasonality and quarterly fluctuations we experience seasonal fluctuations in our net sales , comparable store net sales , operating income and net income and expect this trend to continue . our results of operations may also fluctuate significantly as a result of a variety of factors , including : shifts in the timing of certain holidays , especially easter ; the timing of new store openings ; the net sales contributed by new stores ; changes in our merchandise mix ; and competition . our highest sales periods are the christmas and easter seasons . easter was observed on april 8 , 2012 , march 31 , 2013 , and will be observed on april 20 , 2014. we believe that the later easter in 2014 could result in a $ 8.0 million increase in sales in the first quarter of 2014 as compared to the first quarter of 2013. we generally realize a disproportionate amount of our net sales and of our operating and net income during the fourth quarter . in anticipation of increased sales activity during these months , we purchase substantial amounts of inventory and hire a significant number of temporary employees to supplement our continuing store staff . our operating results , particularly operating and net income , could suffer if our net sales were below seasonal norms during the fourth quarter or during the easter season for any reason , including merchandise delivery delays due to receiving or distribution problems , changes in consumer sentiment or inclement weather . our unaudited results of operations for the eight most recent quarters are shown
| liquidity and capital resources our business requires capital to build and open new stores , expand our distribution network and operate and expand existing stores . our working capital requirements for existing stores are seasonal and usually reach their peak in september and october . historically , we have satisfied our seasonal working capital requirements for existing stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities . the following table compares cash-flow related information for the years ended february 1 , 2014 , february 2 , 2013 and january 28 , 2012 : 21 replace_table_token_10_th net cash provided by operating activities increased $ 115.7 million in 2013 compared to 2012 due to a decrease in cash used for prepaid rent and purchasing merchandise inventory partially offset by a decrease in income taxes payable . net cash provided by operating activities decreased $ 8.8 million in 2012 compared to 2011 due to an increase in cash used to purchase merchandise inventory and cash used for prepaid rent as a result of february 1st falling in the last week of the fiscal year partially offset by increased earnings before income taxes , depreciation and amortization in 2012 and increases in income taxes payable .
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in july 2013 , the company also acquired certain assets of the larson group , inc. and now operates ford and mitsubishi fuso truck franchises at the rush truck center in cincinnati , ohio . ● in september 2013 , the company acquired certain assets of transauthority and now operates full service international dealerships in richmond and suffolk , virginia and parts and service locations in fredericksburg and chester , virginia . the richmond and norfolk locations include idealease franchises . ● in october 2013 , the company acquired certain assets of prairie international trucks and now operates international commercial truck dealerships in champaign , decatur , bloomington , quincy and springfield , illinois ; a collision center in champaign , illinois and idealease commercial lease and rental operations at the dealerships in champaign , decatur , quincy and springfield , illinois . ● in december 2013 , the company opened a newly constructed full service peterbilt dealership and paclease commercial vehicle leasing and rental operation in corpus christi , texas . ● on february 12 , 2013 , the company announced that its board of directors approved a stock repurchase program authorizing the company to repurchase , from time to time , up to an aggregate of $ 40.0 million shares of class a common stock and or class b common stock . this stock repurchase program was replaced with a new program effective february 4 , 2014. as of december 31 , 2013 , the company has purchased approximately $ 12.9 million of its class b common stock under this repurchase program . 27 recent events ● in january 2014 , the company acquired certain assets of cit , inc. , which did business as chicago international trucks , mcgrenho l.l.c . , which did business as indy truck sales , and indiana mack leasing , llc ; and the membership interests of idealease of chicago , llc . the acquisition included international commercial truck dealerships and idealease commercial vehicle rental and leasing businesses in carol stream , chicago , grayslake , huntley , joliet , kankakee and ottawa , illinois , and brazil , gary and indianapolis , indiana . ● on february 4 , 2014 , the company announced its board of directors had approved a stock repurchase program authorizing the company to repurchase , from time to time , up to an aggregate of $ 40.0 million of its shares of class a common stock and or class b common stock . repurchases will be made at times and in amounts as the company deems appropriate and will be made through open market transactions , privately negotiated transactions and other lawful means . the manner , timing and amount of any repurchases will be determined by the company based on an evaluation of market conditions , stock price and other factors . the stock repurchase program expires on february 3 , 2015 and may be suspended or discontinued at any time . while the stock repurchase program does not obligate the company to acquire any particular amount or class of common stock , the company anticipates that it will be repurchasing primarily shares of its class b common stock . 2014 outlook in 2014 , we expect another year of record performance . we expect higher revenues in all areas of our business . our projected increase in earnings is expected to be partially offset by higher spending on growth initiatives . we expect cash flow from our truck segment to remain strong . according to a.c.t . research co. , llc ( “ a.c.t . research ” ) , a truck industry data and forecasting service provider , u. s. class 8 retail sales are estimated to reach 213,500 units in 2014 , a 13.8 % increase over this year . u. s. class 4-7 retail sales are estimated to reach 193,500 units , up 7.7 % over 2013. as we look to 2014 and beyond , we are focused on positioning our company for growth , while continuing to deliver strong and consistent financial results . we believe that the key challenges facing our industry during 2014 will be continued economic growth in the u.s. and the possible rise of interest rates . industry experts believe that the primary drivers of growth in the u.s. during 2014 will be consumption , housing and non-residential investment . the final months of 2013 appeared to indicate growth in the u.s. economy , which we believe will continue into 2014. key performance indicator absorption ratio . management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships , and considers rush truck centers ' “ absorption ratio ” to be of critical importance . absorption ratio is calculated by dividing the gross profit from the parts , service and body shop departments by the overhead expenses of all of a dealership 's departments , except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory . when 100 % absorption is achieved , all of the gross profit from the sale of a commercial vehicle , after sales commissions and inventory carrying costs , directly impacts operating profit . in 1999 , the company 's commercial vehicle dealerships ' absorption ratio was approximately 80 % . the company has made a concerted effort to increase its absorption ratio since 1999. the company 's commercial vehicle dealerships achieved a 114.0 % absorption ratio for the year in 2013 and 115.9 % absorption ratio for the year in 2012 . 28 critical accounting policies and estimates the company 's discussion and analysis of its financial condition and results of operations are based on the company 's consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . story_separator_special_tag the company expects to sell approximately 7,500 to 8,500 used commercial vehicles in 2014. the volume of used commercial vehicle sales will be largely dependent upon our ability to acquire quality used commercial vehicles and maintain an adequate used commercial vehicle inventory throughout 2014. truck lease and rental revenues increased $ 29.4 million , or 29.3 % , in 2013 , compared to 2012. the increase in lease and rental revenue is primarily due to acquisitions since december 31 , 2012. the company expects lease and rental revenue to increase 20 % to 30 % during 2014 , compared to 2013. finance and insurance revenues increased $ 1.7 million , or 12.3 % , in 2013 , compared to 2012. the increase in finance and insurance revenue is primarily a result of the increase in finance penetration rates and increased activity in the company 's insurance business . the company expects finance and insurance revenue to fluctuate proportionately with the company 's new and used commercial vehicle sales in 2014. finance and insurance revenues have limited direct costs and , therefore , contribute a disproportionate share of the company 's operating profits . other income increased $ 1.5 million , or 15.1 % in 2013 , compared to 2012. other income consists primarily of the gain on sale realized on trucks from the lease and rental fleet , document fees related to commercial vehicle sales and mineral royalties . gross profit gross profit increased $ 71.2 million , or 14.2 % , in 2013 , compared to 2012. gross profit as a percentage of sales increased to 16.9 % in 2013 , from 16.2 % in 2012. this increase in gross profit as a percentage of sales is a result of a change in our product sales mix . commercial vehicle sales , a lower margin revenue item , decreased as a percentage of total revenue to 66.2 % in 2013 , from 69.5 % in 2012. parts and service revenue , a higher margin revenue item , increased as a percentage of total revenue to 29.2 % in 2013 , from 26.4 % in 2012. gross margins from the company 's parts , service and body shop operations decreased to 37.3 % in 2013 , from 38.8 % in 2012. gross profit for the parts , service and body shop departments increased to $ 368.3 million in 2013 , from $ 317.4 million in 2012. historically , parts operations gross margins range from 27 % to 28 % and service and body shop operations range from 67 % to 68 % . gross profits from parts sales represented 55 % of total gross profit for parts , service and body shop operations in 2013 , compared to 53 % in 2012. service and body shop operations represented 45 % of total gross profit for parts , service and body shop operations in 2013 , compared to 47 % in 2012. the company expects blended gross margins on parts , service and body shop operations to range 35.0 % to 37.0 % in 2014. gross margins on class 8 truck sales decreased to 6.8 % in 2013 , from 6.9 % in 2012. in 2014 , the company expects overall gross margins from class 8 truck sales of approximately 6.5 % to 7.0 % . the company recorded expense of $ 3.9 million to increase its new heavy-duty truck valuation allowance in 2013 , compared to $ 3.3 million in 2012. gross margins on medium-duty commercial vehicle sales increased to 5.2 % in 2013 , from 4.6 % in 2012. it is difficult to accurately forecast gross margins on medium-duty commercial vehicles because gross margins vary significantly depending upon the mix of fleet and non-fleet purchasers and types of medium-duty commercial vehicles sold . for 2014 , the company expects overall gross margins from medium-duty commercial vehicle sales of approximately 5.0 % to 5.5 % , but this will largely depend upon the mix of purchasers and types of vehicles sold . the company recorded expense of $ 3.7 million to increase its new medium-duty commercial vehicle valuation allowance in 2013 , compared to $ 3.9 million in 2012 . 34 gross margins on used commercial vehicle sales increased to 9.2 % in 2013 , from 8.3 % in 2012. the company expects margins on used commercial vehicles to range between 8.0 % and 10.0 % during 2014 depending upon general economic conditions and the availability of quality used vehicles . the company recorded expense of $ 5.3 million to increase its used commercial vehicle valuation allowance in 2013 , compared to $ 5.7 million in 2012. gross margins from truck lease and rental sales decreased to 15.7 % in 2013 , from approximately 16.0 % in 2012. the company expects gross margins from lease and rental sales of approximately 15.5 % to 16.5 % during 2014 , as it expects to continue to grow its lease and rental fleet . the company 's policy is to depreciate its lease and rental fleet using a straight line method over the customer 's contractual lease term . the lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term . this policy results in the company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term . finance and insurance revenues and other income , as described above , have limited direct costs and , therefore , contribute a disproportionate share of gross profit . selling , general and administrative expenses selling , general and administrative ( “ sg & a ” ) expenses increased $ 88.6 million , or 24.5 % , in 2013 , compared to 2012. sg & a expenses as a percentage of total revenue increased to 13.3 % in 2013 , from 11.7 % in 2012. this increase
| liquidity and capital resources our business requires capital to build and open new stores , expand our distribution network and operate and expand existing stores . our working capital requirements for existing stores are seasonal and usually reach their peak in september and october . historically , we have satisfied our seasonal working capital requirements for existing stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities . the following table compares cash-flow related information for the years ended february 1 , 2014 , february 2 , 2013 and january 28 , 2012 : 21 replace_table_token_10_th net cash provided by operating activities increased $ 115.7 million in 2013 compared to 2012 due to a decrease in cash used for prepaid rent and purchasing merchandise inventory partially offset by a decrease in income taxes payable . net cash provided by operating activities decreased $ 8.8 million in 2012 compared to 2011 due to an increase in cash used to purchase merchandise inventory and cash used for prepaid rent as a result of february 1st falling in the last week of the fiscal year partially offset by increased earnings before income taxes , depreciation and amortization in 2012 and increases in income taxes payable .
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in july 2013 , the company also acquired certain assets of the larson group , inc. and now operates ford and mitsubishi fuso truck franchises at the rush truck center in cincinnati , ohio . ● in september 2013 , the company acquired certain assets of transauthority and now operates full service international dealerships in richmond and suffolk , virginia and parts and service locations in fredericksburg and chester , virginia . the richmond and norfolk locations include idealease franchises . ● in october 2013 , the company acquired certain assets of prairie international trucks and now operates international commercial truck dealerships in champaign , decatur , bloomington , quincy and springfield , illinois ; a collision center in champaign , illinois and idealease commercial lease and rental operations at the dealerships in champaign , decatur , quincy and springfield , illinois . ● in december 2013 , the company opened a newly constructed full service peterbilt dealership and paclease commercial vehicle leasing and rental operation in corpus christi , texas . ● on february 12 , 2013 , the company announced that its board of directors approved a stock repurchase program authorizing the company to repurchase , from time to time , up to an aggregate of $ 40.0 million shares of class a common stock and or class b common stock . this stock repurchase program was replaced with a new program effective february 4 , 2014. as of december 31 , 2013 , the company has purchased approximately $ 12.9 million of its class b common stock under this repurchase program . 27 recent events ● in january 2014 , the company acquired certain assets of cit , inc. , which did business as chicago international trucks , mcgrenho l.l.c . , which did business as indy truck sales , and indiana mack leasing , llc ; and the membership interests of idealease of chicago , llc . the acquisition included international commercial truck dealerships and idealease commercial vehicle rental and leasing businesses in carol stream , chicago , grayslake , huntley , joliet , kankakee and ottawa , illinois , and brazil , gary and indianapolis , indiana . ● on february 4 , 2014 , the company announced its board of directors had approved a stock repurchase program authorizing the company to repurchase , from time to time , up to an aggregate of $ 40.0 million of its shares of class a common stock and or class b common stock . repurchases will be made at times and in amounts as the company deems appropriate and will be made through open market transactions , privately negotiated transactions and other lawful means . the manner , timing and amount of any repurchases will be determined by the company based on an evaluation of market conditions , stock price and other factors . the stock repurchase program expires on february 3 , 2015 and may be suspended or discontinued at any time . while the stock repurchase program does not obligate the company to acquire any particular amount or class of common stock , the company anticipates that it will be repurchasing primarily shares of its class b common stock . 2014 outlook in 2014 , we expect another year of record performance . we expect higher revenues in all areas of our business . our projected increase in earnings is expected to be partially offset by higher spending on growth initiatives . we expect cash flow from our truck segment to remain strong . according to a.c.t . research co. , llc ( “ a.c.t . research ” ) , a truck industry data and forecasting service provider , u. s. class 8 retail sales are estimated to reach 213,500 units in 2014 , a 13.8 % increase over this year . u. s. class 4-7 retail sales are estimated to reach 193,500 units , up 7.7 % over 2013. as we look to 2014 and beyond , we are focused on positioning our company for growth , while continuing to deliver strong and consistent financial results . we believe that the key challenges facing our industry during 2014 will be continued economic growth in the u.s. and the possible rise of interest rates . industry experts believe that the primary drivers of growth in the u.s. during 2014 will be consumption , housing and non-residential investment . the final months of 2013 appeared to indicate growth in the u.s. economy , which we believe will continue into 2014. key performance indicator absorption ratio . management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships , and considers rush truck centers ' “ absorption ratio ” to be of critical importance . absorption ratio is calculated by dividing the gross profit from the parts , service and body shop departments by the overhead expenses of all of a dealership 's departments , except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory . when 100 % absorption is achieved , all of the gross profit from the sale of a commercial vehicle , after sales commissions and inventory carrying costs , directly impacts operating profit . in 1999 , the company 's commercial vehicle dealerships ' absorption ratio was approximately 80 % . the company has made a concerted effort to increase its absorption ratio since 1999. the company 's commercial vehicle dealerships achieved a 114.0 % absorption ratio for the year in 2013 and 115.9 % absorption ratio for the year in 2012 . 28 critical accounting policies and estimates the company 's discussion and analysis of its financial condition and results of operations are based on the company 's consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . story_separator_special_tag the company expects to sell approximately 7,500 to 8,500 used commercial vehicles in 2014. the volume of used commercial vehicle sales will be largely dependent upon our ability to acquire quality used commercial vehicles and maintain an adequate used commercial vehicle inventory throughout 2014. truck lease and rental revenues increased $ 29.4 million , or 29.3 % , in 2013 , compared to 2012. the increase in lease and rental revenue is primarily due to acquisitions since december 31 , 2012. the company expects lease and rental revenue to increase 20 % to 30 % during 2014 , compared to 2013. finance and insurance revenues increased $ 1.7 million , or 12.3 % , in 2013 , compared to 2012. the increase in finance and insurance revenue is primarily a result of the increase in finance penetration rates and increased activity in the company 's insurance business . the company expects finance and insurance revenue to fluctuate proportionately with the company 's new and used commercial vehicle sales in 2014. finance and insurance revenues have limited direct costs and , therefore , contribute a disproportionate share of the company 's operating profits . other income increased $ 1.5 million , or 15.1 % in 2013 , compared to 2012. other income consists primarily of the gain on sale realized on trucks from the lease and rental fleet , document fees related to commercial vehicle sales and mineral royalties . gross profit gross profit increased $ 71.2 million , or 14.2 % , in 2013 , compared to 2012. gross profit as a percentage of sales increased to 16.9 % in 2013 , from 16.2 % in 2012. this increase in gross profit as a percentage of sales is a result of a change in our product sales mix . commercial vehicle sales , a lower margin revenue item , decreased as a percentage of total revenue to 66.2 % in 2013 , from 69.5 % in 2012. parts and service revenue , a higher margin revenue item , increased as a percentage of total revenue to 29.2 % in 2013 , from 26.4 % in 2012. gross margins from the company 's parts , service and body shop operations decreased to 37.3 % in 2013 , from 38.8 % in 2012. gross profit for the parts , service and body shop departments increased to $ 368.3 million in 2013 , from $ 317.4 million in 2012. historically , parts operations gross margins range from 27 % to 28 % and service and body shop operations range from 67 % to 68 % . gross profits from parts sales represented 55 % of total gross profit for parts , service and body shop operations in 2013 , compared to 53 % in 2012. service and body shop operations represented 45 % of total gross profit for parts , service and body shop operations in 2013 , compared to 47 % in 2012. the company expects blended gross margins on parts , service and body shop operations to range 35.0 % to 37.0 % in 2014. gross margins on class 8 truck sales decreased to 6.8 % in 2013 , from 6.9 % in 2012. in 2014 , the company expects overall gross margins from class 8 truck sales of approximately 6.5 % to 7.0 % . the company recorded expense of $ 3.9 million to increase its new heavy-duty truck valuation allowance in 2013 , compared to $ 3.3 million in 2012. gross margins on medium-duty commercial vehicle sales increased to 5.2 % in 2013 , from 4.6 % in 2012. it is difficult to accurately forecast gross margins on medium-duty commercial vehicles because gross margins vary significantly depending upon the mix of fleet and non-fleet purchasers and types of medium-duty commercial vehicles sold . for 2014 , the company expects overall gross margins from medium-duty commercial vehicle sales of approximately 5.0 % to 5.5 % , but this will largely depend upon the mix of purchasers and types of vehicles sold . the company recorded expense of $ 3.7 million to increase its new medium-duty commercial vehicle valuation allowance in 2013 , compared to $ 3.9 million in 2012 . 34 gross margins on used commercial vehicle sales increased to 9.2 % in 2013 , from 8.3 % in 2012. the company expects margins on used commercial vehicles to range between 8.0 % and 10.0 % during 2014 depending upon general economic conditions and the availability of quality used vehicles . the company recorded expense of $ 5.3 million to increase its used commercial vehicle valuation allowance in 2013 , compared to $ 5.7 million in 2012. gross margins from truck lease and rental sales decreased to 15.7 % in 2013 , from approximately 16.0 % in 2012. the company expects gross margins from lease and rental sales of approximately 15.5 % to 16.5 % during 2014 , as it expects to continue to grow its lease and rental fleet . the company 's policy is to depreciate its lease and rental fleet using a straight line method over the customer 's contractual lease term . the lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term . this policy results in the company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term . finance and insurance revenues and other income , as described above , have limited direct costs and , therefore , contribute a disproportionate share of gross profit . selling , general and administrative expenses selling , general and administrative ( “ sg & a ” ) expenses increased $ 88.6 million , or 24.5 % , in 2013 , compared to 2012. sg & a expenses as a percentage of total revenue increased to 13.3 % in 2013 , from 11.7 % in 2012. this increase
| cash flows from investing activities during 2013 , cash used in investing activities was $ 269.7 million . cash flows used in investing activities consist primarily of cash used for capital expenditures and business acquisitions . capital expenditures of $ 191.6 million consisted of purchases of property and equipment and improvements to our existing dealership facilities . property and equipment purchases during 2013 consisted of $ 140.1 million for additional units for the rental and leasing operations , which was directly offset by borrowings of long-term debt . the company expects to purchase or lease trucks worth approximately $ 170.0 million for its leasing operations in 2014 , depending on customer demand , all of which will be financed . cash used in business acquisitions was $ 72.7 million during the year ended december 31 , 2013. see note 15 of the notes to consolidated financial statements for a detailed discussion of the business acquisitions . during 2014 , the company expects to make capital expenditures for recurring items such as computers , shop equipment and vehicles of $ 16.0 million to $ 18.0 million . during 2012 , cash used in investing activities was $ 274.3 million . cash flows used in investing activities consist primarily of cash used for capital expenditures and a business acquisition . capital expenditures of $ 170.0 million consisted of purchases of property and equipment and improvements to our existing dealership facilities . property and equipment purchases during 2012 consisted of $ 128.1 million for additional units for the rental and leasing operations , which was directly offset by borrowings of long-term debt . cash used in the business acquisition was $ 104.6 million during the year ended december 31 , 2012. see note 15 of the notes to consolidated financial statements for a detailed discussion of the business acquisition . cash flows from financing activities cash flows used in financing activities include borrowings and repayments of long-term debt and net payments of floor plan notes payable .
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the regulations have affected and are expected to continue to affect our clients ' businesses and marketing practices , including an overall decrease in our clients ' external marketing expenditures and a related decrease in our revenues from this client vertical . the effect of these regulations may continue to result in fluctuations in the volume and mix of our business with these clients . in our financial services client vertical , prices are largely determined by bidding . in fiscal year 2012 , we have seen pricing that we receive from clients stabilize . throughout the year , our revenue has declined primarily due to volume declines caused by losses of traffic from third-party publishers resulting from acquisitions of media sources by competitors , changes in a search engine 's algorithms which reduced or eliminated traffic from some third-party publishers , and increased competition for quality media . acquisitions acquisitions in fiscal year 2012 in february 2012 , we acquired certain assets of ziff davis enterprise from enterprise media group , inc. , a new york-based online media and marketing company in the business-to-business technology market , in exchange for $ 17.3 million in cash , to broaden our registered user database and brand name in the business-to-business technology market . in august 2011 , we acquired 100 % of the outstanding equity interests of narrowcast group , llc , or it businessedge , a kentucky-based internet media company in the business-to-business technology market , in exchange for $ 24.0 million in cash , to broaden our registered user database and media access in the business-to-business technology market . during fiscal year 2012 , in addition to certain assets of ziff davis enterprise and all of the equity interests of it businessedge , we acquired eleven other online publishing businesses . acquisitions in fiscal year 2011 in november 2010 , we acquired 100 % of the outstanding shares of car insurance.com , inc. , or carinsurance.com , a florida-based online insurance business , and certain of its affiliated companies , in exchange for $ 49.7 million in cash , for its capacity to generate online visitors in the financial services market . in july 2010 , we acquired the website business insurance.com from insurance.com group , inc. , an ohio-based online insurance business , in exchange for $ 33.0 million in cash and the issuance of a $ 2.6 million non-interest-bearing , unsecured promissory note , for its capacity to generate online visitors in the financial services market . during fiscal year 2011 , in addition to the acquisitions of carinsurance.com and insurance.com , we acquired 13 other online publishing businesses . acquisitions in fiscal year 2010 in november 2009 , we acquired the website business internet.com , a division of webmediabrands , inc. , or internet.com , a new york-based internet media company , in exchange for $ 15.9 million in cash and the issuance of a $ 1.7 million non-interest-bearing , unsecured promissory note , to broaden our media access and client base in the business-to-business technology market . in october 2009 , we acquired the website business insure.com from 40 life quotes , inc. , or insure.com , an illinois-based online insurance quote service and brokerage business , in exchange for $ 15.0 million in cash and the issuance of a $ 1.0 million non-interest-bearing , unsecured promissory note , for its capacity to generate online visitors in the financial services market . during fiscal year 2010 , in addition to the acquisitions of internet.com and insure.com , we acquired 31 other online publishing businesses . our acquisition strategy may result in significant fluctuations in our available working capital from period to period and over the years . we may use cash , stock or promissory notes to acquire various businesses or technologies , and we can not accurately predict the timing of those acquisitions or the impact on our cash flows and balance sheet . large acquisitions or multiple acquisitions within a particular period may significantly affect our financial results for that period . we may utilize debt financing to make acquisitions , which could give rise to higher interest expense and more restrictive operating covenants . we may also utilize our stock as consideration , which could result in substantial dilution . development , retention and acquisition of targeted media one of the primary challenges of our business is finding , retaining and developing media that is targeted enough to attract prospects for our clients at costs that work for our business model . in order to grow our business , we must be able to continue to find , develop and retain quality targeted media on a cost-effective basis . our inability to find , develop and retain high quality targeted media has limited , during some periods , and may continue to limit our growth . seasonality our results are subject to significant fluctuation as a result of seasonality . in particular , our quarters ending december 31 ( our second fiscal quarter ) typically demonstrate seasonal weakness . in our second fiscal quarters , there is lower availability of cost effective media during the holiday period and some of our clients request fewer leads due to holiday staffing . in our quarters ending march 31 ( our third fiscal quarter ) , this trend generally reverses with better lead availability and often new budgets at the beginning of the year for our clients with fiscal years ending december 31. basis of presentation general we operate in two segments : dms and dss . for further discussion and financial information about our reporting segments , see note 14 to our consolidated financial statements . net revenue dms . our dms business generates revenue from fees earned through the delivery of qualified leads , clicks and , to a lesser extent , display advertisements , or impressions . story_separator_special_tag we seek to manage our business to a consistent level of adjusted ebitda as a percentage of net revenue . we do so on a fiscal year basis by varying our operations to balance revenue growth and costs throughout the fiscal year . we do not seek to manage our business to a consistent level of adjusted ebitda on a quarterly basis and investors should expect our adjusted ebitda margins to vary from quarter to quarter . liquidity and capital resources our principal sources of liquidity as of june 30 , 2012 consisted of cash and cash equivalents of $ 68.5 million , short-term marketable securities of $ 36.7 million , cash we expect to generate from operations , and our $ 200.0 million revolving credit facility , which is committed until november 2016 , all of which is available to be drawn , subject to compliance with applicable covenants . our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase . we believe our cash equivalents are liquid and accessible . in november 2011 , we replaced our existing $ 225.0 million credit facility with a new credit facility that expanded our overall borrowing capacity by $ 75.0 million to $ 300.0 million , consisting of a $ 100.0 million term loan and a $ 200.0 million revolving credit facility . additionally , in november 2011 , our board of directors authorized a stock repurchase program allowing us to repurchase up to $ 50.0 million , excluding broker commissions , of our outstanding shares of common stock . through june 30 , 2012 , we have repurchased an aggregate of 4.8 million shares of our common stock for an aggregate of $ 45.0 million . as of june 30 , 2012 , the remaining amount available for the repurchase of our common stock under this program was $ 5.0 million , all of which was used for repurchases in july 2012. additionally , in august 2011 , we acquired 100 % of the outstanding equity interests of narrowcast group , llc , or it businessedge , a kentucky-based internet media company in the business-to-business technology market , in exchange for $ 24.0 million in cash . in february 2012 , we acquired certain assets of ziff davis enterprise from enterprise media group , inc. , a new york-based online media and marketing company in the business-to-business technology market , for $ 17.3 million in cash . our short-term and long-term liquidity requirements primarily arise from our working capital requirements , acquisitions from time to time and share repurchases . our primary operating cash requirements include the payment of media costs , personnel costs , costs of information technology systems and office facilities . our 48 ability to fund these requirements will depend on our future cash flows , which are determined by future operating performance and are , therefore , subject to prevailing global macroeconomic conditions and financial , business and other factors , some of which are beyond our control , and also our ability to access our credit facility . we believe that our existing cash , cash equivalents , short-term marketable securities , cash generated from operations and our available borrowings under the credit facility will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months . our ability to service any indebtedness we have incurred or may incur , including under our current credit facility , will depend on our ability to generate cash in the future . in addition , even though we may not need additional funds , we may still elect to obtain additional debt or equity securities or draw down on or increase our borrowing capacity under our current credit facility for other reasons . replace_table_token_16_th net cash provided by operating activities our net cash provided by operating activities is primarily the result of our net income adjusted for non-cash expenses such as depreciation and amortization , stock-based compensation expense and changes in working capital components , and is influenced by the timing of cash collections from our clients and cash payments for purchases of media and other expenses . net cash provided by operating activities in fiscal year 2012 was due to net income of $ 13.0 million , non-cash depreciation , amortization , stock-based compensation expense and related tax benefits of $ 46.0 million , a decrease in other noncurrent assets comprised primarily of deferred taxes of $ 2.8 million , partially offset by an increase in prepaid expenses and other assets of $ 2.6 million , an increase in accounts receivable of $ 2.0 million and a decrease in accounts payable and accrued liabilities of $ 7.8 million . the decrease in accounts payable and accrued liabilities is due to timing of payments and decreased cost of revenue associated with decreased revenue . the increase in prepaid expenses and other assets is primarily due to timing of payments . the increase in accounts receivable is attributable to timing of receipts . the decrease in deferred taxes is due to larger temporary differences between the financial statement carrying amount and the tax basis of certain existing assets and liabilities . net cash provided by operating activities in fiscal year 2011 was due to net income of $ 27.2 million , non-cash depreciation , amortization , stock-based compensation expense and related tax benefits of $ 33.8 million , an increase in accounts payable and accrued liabilities of $ 8.9 million , a decrease in prepaid expenses and other assets of $ 5.1 million and a decrease in accounts receivable of $ 3.9 million , partially offset by an increase in other noncurrent assets comprised primarily of deferred taxes of $ 3.3 million . the increase in accounts payable and accrued liabilities is due to timing of payments and increased cost of revenue associated with increased revenue . the decrease in
| cash flows from investing activities during 2013 , cash used in investing activities was $ 269.7 million . cash flows used in investing activities consist primarily of cash used for capital expenditures and business acquisitions . capital expenditures of $ 191.6 million consisted of purchases of property and equipment and improvements to our existing dealership facilities . property and equipment purchases during 2013 consisted of $ 140.1 million for additional units for the rental and leasing operations , which was directly offset by borrowings of long-term debt . the company expects to purchase or lease trucks worth approximately $ 170.0 million for its leasing operations in 2014 , depending on customer demand , all of which will be financed . cash used in business acquisitions was $ 72.7 million during the year ended december 31 , 2013. see note 15 of the notes to consolidated financial statements for a detailed discussion of the business acquisitions . during 2014 , the company expects to make capital expenditures for recurring items such as computers , shop equipment and vehicles of $ 16.0 million to $ 18.0 million . during 2012 , cash used in investing activities was $ 274.3 million . cash flows used in investing activities consist primarily of cash used for capital expenditures and a business acquisition . capital expenditures of $ 170.0 million consisted of purchases of property and equipment and improvements to our existing dealership facilities . property and equipment purchases during 2012 consisted of $ 128.1 million for additional units for the rental and leasing operations , which was directly offset by borrowings of long-term debt . cash used in the business acquisition was $ 104.6 million during the year ended december 31 , 2012. see note 15 of the notes to consolidated financial statements for a detailed discussion of the business acquisition . cash flows from financing activities cash flows used in financing activities include borrowings and repayments of long-term debt and net payments of floor plan notes payable .
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the regulations have affected and are expected to continue to affect our clients ' businesses and marketing practices , including an overall decrease in our clients ' external marketing expenditures and a related decrease in our revenues from this client vertical . the effect of these regulations may continue to result in fluctuations in the volume and mix of our business with these clients . in our financial services client vertical , prices are largely determined by bidding . in fiscal year 2012 , we have seen pricing that we receive from clients stabilize . throughout the year , our revenue has declined primarily due to volume declines caused by losses of traffic from third-party publishers resulting from acquisitions of media sources by competitors , changes in a search engine 's algorithms which reduced or eliminated traffic from some third-party publishers , and increased competition for quality media . acquisitions acquisitions in fiscal year 2012 in february 2012 , we acquired certain assets of ziff davis enterprise from enterprise media group , inc. , a new york-based online media and marketing company in the business-to-business technology market , in exchange for $ 17.3 million in cash , to broaden our registered user database and brand name in the business-to-business technology market . in august 2011 , we acquired 100 % of the outstanding equity interests of narrowcast group , llc , or it businessedge , a kentucky-based internet media company in the business-to-business technology market , in exchange for $ 24.0 million in cash , to broaden our registered user database and media access in the business-to-business technology market . during fiscal year 2012 , in addition to certain assets of ziff davis enterprise and all of the equity interests of it businessedge , we acquired eleven other online publishing businesses . acquisitions in fiscal year 2011 in november 2010 , we acquired 100 % of the outstanding shares of car insurance.com , inc. , or carinsurance.com , a florida-based online insurance business , and certain of its affiliated companies , in exchange for $ 49.7 million in cash , for its capacity to generate online visitors in the financial services market . in july 2010 , we acquired the website business insurance.com from insurance.com group , inc. , an ohio-based online insurance business , in exchange for $ 33.0 million in cash and the issuance of a $ 2.6 million non-interest-bearing , unsecured promissory note , for its capacity to generate online visitors in the financial services market . during fiscal year 2011 , in addition to the acquisitions of carinsurance.com and insurance.com , we acquired 13 other online publishing businesses . acquisitions in fiscal year 2010 in november 2009 , we acquired the website business internet.com , a division of webmediabrands , inc. , or internet.com , a new york-based internet media company , in exchange for $ 15.9 million in cash and the issuance of a $ 1.7 million non-interest-bearing , unsecured promissory note , to broaden our media access and client base in the business-to-business technology market . in october 2009 , we acquired the website business insure.com from 40 life quotes , inc. , or insure.com , an illinois-based online insurance quote service and brokerage business , in exchange for $ 15.0 million in cash and the issuance of a $ 1.0 million non-interest-bearing , unsecured promissory note , for its capacity to generate online visitors in the financial services market . during fiscal year 2010 , in addition to the acquisitions of internet.com and insure.com , we acquired 31 other online publishing businesses . our acquisition strategy may result in significant fluctuations in our available working capital from period to period and over the years . we may use cash , stock or promissory notes to acquire various businesses or technologies , and we can not accurately predict the timing of those acquisitions or the impact on our cash flows and balance sheet . large acquisitions or multiple acquisitions within a particular period may significantly affect our financial results for that period . we may utilize debt financing to make acquisitions , which could give rise to higher interest expense and more restrictive operating covenants . we may also utilize our stock as consideration , which could result in substantial dilution . development , retention and acquisition of targeted media one of the primary challenges of our business is finding , retaining and developing media that is targeted enough to attract prospects for our clients at costs that work for our business model . in order to grow our business , we must be able to continue to find , develop and retain quality targeted media on a cost-effective basis . our inability to find , develop and retain high quality targeted media has limited , during some periods , and may continue to limit our growth . seasonality our results are subject to significant fluctuation as a result of seasonality . in particular , our quarters ending december 31 ( our second fiscal quarter ) typically demonstrate seasonal weakness . in our second fiscal quarters , there is lower availability of cost effective media during the holiday period and some of our clients request fewer leads due to holiday staffing . in our quarters ending march 31 ( our third fiscal quarter ) , this trend generally reverses with better lead availability and often new budgets at the beginning of the year for our clients with fiscal years ending december 31. basis of presentation general we operate in two segments : dms and dss . for further discussion and financial information about our reporting segments , see note 14 to our consolidated financial statements . net revenue dms . our dms business generates revenue from fees earned through the delivery of qualified leads , clicks and , to a lesser extent , display advertisements , or impressions . story_separator_special_tag we seek to manage our business to a consistent level of adjusted ebitda as a percentage of net revenue . we do so on a fiscal year basis by varying our operations to balance revenue growth and costs throughout the fiscal year . we do not seek to manage our business to a consistent level of adjusted ebitda on a quarterly basis and investors should expect our adjusted ebitda margins to vary from quarter to quarter . liquidity and capital resources our principal sources of liquidity as of june 30 , 2012 consisted of cash and cash equivalents of $ 68.5 million , short-term marketable securities of $ 36.7 million , cash we expect to generate from operations , and our $ 200.0 million revolving credit facility , which is committed until november 2016 , all of which is available to be drawn , subject to compliance with applicable covenants . our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase . we believe our cash equivalents are liquid and accessible . in november 2011 , we replaced our existing $ 225.0 million credit facility with a new credit facility that expanded our overall borrowing capacity by $ 75.0 million to $ 300.0 million , consisting of a $ 100.0 million term loan and a $ 200.0 million revolving credit facility . additionally , in november 2011 , our board of directors authorized a stock repurchase program allowing us to repurchase up to $ 50.0 million , excluding broker commissions , of our outstanding shares of common stock . through june 30 , 2012 , we have repurchased an aggregate of 4.8 million shares of our common stock for an aggregate of $ 45.0 million . as of june 30 , 2012 , the remaining amount available for the repurchase of our common stock under this program was $ 5.0 million , all of which was used for repurchases in july 2012. additionally , in august 2011 , we acquired 100 % of the outstanding equity interests of narrowcast group , llc , or it businessedge , a kentucky-based internet media company in the business-to-business technology market , in exchange for $ 24.0 million in cash . in february 2012 , we acquired certain assets of ziff davis enterprise from enterprise media group , inc. , a new york-based online media and marketing company in the business-to-business technology market , for $ 17.3 million in cash . our short-term and long-term liquidity requirements primarily arise from our working capital requirements , acquisitions from time to time and share repurchases . our primary operating cash requirements include the payment of media costs , personnel costs , costs of information technology systems and office facilities . our 48 ability to fund these requirements will depend on our future cash flows , which are determined by future operating performance and are , therefore , subject to prevailing global macroeconomic conditions and financial , business and other factors , some of which are beyond our control , and also our ability to access our credit facility . we believe that our existing cash , cash equivalents , short-term marketable securities , cash generated from operations and our available borrowings under the credit facility will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months . our ability to service any indebtedness we have incurred or may incur , including under our current credit facility , will depend on our ability to generate cash in the future . in addition , even though we may not need additional funds , we may still elect to obtain additional debt or equity securities or draw down on or increase our borrowing capacity under our current credit facility for other reasons . replace_table_token_16_th net cash provided by operating activities our net cash provided by operating activities is primarily the result of our net income adjusted for non-cash expenses such as depreciation and amortization , stock-based compensation expense and changes in working capital components , and is influenced by the timing of cash collections from our clients and cash payments for purchases of media and other expenses . net cash provided by operating activities in fiscal year 2012 was due to net income of $ 13.0 million , non-cash depreciation , amortization , stock-based compensation expense and related tax benefits of $ 46.0 million , a decrease in other noncurrent assets comprised primarily of deferred taxes of $ 2.8 million , partially offset by an increase in prepaid expenses and other assets of $ 2.6 million , an increase in accounts receivable of $ 2.0 million and a decrease in accounts payable and accrued liabilities of $ 7.8 million . the decrease in accounts payable and accrued liabilities is due to timing of payments and decreased cost of revenue associated with decreased revenue . the increase in prepaid expenses and other assets is primarily due to timing of payments . the increase in accounts receivable is attributable to timing of receipts . the decrease in deferred taxes is due to larger temporary differences between the financial statement carrying amount and the tax basis of certain existing assets and liabilities . net cash provided by operating activities in fiscal year 2011 was due to net income of $ 27.2 million , non-cash depreciation , amortization , stock-based compensation expense and related tax benefits of $ 33.8 million , an increase in accounts payable and accrued liabilities of $ 8.9 million , a decrease in prepaid expenses and other assets of $ 5.1 million and a decrease in accounts receivable of $ 3.9 million , partially offset by an increase in other noncurrent assets comprised primarily of deferred taxes of $ 3.3 million . the increase in accounts payable and accrued liabilities is due to timing of payments and increased cost of revenue associated with increased revenue . the decrease in
| net cash used in investing activities our investing activities include acquisitions of media websites and businesses ; purchases , sales and maturities of marketable securities ; capital expenditures ; and capitalized internal development costs . cash used in investing activities in fiscal year 2012 was primarily due to our acquisition of it business edge for a cash payment of $ 24.0 million , acquisition of certain assets of ziff davis enterprise of $ 17.3 million and the purchases of the operations of eleven other online publishing businesses for an aggregate of $ 14.6 million in cash payments , as well as net investments in marketable securities of $ 3.2 million . capital expenditures and internal software development costs totaled $ 4.6 million in fiscal year 2012. cash used in investing activities in fiscal year 2011 was primarily due to our acquisition of carinsurance.com for an initial cash payment of $ 49.7 million and insurance.com for an initial cash payment of $ 33.0 million . cash used in investing activities was also impacted by purchases of the operations of 13 other online publishing businesses for an aggregate of $ 9.2 million in cash payments , which included $ 4.5 million of contingent consideration related to a prior period acquisition , as well as net investments in marketable securities of $ 35.2 million . capital expenditures and internal software development costs totaled $ 7.2 million in fiscal year 2011. cash used in investing activities in fiscal year 2010 was primarily due to our acquisitions of internet.com , insure.com and hsh association financial publications ( hsh ) . we acquired the website business of the internet.com division of webmediabrands , inc. , a new york-based internet media company , for an initial cash payment of $ 15.9 million . we acquired the website business of insure.com from lifequotes , inc. , an illinois-based online insurance quote service and brokerage business , for an initial cash payment of $ 15.0 million . we acquired hsh , a new jersey-based online company providing comprehensive mortgage rate information , for an initial cash payment of $ 6.0 million .
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to determine the adequacy of the allowance in each of these two components , we employ two primary methodologies , the individual loan review analysis methodology and the classification migration methodology . these methodologies support the basis for determining allocations between the various loan categories and the overall adequacy of our allowance to provide for probable losses inherent in the loan portfolio . these methodologies are further supported by additional analysis of relevant factors such as the historical losses in the portfolio , and environmental factors which include trends in delinquency and non-accrual , and other significant factors , such as the national and local economy , the volume and composition of the portfolio , the strength of management and loan staff , underwriting standards , and the concentration of credit . the bank 's management allocates a specific allowance for “ impaired credits , ” in accordance with accounting standard codification ( “ asc ” ) section 310-10-35. for non-impaired credits , a general allowance is established for those loans internally classified and risk graded pass , minimally acceptable , special mention , or substandard based on historical losses in the specific loan portfolio and a reserve based on environmental factors determined for that loan group . the level of the general allowance is established to provide coverage for management 's estimate of the credit risk in the loan portfolio by various loan segments not covered by the specific allowance . the allowance for credit losses is discussed in more detail in “ risk elements of the loan portfolio — allowance for credit losses ” below . investment securities the classification and accounting for investment securities are discussed in detail in note 1 to the consolidated financial statements . under asc topic 320 , “ accounting for certain investments in debt and equity securities , ” investment securities must be classified as held-to-maturity , available-for-sale , or trading . the appropriate classification is based partially on our ability to hold the securities to maturity and largely on management 's intentions with respect to either holding or selling the securities . the classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities . unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise , whereas available-for-sale securities are recorded as a separate component of stockholders ' equity ( accumulated other comprehensive income or loss ) and do not affect earnings until realized . the fair values of our investment securities are generally determined by reference to quoted market prices and reliable independent sources . we are obligated to assess , at each reporting date , whether there is an `` other-than-temporary `` impairment to our investment securities . asc topic 320 requires us to assess whether we have the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery . other-than-temporary impairment related to credit losses will be recognized in earnings . other-than-temporary impairment related to all other factors will be recognized in other comprehensive income . income taxes the provision for income taxes is based on income reported for financial statement purposes , and differs from the amount of taxes currently payable , since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes . taxes are discussed in more detail in note 12 to the consolidated financial statements . accrued taxes represent the net estimated amount due or to be received from taxing authorities . in estimating accrued taxes , we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory , judicial , and regulatory guidance in the context of our tax position . we account for income taxes using the asset and liability approach , the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled . a valuation allowance is established for deferred tax assets if , based on the weight of available evidence , it is more likely than not that some portion or all of the deferred tax assets will not be realized . 41 goodwill and g oodwill i mpairment goodwill represents the excess of costs over fair value of assets of businesses acquired . asc topic 805 , “ business combinations ( revised 2007 ) , ” requires an entity to recognize the assets , liabilities , and any non-controlling interest at fair value as of the acquisition date . contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt . asc topic 805 also requires an entity to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed . contingent considerations are to be recognized at fair value on the acquisition date in a business combination and would be subject to the probable and estimable recognition criteria of asc topic 450 , “ accounting for contingencies . ” goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized , but instead are tested for impairment at least annually in accordance with the provisions of asc topic 350. asc topic 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values , and reviewed for impairment in accordance with asc topic 360 , “ accounting for impairment or disposal of long-lived assets . story_separator_special_tag investment securities . 46 the following table sets forth information concerning average interest-earning assets , average interest-bearing liabilities , and the yields and rates paid on those assets and liabilities . average outstanding amounts included in the table are daily averages . interest-earning assets and interest-bearing liabilities replace_table_token_5_th ( 1 ) yields and amounts of interest earned include loan fees . non-accrual loans are included in the average balance . ( 2 ) calculated by dividing net interest income by average outstanding interest-earning assets . ( 3 ) the average yield has been adjusted to a fully taxable-equivalent basis for certain securities of states and political subdivisions and other securities held using a statutory federal income tax rate of 35 % . ( 4 ) net interest income , net interest spread , and net interest margin on interest-earning assets have been adjusted to a fully taxable-equivalent basis using a statutory federal income tax rate of 35 % . 47 taxable-equivalent net interest income — changes due to rate and volume ( 1 ) replace_table_token_6_th _ ( 1 ) changes in interest income and interest expense attributable to changes in both volume and rate have been allocated proportionately to changes due to volume and changes due to rate . ( 2 ) the amount of interest earned has been adjusted to a fully tax-equivalent basis for certain securities of states and political subdivisions and other securities held using a statutory federal income tax rate of 35 % . provision for credit losses the provision for credit losses represents the charge against current earnings that is determined by management , through a credit review process , as the amount needed to maintain an allowance for loan losses and an allowance for off-balance sheet unfunded credit commitments that management believes to be sufficient to absorb credit losses inherent in the bank 's loan portfolio and credit commitments . the bank recorded a negative $ 11.4 million provision for credit losses in 2015 compared with a negative $ 10.8 million in 2014 , and a negative $ 3.0 million in 2013. net charge-offs for 2015 were $ 11.1 million , or 0.12 % of average loans , compared to net charge-offs for 2014 of $ 1.3 million , or 0.02 % of average loans , and net charge-offs for 2013 of $ 6.4 million , or 0.08 % of average loans . non-interest income non-interest income decreased $ 7.8 million , or 19.4 % , to $ 32.7 million for 2015 , from $ 40.5 million for 2014 , compared to $ 60.3 million for 2013 . non-interest income includes depository service fees , letters of credit commissions , securities gains ( losses ) , gains ( losses ) from loan sales , gains from sale of premises and equipment , and other sources of fee income . these other fee-based services include wire transfer fees , safe deposit fees , fees on loan-related activities , fee income from our wealth management division , and foreign exchange fees . 48 the decrease in non-interest income from 2014 to 2015 was primarily due to a $ 10.1 million decrease in securities gains and a $ 1.1 million decrease in wealth management commissions offset by increases in venture capital gains of $ 1.9 million and in other fees and commissions of $ 1.6 million . we sold securities of $ 1.03 billion in 2015 compared to $ 859.0 million in 2014. in 2015 , gains of $ 2.4 million and losses of $ 1.9 million were realized on sales of investment securities compared with gains of $ 18.0 million and losses of $ 10.5 million realized in 2014. other-than-temporary write-downs on agency preferred stock were $ 3.9 million in 2015 compared to $ 0.8 million in 2014. the decrease in non-interest income from 2013 to 2014 was primarily due to a $ 20.6 million decrease in securities gains offset by a $ 1.4 million increase in wealth management commissions . we sold securities of $ 859.0 million in 2014 compared to $ 1.0 billion in 2013. in 2014 , gains of $ 18.0 million and losses of $ 10.5 million were realized on sales of investment securities compared with gains of $ 29.0 million and losses of $ 1.6 million realized in 2013. non-interest expense non-interest expense includes expenses related to salaries and benefits of employees , occupancy expenses , marketing expenses , computer and equipment expenses , amortization of core deposit intangibles , and other operating expenses . non-interest expense totaled $ 202.7 million in 2015 compared to $ 174.3 million in 2014. the increase of $ 28.4 million , or 16.3 % , in non-interest expense in 2015 compared to 2014 was primarily due to a combination of the following : ● amortization of investments in affordable housing and alternative energy partnerships increased $ 26.3 million to $ 33.3 million in 2015 from $ 7.0 million in 2014 primarily due to the investment in an alternative energy partnership in 2015 . ● occupancy expenses increased $ 1.3 million , or 8.2 % , due primarily to increases in higher rental expenses resulting from the acquisition of asia bank and from new branches . ● professional service expenses increased $ 2.4 million primarily due to increases in data processing expenses and expenses related to the conversion of asia bank customers to our data processing systems . ● marketing expenses increased $ 0.8 million primarily due to increases in media and promotion expenses . ● oreo expenses increased $ 0.5 million primarily due to decreases in gains on sale and transfer of oreo offset by decreases in the provision for oreo losses and expenses . ● offsetting the above increases were a decrease of $ 3.3 million in costs associated with debt redemptions during 2014 for prepayment penalties on securities sold under agreements to repurchase . the efficiency ratio , defined as non-interest expense divided by the sum of net interest income before provision for
| net cash used in investing activities our investing activities include acquisitions of media websites and businesses ; purchases , sales and maturities of marketable securities ; capital expenditures ; and capitalized internal development costs . cash used in investing activities in fiscal year 2012 was primarily due to our acquisition of it business edge for a cash payment of $ 24.0 million , acquisition of certain assets of ziff davis enterprise of $ 17.3 million and the purchases of the operations of eleven other online publishing businesses for an aggregate of $ 14.6 million in cash payments , as well as net investments in marketable securities of $ 3.2 million . capital expenditures and internal software development costs totaled $ 4.6 million in fiscal year 2012. cash used in investing activities in fiscal year 2011 was primarily due to our acquisition of carinsurance.com for an initial cash payment of $ 49.7 million and insurance.com for an initial cash payment of $ 33.0 million . cash used in investing activities was also impacted by purchases of the operations of 13 other online publishing businesses for an aggregate of $ 9.2 million in cash payments , which included $ 4.5 million of contingent consideration related to a prior period acquisition , as well as net investments in marketable securities of $ 35.2 million . capital expenditures and internal software development costs totaled $ 7.2 million in fiscal year 2011. cash used in investing activities in fiscal year 2010 was primarily due to our acquisitions of internet.com , insure.com and hsh association financial publications ( hsh ) . we acquired the website business of the internet.com division of webmediabrands , inc. , a new york-based internet media company , for an initial cash payment of $ 15.9 million . we acquired the website business of insure.com from lifequotes , inc. , an illinois-based online insurance quote service and brokerage business , for an initial cash payment of $ 15.0 million . we acquired hsh , a new jersey-based online company providing comprehensive mortgage rate information , for an initial cash payment of $ 6.0 million .
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to determine the adequacy of the allowance in each of these two components , we employ two primary methodologies , the individual loan review analysis methodology and the classification migration methodology . these methodologies support the basis for determining allocations between the various loan categories and the overall adequacy of our allowance to provide for probable losses inherent in the loan portfolio . these methodologies are further supported by additional analysis of relevant factors such as the historical losses in the portfolio , and environmental factors which include trends in delinquency and non-accrual , and other significant factors , such as the national and local economy , the volume and composition of the portfolio , the strength of management and loan staff , underwriting standards , and the concentration of credit . the bank 's management allocates a specific allowance for “ impaired credits , ” in accordance with accounting standard codification ( “ asc ” ) section 310-10-35. for non-impaired credits , a general allowance is established for those loans internally classified and risk graded pass , minimally acceptable , special mention , or substandard based on historical losses in the specific loan portfolio and a reserve based on environmental factors determined for that loan group . the level of the general allowance is established to provide coverage for management 's estimate of the credit risk in the loan portfolio by various loan segments not covered by the specific allowance . the allowance for credit losses is discussed in more detail in “ risk elements of the loan portfolio — allowance for credit losses ” below . investment securities the classification and accounting for investment securities are discussed in detail in note 1 to the consolidated financial statements . under asc topic 320 , “ accounting for certain investments in debt and equity securities , ” investment securities must be classified as held-to-maturity , available-for-sale , or trading . the appropriate classification is based partially on our ability to hold the securities to maturity and largely on management 's intentions with respect to either holding or selling the securities . the classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities . unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise , whereas available-for-sale securities are recorded as a separate component of stockholders ' equity ( accumulated other comprehensive income or loss ) and do not affect earnings until realized . the fair values of our investment securities are generally determined by reference to quoted market prices and reliable independent sources . we are obligated to assess , at each reporting date , whether there is an `` other-than-temporary `` impairment to our investment securities . asc topic 320 requires us to assess whether we have the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery . other-than-temporary impairment related to credit losses will be recognized in earnings . other-than-temporary impairment related to all other factors will be recognized in other comprehensive income . income taxes the provision for income taxes is based on income reported for financial statement purposes , and differs from the amount of taxes currently payable , since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes . taxes are discussed in more detail in note 12 to the consolidated financial statements . accrued taxes represent the net estimated amount due or to be received from taxing authorities . in estimating accrued taxes , we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory , judicial , and regulatory guidance in the context of our tax position . we account for income taxes using the asset and liability approach , the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled . a valuation allowance is established for deferred tax assets if , based on the weight of available evidence , it is more likely than not that some portion or all of the deferred tax assets will not be realized . 41 goodwill and g oodwill i mpairment goodwill represents the excess of costs over fair value of assets of businesses acquired . asc topic 805 , “ business combinations ( revised 2007 ) , ” requires an entity to recognize the assets , liabilities , and any non-controlling interest at fair value as of the acquisition date . contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt . asc topic 805 also requires an entity to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed . contingent considerations are to be recognized at fair value on the acquisition date in a business combination and would be subject to the probable and estimable recognition criteria of asc topic 450 , “ accounting for contingencies . ” goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized , but instead are tested for impairment at least annually in accordance with the provisions of asc topic 350. asc topic 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values , and reviewed for impairment in accordance with asc topic 360 , “ accounting for impairment or disposal of long-lived assets . story_separator_special_tag investment securities . 46 the following table sets forth information concerning average interest-earning assets , average interest-bearing liabilities , and the yields and rates paid on those assets and liabilities . average outstanding amounts included in the table are daily averages . interest-earning assets and interest-bearing liabilities replace_table_token_5_th ( 1 ) yields and amounts of interest earned include loan fees . non-accrual loans are included in the average balance . ( 2 ) calculated by dividing net interest income by average outstanding interest-earning assets . ( 3 ) the average yield has been adjusted to a fully taxable-equivalent basis for certain securities of states and political subdivisions and other securities held using a statutory federal income tax rate of 35 % . ( 4 ) net interest income , net interest spread , and net interest margin on interest-earning assets have been adjusted to a fully taxable-equivalent basis using a statutory federal income tax rate of 35 % . 47 taxable-equivalent net interest income — changes due to rate and volume ( 1 ) replace_table_token_6_th _ ( 1 ) changes in interest income and interest expense attributable to changes in both volume and rate have been allocated proportionately to changes due to volume and changes due to rate . ( 2 ) the amount of interest earned has been adjusted to a fully tax-equivalent basis for certain securities of states and political subdivisions and other securities held using a statutory federal income tax rate of 35 % . provision for credit losses the provision for credit losses represents the charge against current earnings that is determined by management , through a credit review process , as the amount needed to maintain an allowance for loan losses and an allowance for off-balance sheet unfunded credit commitments that management believes to be sufficient to absorb credit losses inherent in the bank 's loan portfolio and credit commitments . the bank recorded a negative $ 11.4 million provision for credit losses in 2015 compared with a negative $ 10.8 million in 2014 , and a negative $ 3.0 million in 2013. net charge-offs for 2015 were $ 11.1 million , or 0.12 % of average loans , compared to net charge-offs for 2014 of $ 1.3 million , or 0.02 % of average loans , and net charge-offs for 2013 of $ 6.4 million , or 0.08 % of average loans . non-interest income non-interest income decreased $ 7.8 million , or 19.4 % , to $ 32.7 million for 2015 , from $ 40.5 million for 2014 , compared to $ 60.3 million for 2013 . non-interest income includes depository service fees , letters of credit commissions , securities gains ( losses ) , gains ( losses ) from loan sales , gains from sale of premises and equipment , and other sources of fee income . these other fee-based services include wire transfer fees , safe deposit fees , fees on loan-related activities , fee income from our wealth management division , and foreign exchange fees . 48 the decrease in non-interest income from 2014 to 2015 was primarily due to a $ 10.1 million decrease in securities gains and a $ 1.1 million decrease in wealth management commissions offset by increases in venture capital gains of $ 1.9 million and in other fees and commissions of $ 1.6 million . we sold securities of $ 1.03 billion in 2015 compared to $ 859.0 million in 2014. in 2015 , gains of $ 2.4 million and losses of $ 1.9 million were realized on sales of investment securities compared with gains of $ 18.0 million and losses of $ 10.5 million realized in 2014. other-than-temporary write-downs on agency preferred stock were $ 3.9 million in 2015 compared to $ 0.8 million in 2014. the decrease in non-interest income from 2013 to 2014 was primarily due to a $ 20.6 million decrease in securities gains offset by a $ 1.4 million increase in wealth management commissions . we sold securities of $ 859.0 million in 2014 compared to $ 1.0 billion in 2013. in 2014 , gains of $ 18.0 million and losses of $ 10.5 million were realized on sales of investment securities compared with gains of $ 29.0 million and losses of $ 1.6 million realized in 2013. non-interest expense non-interest expense includes expenses related to salaries and benefits of employees , occupancy expenses , marketing expenses , computer and equipment expenses , amortization of core deposit intangibles , and other operating expenses . non-interest expense totaled $ 202.7 million in 2015 compared to $ 174.3 million in 2014. the increase of $ 28.4 million , or 16.3 % , in non-interest expense in 2015 compared to 2014 was primarily due to a combination of the following : ● amortization of investments in affordable housing and alternative energy partnerships increased $ 26.3 million to $ 33.3 million in 2015 from $ 7.0 million in 2014 primarily due to the investment in an alternative energy partnership in 2015 . ● occupancy expenses increased $ 1.3 million , or 8.2 % , due primarily to increases in higher rental expenses resulting from the acquisition of asia bank and from new branches . ● professional service expenses increased $ 2.4 million primarily due to increases in data processing expenses and expenses related to the conversion of asia bank customers to our data processing systems . ● marketing expenses increased $ 0.8 million primarily due to increases in media and promotion expenses . ● oreo expenses increased $ 0.5 million primarily due to decreases in gains on sale and transfer of oreo offset by decreases in the provision for oreo losses and expenses . ● offsetting the above increases were a decrease of $ 3.3 million in costs associated with debt redemptions during 2014 for prepayment penalties on securities sold under agreements to repurchase . the efficiency ratio , defined as non-interest expense divided by the sum of net interest income before provision for
| capital resources stockholders ' equity total equity was $ 1.75 billion at december 31 , 2015 , an increase of $ 144.9 million , or 9.0 % , from $ 1.60 billion at december 31 , 2014 , primarily due to increases in net income of $ 161.1 million and equity consideration for the acquisition of asia bancshares , inc. of $ 82.8 million offset by purchases of treasury stock of $ 59.4 million and common stock cash dividends of $ 45.3 million . under the terms of the acquisition of asia bancshares , inc. which was completed on july 31 , 2015 , we issued 2.58 million shares of our common stock and paid $ 57.0 million in cash for all of the issued and outstanding stock of asia bancshares . the company paid cash dividends of $ 0.56 per common share in 2015 and $ 0.29 per common share in 2014. in november 2007 , the board of directors approved a stock repurchase program for the company to buy back up to one million shares of our common stock , and 377,500 shares were repurchased during 2007. repurchases of shares were suspended under this program between 2008 and july 2015. in august 2015 , the company resumed stock repurchases under the november 2007 repurchase program and repurchased the remaining 622,500 shares under the november 2007 repurchase program for $ 18.1 million , or an average price of $ 29.08 per share . on august 31 , 2015 , the board of directors approved a new stock repurchase program to buy back up to two million shares of our common stock . in 2015 , the company repurchased 1,366,750 shares for $ 41.3 million , or $ 30.22 per share under the august 2015 repurchase program .
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if we enter into contracts for the sale of services and software or hardware , management evaluates whether each element should be accounted for separately by considering the following criteria : ( 1 ) whether the deliverables have value to the client on a stand-alone basis ; and ( 2 ) whether delivery or performance of the undelivered item or items is considered probable and substantially in our control ( only if the arrangement includes a general right of return related to the delivered item ) . further , for sales of software and services , management also evaluates whether the services are essential to the functionality of the software and has fair value evidence for each deliverable . if management concludes that the separation criteria are met , then it accounts for each deliverable in the transaction separately , based on the relevant revenue recognition policies . generally , all deliverables of our multiple element arrangements meet these criteria and are accounted for separately , with the arrangement consideration allocated among the deliverables using vendor-specific objective evidence of the selling price . as a result , we generally recognize software and hardware sales upon delivery to the customer and services consistent with the policies described herein . further , delivery of software and hardware sales , when sold contemporaneously with services , can generally occur at varying times depending on the specific client project arrangement . delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client contract . there are no significant cancellation or termination-type provisions for our software and hardware sales . contracts for 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 primarily of cash and non-cash compensation and benefits , including bonuses and non-cash compensation related to equity awards . cost of revenues also includes the costs associated with subcontractors . third-party software and hardware costs , reimbursable expenses and other unreimbursed project-related expenses are also included in cost of revenues . project-related expenses will fluctuate generally depending on outside factors including the cost and frequency of travel and the location of our clients . 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 . gross margins our gross margins for services are 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 if demand for our services declines , our utilization rate will decline and adversely affect our gross margins . gross margin percentages of third-party software and hardware sales are typically lower than gross margin percentages for services , and the mix of services and software and hardware for a particular period can significantly impact our total combined gross margin percentage for such period . in addition , gross margin for software and hardware sales can fluctuate due to pricing and other competitive pressures . 16 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 , recruiting expense , office costs , bad debts , variable compensation costs , and other miscellaneous expenses . we work to minimize selling costs by focusing on repeat business with existing clients and by accessing sales leads generated by our software vendors , most notably ibm , oracle and microsoft , whose products we use to design and implement solutions for our clients . these relationships enable us to reduce 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 independent 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 . given the economic conditions during 2008 and 2009 we suspended acquisition activity pending improved visibility into the health of the economy . with the return to growth in 2010 , we resumed our disciplined acquisition strategy as evidenced by our acquisitions of kerdock consulting , llc ( “ kerdock ” ) in march 2010 , speaktech in december 2010 , exervio in april 2011 , jcb partners , llc ( “ jcb ” ) in july 2011 , pointbridge in february 2012 , nascent in june 2012 , and northridge in july 2012. we also intend to further leverage our existing offshore capabilities to support our future growth and provide our clients flexible options for project delivery . when analyzing revenue growth by base business compared to acquired companies in the results of operations section below , revenue attributable to base business is defined as revenue from an acquired company that has been owned for a full four quarters after the date of acquisition . story_separator_special_tag 22 critical accounting policies our accounting policies are described in note 2 , summary of significant accounting policies , in the notes to consolidated financial statements . we believe our most critical accounting policies include revenue recognition , accounting for goodwill and intangible assets , purchase accounting , accounting for stock-based compensation , and income taxes . revenue recognition and allowance for doubtful accounts revenues are primarily derived from professional services provided on a time and materials basis . for time and material contracts , revenues are recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates . for fixed fee projects , revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours . amounts invoiced and collected in excess of revenues recognized are classified as deferred revenues . on many projects we are also reimbursed for out-of-pocket expenses such as airfare , lodging , and meals . these reimbursements are included as a component of revenues . revenues from software and hardware sales are generally recorded on a gross basis considering our role as a principal in the transaction . on rare occasions , we enter into a transaction where we are not the principal . in these cases , revenue is recorded on a net basis . unbilled revenues represent the project time and expenses that have been incurred , but not yet billed to the client , prior to the end of the fiscal period . for time and materials projects , the client is invoiced for the amount of hours worked multiplied by the billing rates as stated in the contract . for fixed fee arrangements , the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract . clients are typically billed monthly for services provided during that month , but can be billed on a more or less frequent basis as determined by the contract . if the time and expenses are worked/incurred and approved at the end of a fiscal period and the invoice has not yet been sent to the client , the amount is recorded as unbilled revenue once we verify all other revenue recognition criteria have been met . revenues are recognized when the following criteria are met : ( 1 ) persuasive evidence of the customer arrangement exists ; ( 2 ) fees are fixed and determinable ; ( 3 ) delivery and acceptance have occurred ; and ( 4 ) collectability is deemed probable . our policy for revenue recognition in instances where multiple deliverables are sold contemporaneously to the same customer is in accordance with accounting standards board accounting standards codification ( “ asc ” ) subtopic 985-605 , software – revenue recognition , asc subtopic 605-25 , revenue recognition – multiple-element arrangements , and asc section 605-10-s99 ( staff accounting bulletin topic 13 , revenue recognition ) . specifically , if we enter into contracts for the sale of services and software or hardware , then we evaluate whether each element should be accounted for separately by considering the following criteria : ( 1 ) whether the deliverables have value to the client on a stand-alone basis ; and ( 2 ) whether delivery or performance of the undelivered item or items is considered probable and substantially in our control ( only if the arrangement includes a general right of return related to the delivered item ) . further , for sales of software and services , we also evaluate whether the services are essential to the functionality of the software and we have fair value evidence for each deliverable . if we have concluded that the separation criteria are met , then we account for each deliverable in the transaction separately , based on the relevant revenue recognition policies . generally , all deliverables of our multiple element arrangements meet these criteria and are accounted for separately , with the arrangement consideration allocated among the deliverables using vendor-specific objective evidence of the selling price . as a result , we generally recognize software and hardware sales upon delivery to the customer and services consistent with the policies described herein . further , delivery of software and hardware sales , when sold contemporaneously with services , can generally occur at varying times depending on the specific client project arrangement . delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client contract . there are no significant cancellation or termination-type provisions for our software and hardware sales . contracts for professional services provide for a general right , to the client or to 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 . we may provide multiple services under the terms of an arrangement and we are required to assess whether one or more units of accounting are present . service fees are typically accounted for as one unit of accounting , as fair value evidence for individual tasks or milestones is not available . we follow the guidelines discussed above in determining revenues ; however , certain judgments and estimates are made and used to determine revenues recognized in any accounting period . if estimates are revised , material differences may result in the amount and timing of revenues recognized for a given period . 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 . 23 allowance for doubtful accounts is based upon specific identification of likely and probable losses . each accounting period , accounts receivable is evaluated
| capital resources stockholders ' equity total equity was $ 1.75 billion at december 31 , 2015 , an increase of $ 144.9 million , or 9.0 % , from $ 1.60 billion at december 31 , 2014 , primarily due to increases in net income of $ 161.1 million and equity consideration for the acquisition of asia bancshares , inc. of $ 82.8 million offset by purchases of treasury stock of $ 59.4 million and common stock cash dividends of $ 45.3 million . under the terms of the acquisition of asia bancshares , inc. which was completed on july 31 , 2015 , we issued 2.58 million shares of our common stock and paid $ 57.0 million in cash for all of the issued and outstanding stock of asia bancshares . the company paid cash dividends of $ 0.56 per common share in 2015 and $ 0.29 per common share in 2014. in november 2007 , the board of directors approved a stock repurchase program for the company to buy back up to one million shares of our common stock , and 377,500 shares were repurchased during 2007. repurchases of shares were suspended under this program between 2008 and july 2015. in august 2015 , the company resumed stock repurchases under the november 2007 repurchase program and repurchased the remaining 622,500 shares under the november 2007 repurchase program for $ 18.1 million , or an average price of $ 29.08 per share . on august 31 , 2015 , the board of directors approved a new stock repurchase program to buy back up to two million shares of our common stock . in 2015 , the company repurchased 1,366,750 shares for $ 41.3 million , or $ 30.22 per share under the august 2015 repurchase program .
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if we enter into contracts for the sale of services and software or hardware , management evaluates whether each element should be accounted for separately by considering the following criteria : ( 1 ) whether the deliverables have value to the client on a stand-alone basis ; and ( 2 ) whether delivery or performance of the undelivered item or items is considered probable and substantially in our control ( only if the arrangement includes a general right of return related to the delivered item ) . further , for sales of software and services , management also evaluates whether the services are essential to the functionality of the software and has fair value evidence for each deliverable . if management concludes that the separation criteria are met , then it accounts for each deliverable in the transaction separately , based on the relevant revenue recognition policies . generally , all deliverables of our multiple element arrangements meet these criteria and are accounted for separately , with the arrangement consideration allocated among the deliverables using vendor-specific objective evidence of the selling price . as a result , we generally recognize software and hardware sales upon delivery to the customer and services consistent with the policies described herein . further , delivery of software and hardware sales , when sold contemporaneously with services , can generally occur at varying times depending on the specific client project arrangement . delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client contract . there are no significant cancellation or termination-type provisions for our software and hardware sales . contracts for 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 primarily of cash and non-cash compensation and benefits , including bonuses and non-cash compensation related to equity awards . cost of revenues also includes the costs associated with subcontractors . third-party software and hardware costs , reimbursable expenses and other unreimbursed project-related expenses are also included in cost of revenues . project-related expenses will fluctuate generally depending on outside factors including the cost and frequency of travel and the location of our clients . 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 . gross margins our gross margins for services are 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 if demand for our services declines , our utilization rate will decline and adversely affect our gross margins . gross margin percentages of third-party software and hardware sales are typically lower than gross margin percentages for services , and the mix of services and software and hardware for a particular period can significantly impact our total combined gross margin percentage for such period . in addition , gross margin for software and hardware sales can fluctuate due to pricing and other competitive pressures . 16 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 , recruiting expense , office costs , bad debts , variable compensation costs , and other miscellaneous expenses . we work to minimize selling costs by focusing on repeat business with existing clients and by accessing sales leads generated by our software vendors , most notably ibm , oracle and microsoft , whose products we use to design and implement solutions for our clients . these relationships enable us to reduce 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 independent 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 . given the economic conditions during 2008 and 2009 we suspended acquisition activity pending improved visibility into the health of the economy . with the return to growth in 2010 , we resumed our disciplined acquisition strategy as evidenced by our acquisitions of kerdock consulting , llc ( “ kerdock ” ) in march 2010 , speaktech in december 2010 , exervio in april 2011 , jcb partners , llc ( “ jcb ” ) in july 2011 , pointbridge in february 2012 , nascent in june 2012 , and northridge in july 2012. we also intend to further leverage our existing offshore capabilities to support our future growth and provide our clients flexible options for project delivery . when analyzing revenue growth by base business compared to acquired companies in the results of operations section below , revenue attributable to base business is defined as revenue from an acquired company that has been owned for a full four quarters after the date of acquisition . story_separator_special_tag 22 critical accounting policies our accounting policies are described in note 2 , summary of significant accounting policies , in the notes to consolidated financial statements . we believe our most critical accounting policies include revenue recognition , accounting for goodwill and intangible assets , purchase accounting , accounting for stock-based compensation , and income taxes . revenue recognition and allowance for doubtful accounts revenues are primarily derived from professional services provided on a time and materials basis . for time and material contracts , revenues are recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates . for fixed fee projects , revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours . amounts invoiced and collected in excess of revenues recognized are classified as deferred revenues . on many projects we are also reimbursed for out-of-pocket expenses such as airfare , lodging , and meals . these reimbursements are included as a component of revenues . revenues from software and hardware sales are generally recorded on a gross basis considering our role as a principal in the transaction . on rare occasions , we enter into a transaction where we are not the principal . in these cases , revenue is recorded on a net basis . unbilled revenues represent the project time and expenses that have been incurred , but not yet billed to the client , prior to the end of the fiscal period . for time and materials projects , the client is invoiced for the amount of hours worked multiplied by the billing rates as stated in the contract . for fixed fee arrangements , the client is invoiced according to the agreed-upon schedule detailing the amount and timing of payments in the contract . clients are typically billed monthly for services provided during that month , but can be billed on a more or less frequent basis as determined by the contract . if the time and expenses are worked/incurred and approved at the end of a fiscal period and the invoice has not yet been sent to the client , the amount is recorded as unbilled revenue once we verify all other revenue recognition criteria have been met . revenues are recognized when the following criteria are met : ( 1 ) persuasive evidence of the customer arrangement exists ; ( 2 ) fees are fixed and determinable ; ( 3 ) delivery and acceptance have occurred ; and ( 4 ) collectability is deemed probable . our policy for revenue recognition in instances where multiple deliverables are sold contemporaneously to the same customer is in accordance with accounting standards board accounting standards codification ( “ asc ” ) subtopic 985-605 , software – revenue recognition , asc subtopic 605-25 , revenue recognition – multiple-element arrangements , and asc section 605-10-s99 ( staff accounting bulletin topic 13 , revenue recognition ) . specifically , if we enter into contracts for the sale of services and software or hardware , then we evaluate whether each element should be accounted for separately by considering the following criteria : ( 1 ) whether the deliverables have value to the client on a stand-alone basis ; and ( 2 ) whether delivery or performance of the undelivered item or items is considered probable and substantially in our control ( only if the arrangement includes a general right of return related to the delivered item ) . further , for sales of software and services , we also evaluate whether the services are essential to the functionality of the software and we have fair value evidence for each deliverable . if we have concluded that the separation criteria are met , then we account for each deliverable in the transaction separately , based on the relevant revenue recognition policies . generally , all deliverables of our multiple element arrangements meet these criteria and are accounted for separately , with the arrangement consideration allocated among the deliverables using vendor-specific objective evidence of the selling price . as a result , we generally recognize software and hardware sales upon delivery to the customer and services consistent with the policies described herein . further , delivery of software and hardware sales , when sold contemporaneously with services , can generally occur at varying times depending on the specific client project arrangement . delivery of services generally occurs over a period of time consistent with the timeline as outlined in the client contract . there are no significant cancellation or termination-type provisions for our software and hardware sales . contracts for professional services provide for a general right , to the client or to 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 . we may provide multiple services under the terms of an arrangement and we are required to assess whether one or more units of accounting are present . service fees are typically accounted for as one unit of accounting , as fair value evidence for individual tasks or milestones is not available . we follow the guidelines discussed above in determining revenues ; however , certain judgments and estimates are made and used to determine revenues recognized in any accounting period . if estimates are revised , material differences may result in the amount and timing of revenues recognized for a given period . 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 . 23 allowance for doubtful accounts is based upon specific identification of likely and probable losses . each accounting period , accounts receivable is evaluated
| net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2012 was $ 39.2 million compared to $ 14.3 million and $ 18.7 million for the years ended december 31 , 2011 and 2010 , respectively . for the year ended december 31 , 2012 , the components of operating cash flows were net income of $ 16.1 million plus non-cash charges of $ 18.5 million and net working capital reductions of $ 4.6 million . the primary components of operating cash flows for the year ended december 31 , 2011 were net income of $ 10.7 million plus non-cash charges of $ 17.6 million , partially offset by investments in working capital of $ 14.0 million . the primary components of operating cash flow for the year ended december 31 , 2010 were net income of $ 6.5 million plus non-cash charges of $ 14.3 million , partially offset by investments in working capital of $ 2.1 million . the increase in cash resulting from operating activities as of december 31 , 2012 is primarily related to the increase in accounts payable and other liabilities and decrease in accounts receivable . accounts payable and other liabilities increased due to having higher accrued software costs and variable compensation liabilities during 2012. our days sales outstanding as of december 31 , 2012 decreased to 75 days compared to 78 and 73 days as of december 31 , 2011 and 2010 , respectively .
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risk factors or by other unknown risks and uncertainties . restatement of prior financial information in our annual report on form 10-k for the year ended december 31 , 2014 ( the 2014 form 10-k ) , which we filed on may 12 , 2017 , we restated our prior financial filings . in that filing , we restated : ( a ) our consolidated balance sheet as of december 31 , 2013 and the related statements of operations and comprehensive ( loss ) income , consolidated statements of changes in shareholders ' equity and consolidated statements of cash flows for the fiscal years ended december 31 , 2013 and december 31 , 2012 ; ( b ) our selected financial data in item 6. for fiscal years 2013 , 2012 , 2011 ( unaudited ) and 2010 ( unaudited ) ; and ( c ) our quarterly financial information ( unaudited ) for the first two quarters in the fiscal year ended december 31 , 2014 and each of the quarters in the fiscal year ended december 31 , 2013. accordingly , investors should not rely upon any consolidated financial statements for these periods and any earnings releases or other communications relating to these periods that occurred prior to our filing the 2014 form 10-k. for information regarding the nature and effects of our restatement of prior financial reports , in addition to information which we have provided you in this annual report on form 10-k , we encourage you to also refer to our 2014 form 10-k. 33 effect of delay in financial filings due to our detection of the material weaknesses and the necessity of our correction of previously issued financial information , we have been undergoing extensive delays in the filing of our periodic reports with the sec . our 2014 form 10-k included consolidated financial statements for the years ended december 31 , 2014 , december 31 , 2013 and december 31 , 2012 , financial information pertaining to quarterly periods in 2014 and 2013 , as well as selected financial data for the years ended december 31 , 2011 and december 31 , 2010 ( both unaudited ) . we also presented the effects of our restatement of the previously filed financial statements . upon the completion of that filing , we commenced the preparation and review of the financial statements provided in this annual report on form 10-k. the delay in our completion of this filing relates primarily to the effects of our delay in the completion of the 2014 form 10-k , the number of accounting periods encompassed within this filing and , importantly , due to the necessity of our performance of additional review , analysis and substantive procedures related to the material weaknesses , to ensure that our consolidated financial statements for the periods encompassed by this report are complete and accurate in all material respects . with the completion and filing of this annual report on form 10-k , we are now focused on the preparation , review and filing of our financial information for interim periods in 2017 , and in preparing and commencing our work relating to our annual financial statements for the year ended december 31 , 2017. our efforts to remediate our material weaknesses , restate our historical financial statements , prepare this annual report and other factors have come at a cost in excess of the amount we estimate we would otherwise have incurred . the estimated professional fees associated with these efforts are as follows : replace_table_token_7_th in 2018 , we currently estimate that we will incur an additional $ 11.8 million of such excess fees . of the $ 11.8 million in excess fees estimated to be incurred in 2018 , we estimate that we will pay approximately $ 10.3 million , such that total payments for excess fees in 2018 will total $ 25.5 million , which includes $ 15.2 million related to prior periods . see the liquidity and capital resources section in this management 's discussion and analysis for further discussion . unless otherwise stated , this management 's discussion and analysis has been written to provide you with pertinent information regarding our performance during the periods encompassed by this report . accordingly , we have not provided information regarding our performance during subsequent periods . nevertheless , for certain information and events , which relate primarily to our indebtedness , capital structure and liquidity , we have provided disclosure regarding subsequent periods or have included further information in note u - subsequent events to our consolidated financial statements . additionally , we have referenced certain trends and events occurring subsequent to december 31 , 2016 as forward-looking items within this management 's discussion and analysis . non-gaap measures in this management 's discussion and analysis , we refer to certain financial measures and statistics ( or metrics ) that are not prescribed under generally accepted accounting principles ( gaap ) as applied in the united states . we utilize these non-gaap measures in order to evaluate the underlying factors that affect our business performance and trends . these non-gaap measures should not be considered in isolation and should not be considered superior to , or a substitute for , financial measures calculated in accordance with gaap . we have defined and provided a reconciliation of these non-gaap measures 34 to their most comparable gaap measures . the non-gaap measures used in this management 's discussion and analysis are as follows : adjusted gross revenue and disallowed revenue - adjusted gross revenue reflects our gross billings after their adjustment to reflect estimated discounts established in our contracts with payors of health care claims . story_separator_special_tag as a part of those terminations of service , in a number of cases , we elected to sell terminating clients the equipment which we had utilized for their locations which resulted in our recognition of $ 6.7 million in equipment sales in this segment during 2016 as compared with $ 2.9 million in 2015 and $ 2.4 million in 2014. in 2017 , we anticipate that we will experience a decrease of approximately $ 11.0 million in services and supplies revenue associated with customer discontinuances of their therapy services and that our equipment sales will decrease to levels similar to those experienced in 2015 and 2014 , resulting in approximately a $ 15.0 million decrease in revenue from therapeutic services in 2017 as compared with 2016. we also currently believe that our revenues from these therapeutic services will continue to decline in 2018. within this portion of our business , we have responded to these trends through increases in our marketing programs which convey the value we believe our services have to patients at snfs and have begun to increase our focus on sales of our therapeutic services to other adjacent health services provider markets . discontinuance of the dosteon and cares businesses on november 5 , 2014 , the audit committee of our board of directors approved a plan to sell or otherwise dispose of dosteon and cares , both part of our patient care segment . this action was taken as a result of our strategic evaluation of these businesses . as of december 31 , 2014 , dosteon qualified as assets held for sale and discontinued operations . as such the assets , operating results and cash flows of the dosteon disposal group have been presented separately as discontinued operations within our consolidated financial statements . the cares business did not qualify as assets held for sale and was ultimately wound down in 2015. accordingly , the cares business has been classified as a continuing operation in our consolidated financial statements for all financial periods through 2015 , the year of its cessation of operations . the information provided herein is for continuing operations , unless otherwise indicated . see note s - discontinued operations to our consolidated financial statements in this annual report on form 10-k for additional discussion of our discontinued operations . 39 acquisitions since the first quarter of 2015 , we have made no acquisitions . we halted our acquisitions at that time both due to the necessity of our utilizing available operating cash flow to fund accounting , legal and other professional fees in connection with our preparation and review of the financial statements , efforts to remediate material weaknesses , and related legal matters , as well as due to the effect of our non-compliance with certain of our debt covenants relating to our failure to meet financial statement reporting requirements . once we regain timely filing status , and provided no other events or factors emerge that would prevent our use of capital for the purposes of acquisitions , we currently intend to recommence acquisitions of o & p businesses similar to those that we have consummated in prior years . in the first quarter of 2015 , we acquired three o & p businesses with approximately $ 11.8 million in revenue , operating a total of 15 patient care clinics located in three states . the aggregate purchase price for these businesses was $ 15.3 million , including $ 10.2 million in net cash , $ 4.7 million of seller notes and $ 0.4 million of working capital adjustments and other . in 2014 , we acquired twelve o & p businesses and one distribution business with approximately $ 55.7 million in revenue , operating a total of 37 patient care clinics and one distribution center located in eleven states . the aggregate purchase price for these businesses was $ 52.7 million , including $ 38.1 million in net cash , $ 14.0 million of seller notes and $ 0.6 million of working capital adjustments and other . walkaide system coverage decision our walkaide system is a device manufactured and sold through our products & services segment that is designed to use functional electrical stimulation , or fes , to improve ambulation in people experiencing a condition known as foot drop. foot drop is a gait abnormality in which patients have difficulty lifting the front part of their foot as they walk due to weakness , irritation or damage to the common fibular nerve in the lower leg . in 2006 , cms issued a national coverage determination ( ncd ) that provided limited medicare coverage for the walkaide system in specific cases where the foot drop condition was caused by partial spinal injury . in an effort to seek expanded medicare coverage , in 2012 and 2013 we conducted randomized clinical trials involving a use of the walkaide system for patients with foot drop caused by stroke . based on the outcomes of those studies , in late 2013 we requested that cms reopen the 2006 ncd to include coverage under medicare for foot drop caused by stroke . however , in the fourth quarter of 2014 , after reviewing the results of the clinical trial , cms determined that they would not reopen the ncd to expand coverage . the walkaide system remains a steady , but not significant , part of our overall business . seasonality we believe our business is affected by the degree to which patients have otherwise met the deductibles for which they are responsible in their medical plans during the course of the year . the first quarter is normally our lowest relative net revenue quarter , followed by the second and third quarters , which are somewhat higher and consistent with one another , and , due to the general fulfillment by patients of their health plan co-payments and deductible requirements towards the year 's end , our fourth quarter
| net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2012 was $ 39.2 million compared to $ 14.3 million and $ 18.7 million for the years ended december 31 , 2011 and 2010 , respectively . for the year ended december 31 , 2012 , the components of operating cash flows were net income of $ 16.1 million plus non-cash charges of $ 18.5 million and net working capital reductions of $ 4.6 million . the primary components of operating cash flows for the year ended december 31 , 2011 were net income of $ 10.7 million plus non-cash charges of $ 17.6 million , partially offset by investments in working capital of $ 14.0 million . the primary components of operating cash flow for the year ended december 31 , 2010 were net income of $ 6.5 million plus non-cash charges of $ 14.3 million , partially offset by investments in working capital of $ 2.1 million . the increase in cash resulting from operating activities as of december 31 , 2012 is primarily related to the increase in accounts payable and other liabilities and decrease in accounts receivable . accounts payable and other liabilities increased due to having higher accrued software costs and variable compensation liabilities during 2012. our days sales outstanding as of december 31 , 2012 decreased to 75 days compared to 78 and 73 days as of december 31 , 2011 and 2010 , respectively .
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risk factors or by other unknown risks and uncertainties . restatement of prior financial information in our annual report on form 10-k for the year ended december 31 , 2014 ( the 2014 form 10-k ) , which we filed on may 12 , 2017 , we restated our prior financial filings . in that filing , we restated : ( a ) our consolidated balance sheet as of december 31 , 2013 and the related statements of operations and comprehensive ( loss ) income , consolidated statements of changes in shareholders ' equity and consolidated statements of cash flows for the fiscal years ended december 31 , 2013 and december 31 , 2012 ; ( b ) our selected financial data in item 6. for fiscal years 2013 , 2012 , 2011 ( unaudited ) and 2010 ( unaudited ) ; and ( c ) our quarterly financial information ( unaudited ) for the first two quarters in the fiscal year ended december 31 , 2014 and each of the quarters in the fiscal year ended december 31 , 2013. accordingly , investors should not rely upon any consolidated financial statements for these periods and any earnings releases or other communications relating to these periods that occurred prior to our filing the 2014 form 10-k. for information regarding the nature and effects of our restatement of prior financial reports , in addition to information which we have provided you in this annual report on form 10-k , we encourage you to also refer to our 2014 form 10-k. 33 effect of delay in financial filings due to our detection of the material weaknesses and the necessity of our correction of previously issued financial information , we have been undergoing extensive delays in the filing of our periodic reports with the sec . our 2014 form 10-k included consolidated financial statements for the years ended december 31 , 2014 , december 31 , 2013 and december 31 , 2012 , financial information pertaining to quarterly periods in 2014 and 2013 , as well as selected financial data for the years ended december 31 , 2011 and december 31 , 2010 ( both unaudited ) . we also presented the effects of our restatement of the previously filed financial statements . upon the completion of that filing , we commenced the preparation and review of the financial statements provided in this annual report on form 10-k. the delay in our completion of this filing relates primarily to the effects of our delay in the completion of the 2014 form 10-k , the number of accounting periods encompassed within this filing and , importantly , due to the necessity of our performance of additional review , analysis and substantive procedures related to the material weaknesses , to ensure that our consolidated financial statements for the periods encompassed by this report are complete and accurate in all material respects . with the completion and filing of this annual report on form 10-k , we are now focused on the preparation , review and filing of our financial information for interim periods in 2017 , and in preparing and commencing our work relating to our annual financial statements for the year ended december 31 , 2017. our efforts to remediate our material weaknesses , restate our historical financial statements , prepare this annual report and other factors have come at a cost in excess of the amount we estimate we would otherwise have incurred . the estimated professional fees associated with these efforts are as follows : replace_table_token_7_th in 2018 , we currently estimate that we will incur an additional $ 11.8 million of such excess fees . of the $ 11.8 million in excess fees estimated to be incurred in 2018 , we estimate that we will pay approximately $ 10.3 million , such that total payments for excess fees in 2018 will total $ 25.5 million , which includes $ 15.2 million related to prior periods . see the liquidity and capital resources section in this management 's discussion and analysis for further discussion . unless otherwise stated , this management 's discussion and analysis has been written to provide you with pertinent information regarding our performance during the periods encompassed by this report . accordingly , we have not provided information regarding our performance during subsequent periods . nevertheless , for certain information and events , which relate primarily to our indebtedness , capital structure and liquidity , we have provided disclosure regarding subsequent periods or have included further information in note u - subsequent events to our consolidated financial statements . additionally , we have referenced certain trends and events occurring subsequent to december 31 , 2016 as forward-looking items within this management 's discussion and analysis . non-gaap measures in this management 's discussion and analysis , we refer to certain financial measures and statistics ( or metrics ) that are not prescribed under generally accepted accounting principles ( gaap ) as applied in the united states . we utilize these non-gaap measures in order to evaluate the underlying factors that affect our business performance and trends . these non-gaap measures should not be considered in isolation and should not be considered superior to , or a substitute for , financial measures calculated in accordance with gaap . we have defined and provided a reconciliation of these non-gaap measures 34 to their most comparable gaap measures . the non-gaap measures used in this management 's discussion and analysis are as follows : adjusted gross revenue and disallowed revenue - adjusted gross revenue reflects our gross billings after their adjustment to reflect estimated discounts established in our contracts with payors of health care claims . story_separator_special_tag as a part of those terminations of service , in a number of cases , we elected to sell terminating clients the equipment which we had utilized for their locations which resulted in our recognition of $ 6.7 million in equipment sales in this segment during 2016 as compared with $ 2.9 million in 2015 and $ 2.4 million in 2014. in 2017 , we anticipate that we will experience a decrease of approximately $ 11.0 million in services and supplies revenue associated with customer discontinuances of their therapy services and that our equipment sales will decrease to levels similar to those experienced in 2015 and 2014 , resulting in approximately a $ 15.0 million decrease in revenue from therapeutic services in 2017 as compared with 2016. we also currently believe that our revenues from these therapeutic services will continue to decline in 2018. within this portion of our business , we have responded to these trends through increases in our marketing programs which convey the value we believe our services have to patients at snfs and have begun to increase our focus on sales of our therapeutic services to other adjacent health services provider markets . discontinuance of the dosteon and cares businesses on november 5 , 2014 , the audit committee of our board of directors approved a plan to sell or otherwise dispose of dosteon and cares , both part of our patient care segment . this action was taken as a result of our strategic evaluation of these businesses . as of december 31 , 2014 , dosteon qualified as assets held for sale and discontinued operations . as such the assets , operating results and cash flows of the dosteon disposal group have been presented separately as discontinued operations within our consolidated financial statements . the cares business did not qualify as assets held for sale and was ultimately wound down in 2015. accordingly , the cares business has been classified as a continuing operation in our consolidated financial statements for all financial periods through 2015 , the year of its cessation of operations . the information provided herein is for continuing operations , unless otherwise indicated . see note s - discontinued operations to our consolidated financial statements in this annual report on form 10-k for additional discussion of our discontinued operations . 39 acquisitions since the first quarter of 2015 , we have made no acquisitions . we halted our acquisitions at that time both due to the necessity of our utilizing available operating cash flow to fund accounting , legal and other professional fees in connection with our preparation and review of the financial statements , efforts to remediate material weaknesses , and related legal matters , as well as due to the effect of our non-compliance with certain of our debt covenants relating to our failure to meet financial statement reporting requirements . once we regain timely filing status , and provided no other events or factors emerge that would prevent our use of capital for the purposes of acquisitions , we currently intend to recommence acquisitions of o & p businesses similar to those that we have consummated in prior years . in the first quarter of 2015 , we acquired three o & p businesses with approximately $ 11.8 million in revenue , operating a total of 15 patient care clinics located in three states . the aggregate purchase price for these businesses was $ 15.3 million , including $ 10.2 million in net cash , $ 4.7 million of seller notes and $ 0.4 million of working capital adjustments and other . in 2014 , we acquired twelve o & p businesses and one distribution business with approximately $ 55.7 million in revenue , operating a total of 37 patient care clinics and one distribution center located in eleven states . the aggregate purchase price for these businesses was $ 52.7 million , including $ 38.1 million in net cash , $ 14.0 million of seller notes and $ 0.6 million of working capital adjustments and other . walkaide system coverage decision our walkaide system is a device manufactured and sold through our products & services segment that is designed to use functional electrical stimulation , or fes , to improve ambulation in people experiencing a condition known as foot drop. foot drop is a gait abnormality in which patients have difficulty lifting the front part of their foot as they walk due to weakness , irritation or damage to the common fibular nerve in the lower leg . in 2006 , cms issued a national coverage determination ( ncd ) that provided limited medicare coverage for the walkaide system in specific cases where the foot drop condition was caused by partial spinal injury . in an effort to seek expanded medicare coverage , in 2012 and 2013 we conducted randomized clinical trials involving a use of the walkaide system for patients with foot drop caused by stroke . based on the outcomes of those studies , in late 2013 we requested that cms reopen the 2006 ncd to include coverage under medicare for foot drop caused by stroke . however , in the fourth quarter of 2014 , after reviewing the results of the clinical trial , cms determined that they would not reopen the ncd to expand coverage . the walkaide system remains a steady , but not significant , part of our overall business . seasonality we believe our business is affected by the degree to which patients have otherwise met the deductibles for which they are responsible in their medical plans during the course of the year . the first quarter is normally our lowest relative net revenue quarter , followed by the second and third quarters , which are somewhat higher and consistent with one another , and , due to the general fulfillment by patients of their health plan co-payments and deductible requirements towards the year 's end , our fourth quarter
| liquidity to provide cash for our operations and capital expenditures , our immediate source of liquidity is our cash and investment balances and any amounts we have available for borrowing under our revolving credit facility . we refer to the sum of these two amounts as our liquidity. our credit agreements define cash and cash equivalents available to us in our bank accounts which differs from our financial statement presentation . if we are not compliant with our debt covenants in any period , absent a waiver or amendment of our credit agreement , we may be unable to access funds in our revolving credit facility . as discussed below , during 2015 and 2016 , due to the issues we encountered in preparing and issuing our financial statements , and other factors , our lenders , with our agreement , decreased the size of our available revolving credit facility by $ 99.0 million , which had a significant bearing on our overall liquidity . the nature of this decrease and our corresponding management of our liquidity are discussed below . as of december 31 , 2014 , we had liquidity of $ 138.1 million , which was comprised of cash of $ 11.7 million and revolver availability of $ 126.4 million , under our $ 200.0 million revolving credit facility . during 2015 , due to the financial statement and related covenant issues described above , our lenders , with our agreement , reduced the size of our total revolving credit facility from $ 200.0 million to $ 146.3 million , which had the effect of reducing our liquidity by $ 53.7 million . our net uses 90 of cash during the year also contributed to further reductions in our liquidity during 2015. while we produced $ 57.3 million of net cash from operating activities , we utilized $ 35.2 million for capital expenditures and other investing activities , and $ 37.0 million for reductions in our long-term term indebtedness , payments to lenders and other non-revolver related financing activities , and increased our letters of credit by $ 0.7 million .
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we will remain an “ emerging growth company ” for up to five years from our initial public offering , or until the earliest to occur of ( 1 ) the last day of the first fiscal year in which our total annual gross revenues exceed $ 1.0 billion , ( 2 ) the date that we become a “ large accelerated filer ” as defined in rule 12b-2 under the securities exchange act of 1934 , which would occur if the market value of our common stock that is held by non-affiliates exceeds $ 700 million as of the last business day of our most recently completed second fiscal quarter or ( 3 ) the date on which we have issued more than $ 1.0 billion in non-convertible debt during the preceding three year period . overview unique is engaged in the engineering and manufacture of multi-material foam , rubber and plastic components utilized in noise , vibration and harshness , acoustical management , water and air sealing , decorative and other functional applications . the 27 company combines a long history of organic growth with some more recent strategic acquisitions to diversify both product capabilities and markets served . unique 's markets served are the north america automotive and heavy duty truck , as well as the appliance , water heater and hvac markets . sales are conducted directly with major automotive and heavy duty truck , appliance , water heater and hvac oems , or indirectly through the tier 1 suppliers of these oems . the company has its principal executive offices in auburn hills , michigan and has sales , engineering and production facilities in auburn hills , michigan , concord , michigan , lafayette , georgia , louisville , kentucky , evansville , indiana , ft. smith , arkansas , bryan , ohio , port huron , michigan , monterrey , mexico , queretaro , mexico and london , ontario . the company also has an independent client sales representative who maintains offices in baldham , germany . subsequent to the 2017 fiscal year-end we announced we will be closing the ft. smith and port huron facilities in 2018. please refer to note 8 for further information . unique derives the majority of its net sales from the sales of foam , rubber plastic , and tape adhesive related automotive products . these products are produced from a variety of manufacturing processes including die cutting , compression molding , thermoforming , reaction injection molding , and fusion molding . we believe unique has a broader array of processes and materials utilized than any of its direct competitors , based on our product offerings . by sealing out air noise and water intrusion , and by providing sound absorption and blocking , unique 's products improve the interior comfort of a vehicle , increasing perceived vehicle quality and the overall experience of its passengers . unique 's products perform similar functions for appliances , water heaters and hvac systems , improving thermal characteristics , reducing noise and prolonging equipment life . we primarily operate within the highly competitive and cyclical automotive parts industry . over the past several years the industry has experienced consistent growth as it recovered from the recession of 2009. many sectors of the supply chain are operating near capacity . over the same period we have grown our core automotive parts business at a faster rate than the industry as a whole , indicating we are taking market share from competitors and increasing our content per vehicle on the programs we supply . we expect this trend to continue . recent developments dividend declaration on february 16 , 2018 , our board of directors declared a quarterly cash dividend of $ 0.15 per common share . the dividend will be payable on march 7 , 2018 to shareholders of record at the close of business on february 28 , 2018. fort smith facility closure on february 13 , 2018 , subsequent to our 2017 fiscal year-end , the company made the decision to close its manufacturing facility in fort smith , arkansas . the company currently expects to cease operations at the fort smith facility by end of june of 2018 , and that approximately 20 positions will be eliminated as a result of the closure . the company 's decision resulted from our desire to streamline operations and to utilize some of the available excess capacity in other of our facilities . as such , the company will move existing fort smith production to our manufacturing facilities in evansville , indiana and monterrey , mexico . the company will provide the affected employees severance pay , health benefits continuation and job search assistance . the company evaluated whether or not this closing met the criteria for discontinued operations and concluded that the closing did not meet the definition as the closing did not represent a strategic shift in the company 's operations and the company will have continuing cash flows from the production being moved to other facilities within the company . the company currently estimates that it will incur approximately $ 0.2 million in employee termination costs . at this time , the company estimates the ranges of amounts of other major types of costs expected to be incurred in connection with the closure to be approximately $ 0.4 million to $ 0.5 million . following the closure , the company expects to market the facility , which currently has a net book value of approximately $ 0.7 million , for sale . port huron facility closure on february 1 , 2018 , subsequent to our 2017 fiscal year-end , the company made the decision to close its manufacturing facility in port huron , michigan . story_separator_special_tag income before income taxes as a result of the foregoing factors , income before income taxes for the fifty-two weeks ended december 31 , 2017 was $ 7.62 million , compared to $ 9.94 million for the fifty-two weeks ended january 1 , 2017 . 32 income tax provision for the fifty-two weeks ended december 31 , 2017 , income tax expense was $ 1.13 million , and the effective income tax rate was 14.9 % . the difference between the actual effective rate and the statutory rate was mainly a result of the enactment of the tax cuts on jobs act on december 22 , 2017 , and research and development credits . these adjustments are further explained in note 11. for the fifty-two weeks ended january 1 , 2017 , income tax expense was $ 3.26 million , and the effective income tax rate was 32.8 % . the difference between the actual effective rate and the statutory rate was mainly a result of the domestic production activities deduction , or dpad , in the u.s. the company has deferred tax assets associated with timing differences between when an expense is recorded for book purposes versus when it is deductible for tax . the company has considered evidence both supporting and not supporting the determination that the deferred tax assets are more likely than not to be realized , and has not recorded a tax valuation allowance as of december 31 , 2017 . the company will continue to evaluate whether the deferred tax assets will be realizable , and if appropriate , will record a valuation allowance against these assets . net income as a result of the increased net sales and changes in expenses discussed above , net income for the fifty-two weeks ended december 31 , 2017 was $ 6.49 million compared to $ 6.68 million during the fifty-two weeks ended january 1 , 2017 . comparison of results of operations for the fifty-two weeks ended january 1 , 2017 and the fifty-two weeks ended january 3 , 2016 on april 29 , 2016 , the canadian buyer , a newly formed subsidiary of the company , acquired the business and substantially all of the assets of intasco corporation , a canadian based tape manufacturer , for a purchase price of $ 21.03 million , net of cash acquired , at closing , with a portion being held in escrow to fund the obligations of intasco corporation and its stockholders to indemnify unique against certain claims , losses and liabilities . on the same date , the us buyer , an existing subsidiary of the company , purchased 100 % of the outstanding capital stock of intasco usa , inc. , a united states based tape manufacturer , for a purchase price of $ 0.89 million paid by the issuance of 70,797 shares of the company 's common stock , par value $ 0.001 per share . the purchase price was paid with borrowings under a new credit facility which replaced the company 's existing facility . for the fifty-two weeks ended january 1 , 2017 , our financial results include the transaction related expenses from the acquisition and the results of operations of the intasco business from apri1 29 , 2016 through january 1 , 2017 . on august 31 , 2015 , the company acquired the business and substantially all of the assets of great lakes for a cash purchase price of $ 11.82 million . following the closing , we made a payment to the seller of $ 0.13 million as a result of post-closing calculation of net working capital . for the fifty-two weeks ended january 1 , 2017 our financial results include the results of operations of the great lakes business for the entire period and for the fifty-two weeks ended january 3 , 2016 , our financial results include the transaction-related expenses from the acquisition and the results of operations of the great lakes business from august 31 , 2015 through january 3 , 2016. fifty-two weeks ended january 1 , 2017 and fifty-two weeks ended january 3 , 2016 net sales fifty-two weeks ended january 1 , 2017 fifty-two weeks ended january 3 , 2016 ( in thousands ) net sales $ 170,463 $ 143,309 net sales for the fifty-two weeks ended january 1 , 2017 were approximately $ 170.46 million compared to $ 143.31 million for the fifty-two weeks ended january 3 , 2016. the increase in net sales for the fifty-two weeks ended january 1 , 2017 is attributable to our increased market penetration and content per vehicle and new product introductions , including approximately eight months of sales from the intasco acquisition that occurred on april 29 , 2016 included in the results for the fifty-two weeks ended january 3 , 2016 , and a full year of sales for the fifty-two weeks ended january 1 , 2017 , compared to eighteen weeks in the fifty-two weeks ended january 3 , 2016 , from the great lakes acquisition that occurred on august 31 , 2015 . 33 cost of sales the major components of cost of sales are raw materials purchased from third parties , direct labor and benefits , and manufacturing overhead , including facility costs , utilities , supplies , repairs and maintenance , insurance , freight costs of products shipped to customers and depreciation . replace_table_token_6_th cost of sales as a percent of net sales replace_table_token_7_th cost of sales as a percentage of net sales for the fifty-two weeks ended january 1 , 2017 increased to 75.9 % from 75.6 % for the fifty-two weeks ended january 3 , 2016 . the increase in cost of sales as a percentage of net sales was attributable to higher direct labor and benefits and manufacturing overhead as a percentage of net sales , partially offset by lower material costs as a percentage of net sales . material costs as a percentage of net sales
| liquidity to provide cash for our operations and capital expenditures , our immediate source of liquidity is our cash and investment balances and any amounts we have available for borrowing under our revolving credit facility . we refer to the sum of these two amounts as our liquidity. our credit agreements define cash and cash equivalents available to us in our bank accounts which differs from our financial statement presentation . if we are not compliant with our debt covenants in any period , absent a waiver or amendment of our credit agreement , we may be unable to access funds in our revolving credit facility . as discussed below , during 2015 and 2016 , due to the issues we encountered in preparing and issuing our financial statements , and other factors , our lenders , with our agreement , decreased the size of our available revolving credit facility by $ 99.0 million , which had a significant bearing on our overall liquidity . the nature of this decrease and our corresponding management of our liquidity are discussed below . as of december 31 , 2014 , we had liquidity of $ 138.1 million , which was comprised of cash of $ 11.7 million and revolver availability of $ 126.4 million , under our $ 200.0 million revolving credit facility . during 2015 , due to the financial statement and related covenant issues described above , our lenders , with our agreement , reduced the size of our total revolving credit facility from $ 200.0 million to $ 146.3 million , which had the effect of reducing our liquidity by $ 53.7 million . our net uses 90 of cash during the year also contributed to further reductions in our liquidity during 2015. while we produced $ 57.3 million of net cash from operating activities , we utilized $ 35.2 million for capital expenditures and other investing activities , and $ 37.0 million for reductions in our long-term term indebtedness , payments to lenders and other non-revolver related financing activities , and increased our letters of credit by $ 0.7 million .
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we will remain an “ emerging growth company ” for up to five years from our initial public offering , or until the earliest to occur of ( 1 ) the last day of the first fiscal year in which our total annual gross revenues exceed $ 1.0 billion , ( 2 ) the date that we become a “ large accelerated filer ” as defined in rule 12b-2 under the securities exchange act of 1934 , which would occur if the market value of our common stock that is held by non-affiliates exceeds $ 700 million as of the last business day of our most recently completed second fiscal quarter or ( 3 ) the date on which we have issued more than $ 1.0 billion in non-convertible debt during the preceding three year period . overview unique is engaged in the engineering and manufacture of multi-material foam , rubber and plastic components utilized in noise , vibration and harshness , acoustical management , water and air sealing , decorative and other functional applications . the 27 company combines a long history of organic growth with some more recent strategic acquisitions to diversify both product capabilities and markets served . unique 's markets served are the north america automotive and heavy duty truck , as well as the appliance , water heater and hvac markets . sales are conducted directly with major automotive and heavy duty truck , appliance , water heater and hvac oems , or indirectly through the tier 1 suppliers of these oems . the company has its principal executive offices in auburn hills , michigan and has sales , engineering and production facilities in auburn hills , michigan , concord , michigan , lafayette , georgia , louisville , kentucky , evansville , indiana , ft. smith , arkansas , bryan , ohio , port huron , michigan , monterrey , mexico , queretaro , mexico and london , ontario . the company also has an independent client sales representative who maintains offices in baldham , germany . subsequent to the 2017 fiscal year-end we announced we will be closing the ft. smith and port huron facilities in 2018. please refer to note 8 for further information . unique derives the majority of its net sales from the sales of foam , rubber plastic , and tape adhesive related automotive products . these products are produced from a variety of manufacturing processes including die cutting , compression molding , thermoforming , reaction injection molding , and fusion molding . we believe unique has a broader array of processes and materials utilized than any of its direct competitors , based on our product offerings . by sealing out air noise and water intrusion , and by providing sound absorption and blocking , unique 's products improve the interior comfort of a vehicle , increasing perceived vehicle quality and the overall experience of its passengers . unique 's products perform similar functions for appliances , water heaters and hvac systems , improving thermal characteristics , reducing noise and prolonging equipment life . we primarily operate within the highly competitive and cyclical automotive parts industry . over the past several years the industry has experienced consistent growth as it recovered from the recession of 2009. many sectors of the supply chain are operating near capacity . over the same period we have grown our core automotive parts business at a faster rate than the industry as a whole , indicating we are taking market share from competitors and increasing our content per vehicle on the programs we supply . we expect this trend to continue . recent developments dividend declaration on february 16 , 2018 , our board of directors declared a quarterly cash dividend of $ 0.15 per common share . the dividend will be payable on march 7 , 2018 to shareholders of record at the close of business on february 28 , 2018. fort smith facility closure on february 13 , 2018 , subsequent to our 2017 fiscal year-end , the company made the decision to close its manufacturing facility in fort smith , arkansas . the company currently expects to cease operations at the fort smith facility by end of june of 2018 , and that approximately 20 positions will be eliminated as a result of the closure . the company 's decision resulted from our desire to streamline operations and to utilize some of the available excess capacity in other of our facilities . as such , the company will move existing fort smith production to our manufacturing facilities in evansville , indiana and monterrey , mexico . the company will provide the affected employees severance pay , health benefits continuation and job search assistance . the company evaluated whether or not this closing met the criteria for discontinued operations and concluded that the closing did not meet the definition as the closing did not represent a strategic shift in the company 's operations and the company will have continuing cash flows from the production being moved to other facilities within the company . the company currently estimates that it will incur approximately $ 0.2 million in employee termination costs . at this time , the company estimates the ranges of amounts of other major types of costs expected to be incurred in connection with the closure to be approximately $ 0.4 million to $ 0.5 million . following the closure , the company expects to market the facility , which currently has a net book value of approximately $ 0.7 million , for sale . port huron facility closure on february 1 , 2018 , subsequent to our 2017 fiscal year-end , the company made the decision to close its manufacturing facility in port huron , michigan . story_separator_special_tag income before income taxes as a result of the foregoing factors , income before income taxes for the fifty-two weeks ended december 31 , 2017 was $ 7.62 million , compared to $ 9.94 million for the fifty-two weeks ended january 1 , 2017 . 32 income tax provision for the fifty-two weeks ended december 31 , 2017 , income tax expense was $ 1.13 million , and the effective income tax rate was 14.9 % . the difference between the actual effective rate and the statutory rate was mainly a result of the enactment of the tax cuts on jobs act on december 22 , 2017 , and research and development credits . these adjustments are further explained in note 11. for the fifty-two weeks ended january 1 , 2017 , income tax expense was $ 3.26 million , and the effective income tax rate was 32.8 % . the difference between the actual effective rate and the statutory rate was mainly a result of the domestic production activities deduction , or dpad , in the u.s. the company has deferred tax assets associated with timing differences between when an expense is recorded for book purposes versus when it is deductible for tax . the company has considered evidence both supporting and not supporting the determination that the deferred tax assets are more likely than not to be realized , and has not recorded a tax valuation allowance as of december 31 , 2017 . the company will continue to evaluate whether the deferred tax assets will be realizable , and if appropriate , will record a valuation allowance against these assets . net income as a result of the increased net sales and changes in expenses discussed above , net income for the fifty-two weeks ended december 31 , 2017 was $ 6.49 million compared to $ 6.68 million during the fifty-two weeks ended january 1 , 2017 . comparison of results of operations for the fifty-two weeks ended january 1 , 2017 and the fifty-two weeks ended january 3 , 2016 on april 29 , 2016 , the canadian buyer , a newly formed subsidiary of the company , acquired the business and substantially all of the assets of intasco corporation , a canadian based tape manufacturer , for a purchase price of $ 21.03 million , net of cash acquired , at closing , with a portion being held in escrow to fund the obligations of intasco corporation and its stockholders to indemnify unique against certain claims , losses and liabilities . on the same date , the us buyer , an existing subsidiary of the company , purchased 100 % of the outstanding capital stock of intasco usa , inc. , a united states based tape manufacturer , for a purchase price of $ 0.89 million paid by the issuance of 70,797 shares of the company 's common stock , par value $ 0.001 per share . the purchase price was paid with borrowings under a new credit facility which replaced the company 's existing facility . for the fifty-two weeks ended january 1 , 2017 , our financial results include the transaction related expenses from the acquisition and the results of operations of the intasco business from apri1 29 , 2016 through january 1 , 2017 . on august 31 , 2015 , the company acquired the business and substantially all of the assets of great lakes for a cash purchase price of $ 11.82 million . following the closing , we made a payment to the seller of $ 0.13 million as a result of post-closing calculation of net working capital . for the fifty-two weeks ended january 1 , 2017 our financial results include the results of operations of the great lakes business for the entire period and for the fifty-two weeks ended january 3 , 2016 , our financial results include the transaction-related expenses from the acquisition and the results of operations of the great lakes business from august 31 , 2015 through january 3 , 2016. fifty-two weeks ended january 1 , 2017 and fifty-two weeks ended january 3 , 2016 net sales fifty-two weeks ended january 1 , 2017 fifty-two weeks ended january 3 , 2016 ( in thousands ) net sales $ 170,463 $ 143,309 net sales for the fifty-two weeks ended january 1 , 2017 were approximately $ 170.46 million compared to $ 143.31 million for the fifty-two weeks ended january 3 , 2016. the increase in net sales for the fifty-two weeks ended january 1 , 2017 is attributable to our increased market penetration and content per vehicle and new product introductions , including approximately eight months of sales from the intasco acquisition that occurred on april 29 , 2016 included in the results for the fifty-two weeks ended january 3 , 2016 , and a full year of sales for the fifty-two weeks ended january 1 , 2017 , compared to eighteen weeks in the fifty-two weeks ended january 3 , 2016 , from the great lakes acquisition that occurred on august 31 , 2015 . 33 cost of sales the major components of cost of sales are raw materials purchased from third parties , direct labor and benefits , and manufacturing overhead , including facility costs , utilities , supplies , repairs and maintenance , insurance , freight costs of products shipped to customers and depreciation . replace_table_token_6_th cost of sales as a percent of net sales replace_table_token_7_th cost of sales as a percentage of net sales for the fifty-two weeks ended january 1 , 2017 increased to 75.9 % from 75.6 % for the fifty-two weeks ended january 3 , 2016 . the increase in cost of sales as a percentage of net sales was attributable to higher direct labor and benefits and manufacturing overhead as a percentage of net sales , partially offset by lower material costs as a percentage of net sales . material costs as a percentage of net sales
| liquidity and capital resources our principal sources of liquidity are cash flow from operations and borrowings under our new credit agreement from our senior lenders . our primary uses of cash are payment of vendors , payroll , operating costs , capital expenditures and debt service . as of december 31 , 2017 , january 1 , 2017 and january 3 , 2016 , we had a cash balance of $ 1.43 million , $ 0.71 million and $ 0.73 million , respectively . our excess cash balance is swept daily and applied to reduce borrowings under our revolving line of credit , which remains available for re-borrowing , as needed , subject to compliance with the terms of the facility . as of december 31 , 2017 , january 1 , 2017 and january 3 , 2016 , we had $ 7.19 million , $ 9.42 million and $ 10.11 million , respectively , available for borrowing under our current credit facility and our old credit facility , respectively , subject , in each case , to borrowing base restrictions , compliance with the terms of the facility and outstanding letters of credit . at each such date , we were in compliance with all debt covenants under such facilities .
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diluted earnings per common share from continuing operations were $ 0.05 , $ 0.38 and $ 0.63 for the years ended december 31 , 2019 , 2018 and 2017 . the decrease in net income from continuing operations for the year ended december 31 , 2019 as compared to the year ended december 31 , 2018 was mainly due to lower net interest income and noninterest income , and a higher provision for loan losses , partially offset by lower noninterest expense . total assets were $ 7.83 billion at december 31 , 2019 , a decrease of $ 2.80 billion , or 26 % , from $ 10.63 billion at december 31 , 2018 . the decrease was mainly due to our continued progress towards transitioning to become a relationship-focused business bank . as part of this transition , we continue to de-emphasize the production of lower margin commoditized loan products and we opportunistically reduced holdings of certain investment securities . significant financial highlights include : securities available-for-sale were $ 912.6 million at december 31 , 2019 , a decrease of $ 1.08 billion , or 54.2 % , from $ 1.99 billion at december 31 , 2018 . the decrease was primarily the result of call and net sale activities between periods . we lowered the amount of collateralized loan obligations in the investment securities portfolio and repositioned our securities available-for-sale portfolio to navigate a volatile rate environment by reducing the overall duration of the portfolio by selling longer-duration residential mortgage-backed securities and commercial mortgage-backed-securities . the sales of securities helped remix overall earning assets as the proceeds were primarily used to fund loan originations and reduce borrowings . loans receivable , net of all , totaled $ 5.89 billion at december 31 , 2019 , a decrease of $ 1.74 billion , or 22.84 % , from $ 7.64 billion at december 31 , 2018 . the decrease was mainly due to sales of approximately $ 1.13 billion in sfr mortgage and multifamily loans , coupled with net paydowns and payoffs within the portfolio . total deposits were $ 5.43 billion at december 31 , 2019 , a decrease of $ 2.49 billion , or 31.45 % , from $ 7.92 billion at december 31 , 2018 . the decrease was mainly due to our strategic reduction of high-rate and high-volatility deposits , partially offset by our continuous efforts to build core deposits across our business units , including strong growth from the community banking and private banking channel . total stockholders ' equity was $ 907.2 million at december 31 , 2019 , a decrease of $ 38.3 million , or 4.05 % , from $ 945.5 million at december 31 , 2018 . the decrease was primarily the result of the partial redemption of our series d and series e preferred stock for an aggregate amount of $ 46.0 million and cash dividends on common stock and preferred stock of $ 15.6 million , partially offset by $ 12.2 million of other comprehensive income on securities available-for-sale primarily due to decreases in market interest rates and net income of $ 23.8 million during the year ended december 31 , 2019 . for the quarters ended december 31 , 2019 , 2018 and 2017 , net income from continuing operations was $ 14.3 million , $ 10.8 million , and $ 10.9 million . diluted earnings from continuing operations per total common share were $ 0.20 , $ 0.12 , and $ 0.11 for the quarters ended december 31 , 2019 , 2018 and 2017 . refer to the 2018 form 10-k filed on march 2 , 2019 for discussion related to 2018 activity compared to 2017 activity . 39 results of operations the following table presents condensed statements of operations for the periods indicated : replace_table_token_6_th 40 net interest income the following table presents interest income , average interest-earning assets , interest expense , average interest-bearing liabilities , and their related yields and costs expressed both in dollars and rates for the years indicated : replace_table_token_7_th ( 1 ) total loans are net of deferred fees , related direct costs and discounts , but exclude the allowance for loan losses . non-accrual loans are included in the average balance . interest income includes net accretion of deferred loan ( fees ) and costs of $ ( 916 ) thousand , $ 612 thousand and $ 1.3 million and net discount accretion on purchased loans of $ 364 thousand , $ 637 thousand and $ 4.8 million for the years ended december 31 , 2019 , 2018 and 2017 . total loans includes income from discontinued operations for the years ended december 31 , 2018 and 2017 . ( 2 ) includes average balance of fhlb and federal reserve bank stock at cost and average time deposits with other financial institutions . ( 3 ) includes average balance of boli of $ 108.1 million , $ 105.8 million and $ 103.6 million for the years ended december 31 , 2019 , 2018 and 2017 . ( 4 ) net interest income divided by average interest-earning assets . 41 rate/volume analysis the following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities . information is provided on changes attributable to ( i ) changes in volume multiplied by the prior rate and ( ii ) changes in rate multiplied by the prior volume . changes attributable to both rate and volume which can not be segregated have been allocated proportionately to the change due to volume and the change due to rate . story_separator_special_tag the decrease was mainly due to the aforementioned sale of mortgage servicing rights on $ 3.55 billion in unpaid principal balances of conventional mortgage loans and reduced loan repurchase settlement activities . 45 restructuring expense was $ 4.3 million for the year ended december 31 , 2019 and consisted of severance and retention costs associated with the exit from our third-party mortgage origination and brokered single family lending business and ceo and cfo transitions during 2019. for the year ended december 31 , 2018 , restructuring expense was $ 4.4 million and consisted of severance-related costs as a result of the reduction in workforce that was previously implemented in 2018 to reduce our workforce by approximately 9 % of total staff . all other expenses were $ 14.7 million for the year ended december 31 , 2019 , a decrease of $ 621 thousand , or 4.0 % , from $ 15.4 million for the year ended december 31 , 2018 . the decrease was mainly due to lower provision for unfunded loan commitments and overall expense reductions . loss on investments in alternative energy partnerships was $ 1.7 million for the year ended december 31 , 2019 , a decrease of $ 3.4 million from $ 5.0 million for the year ended december 31 , 2018 . the decrease in loss was mainly due to decreased loss sharing allocations resulting in lower hypothetical liquidation at book value ( hlbv ) losses . income tax expense for the years ended december 31 , 2019 , 2018 and 2017 , income tax expense ( benefit ) from continuing operations was $ 4.2 million , $ 4.8 million and $ ( 26.6 ) million , respectively , and the effective tax rate was 15.1 percent , 10.3 percent and ( 98.8 ) percent , respectively . our effective tax rate of continuing operations for the year ended december 31 , 2019 was higher than the effective tax rate of continuing operations for the year ended december 31 , 2018 mainly due to the reduction in the recognition of tax credits on investments in alternative energy partnerships , which were $ 3.4 million for the year ended december 31 , 2019 , compared to $ 9.6 million for the year ended december 31 , 2018 . the reduction in tax credits received by the bank is due to fewer investments in alternative energy partnerships . we use the flow-through income statement method to account for the tax credits earned on investments in alternative energy partnerships . under this method , the tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments is recognized as additional tax expense in the year they are earned . for additional information , see note 14 to consolidated financial statements included in `` item 8. financial statements and supplementary data `` of this annual report on form 10-k. 46 financial condition investment securities investment securities that we have the ability and the intent to hold to maturity are classified as held-to-maturity . all other securities are classified as available-for-sale . investment securities classified as available-for-sale are carried at their estimated fair values with the changes in fair values recorded in accumulated other comprehensive income , net of tax , as a component of stockholders ' equity . at december 31 , 2019 , 2018 and 2017 , all of our investment securities were classified as available-for-sale . the primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk , including credit risk , reinvestment risk , liquidity risk and interest rate risk . certain investment securities provide a source of liquidity as collateral for fhlb advances , federal reserve discount window capacity , repurchase agreements and for certain public deposits . the following table presents the amortized cost and fair value of the investment securities portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income ( loss ) as of the dates indicated : replace_table_token_11_th securities available-for-sale were $ 912.6 million at december 31 , 2019 , a decrease of $ 1.08 billion , or 54.2 % , from $ 1.99 billion at december 31 , 2018 . the decrease was mainly due to sales of $ 1.20 billion , principal payments of $ 36.5 million , and calls and pay-offs of $ 53.1 million , partially offset by purchases of $ 195.3 million during the year ended december 31 , 2019 . securities available-for-sale had a net unrealized loss of $ 16.9 million and $ 34.2 million at december 31 , 2019 and 2018 . 47 during the year ended december 31 , 2019 , in response to a changing interest rate environment we repositioned our securities available-for-sale portfolio by reducing the overall duration through sales of certain longer-duration and fixed-rate mortgage-backed securities . additionally , we continued to strategically reduce our collateralized loan obligations exposure . a portion of the funds from sales of investment securities during 2019 and other available cash balances were reinvested into a mix of security classes , resulting in an overall shorter duration for the securities portfolio . as of december 31 , 2019 , our securities portfolio included $ 718.4 million of clos , $ 91.3 million of agency collateralized mortgage obligations , $ 36.5 million of agency mortgage-backed securities , $ 52.7 million of municipal securities , and $ 13.6 million of corporate debt securities . clos totaled $ 718.4 million and $ 1.42 billion at december 31 , 2019 and 2018 . the $ 703.2 million decrease between periods was due primarily to call and sale activities . clos are floating rate debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries . underlying loans are generally secured by a company 's assets such as inventory
| liquidity and capital resources our principal sources of liquidity are cash flow from operations and borrowings under our new credit agreement from our senior lenders . our primary uses of cash are payment of vendors , payroll , operating costs , capital expenditures and debt service . as of december 31 , 2017 , january 1 , 2017 and january 3 , 2016 , we had a cash balance of $ 1.43 million , $ 0.71 million and $ 0.73 million , respectively . our excess cash balance is swept daily and applied to reduce borrowings under our revolving line of credit , which remains available for re-borrowing , as needed , subject to compliance with the terms of the facility . as of december 31 , 2017 , january 1 , 2017 and january 3 , 2016 , we had $ 7.19 million , $ 9.42 million and $ 10.11 million , respectively , available for borrowing under our current credit facility and our old credit facility , respectively , subject , in each case , to borrowing base restrictions , compliance with the terms of the facility and outstanding letters of credit . at each such date , we were in compliance with all debt covenants under such facilities .
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diluted earnings per common share from continuing operations were $ 0.05 , $ 0.38 and $ 0.63 for the years ended december 31 , 2019 , 2018 and 2017 . the decrease in net income from continuing operations for the year ended december 31 , 2019 as compared to the year ended december 31 , 2018 was mainly due to lower net interest income and noninterest income , and a higher provision for loan losses , partially offset by lower noninterest expense . total assets were $ 7.83 billion at december 31 , 2019 , a decrease of $ 2.80 billion , or 26 % , from $ 10.63 billion at december 31 , 2018 . the decrease was mainly due to our continued progress towards transitioning to become a relationship-focused business bank . as part of this transition , we continue to de-emphasize the production of lower margin commoditized loan products and we opportunistically reduced holdings of certain investment securities . significant financial highlights include : securities available-for-sale were $ 912.6 million at december 31 , 2019 , a decrease of $ 1.08 billion , or 54.2 % , from $ 1.99 billion at december 31 , 2018 . the decrease was primarily the result of call and net sale activities between periods . we lowered the amount of collateralized loan obligations in the investment securities portfolio and repositioned our securities available-for-sale portfolio to navigate a volatile rate environment by reducing the overall duration of the portfolio by selling longer-duration residential mortgage-backed securities and commercial mortgage-backed-securities . the sales of securities helped remix overall earning assets as the proceeds were primarily used to fund loan originations and reduce borrowings . loans receivable , net of all , totaled $ 5.89 billion at december 31 , 2019 , a decrease of $ 1.74 billion , or 22.84 % , from $ 7.64 billion at december 31 , 2018 . the decrease was mainly due to sales of approximately $ 1.13 billion in sfr mortgage and multifamily loans , coupled with net paydowns and payoffs within the portfolio . total deposits were $ 5.43 billion at december 31 , 2019 , a decrease of $ 2.49 billion , or 31.45 % , from $ 7.92 billion at december 31 , 2018 . the decrease was mainly due to our strategic reduction of high-rate and high-volatility deposits , partially offset by our continuous efforts to build core deposits across our business units , including strong growth from the community banking and private banking channel . total stockholders ' equity was $ 907.2 million at december 31 , 2019 , a decrease of $ 38.3 million , or 4.05 % , from $ 945.5 million at december 31 , 2018 . the decrease was primarily the result of the partial redemption of our series d and series e preferred stock for an aggregate amount of $ 46.0 million and cash dividends on common stock and preferred stock of $ 15.6 million , partially offset by $ 12.2 million of other comprehensive income on securities available-for-sale primarily due to decreases in market interest rates and net income of $ 23.8 million during the year ended december 31 , 2019 . for the quarters ended december 31 , 2019 , 2018 and 2017 , net income from continuing operations was $ 14.3 million , $ 10.8 million , and $ 10.9 million . diluted earnings from continuing operations per total common share were $ 0.20 , $ 0.12 , and $ 0.11 for the quarters ended december 31 , 2019 , 2018 and 2017 . refer to the 2018 form 10-k filed on march 2 , 2019 for discussion related to 2018 activity compared to 2017 activity . 39 results of operations the following table presents condensed statements of operations for the periods indicated : replace_table_token_6_th 40 net interest income the following table presents interest income , average interest-earning assets , interest expense , average interest-bearing liabilities , and their related yields and costs expressed both in dollars and rates for the years indicated : replace_table_token_7_th ( 1 ) total loans are net of deferred fees , related direct costs and discounts , but exclude the allowance for loan losses . non-accrual loans are included in the average balance . interest income includes net accretion of deferred loan ( fees ) and costs of $ ( 916 ) thousand , $ 612 thousand and $ 1.3 million and net discount accretion on purchased loans of $ 364 thousand , $ 637 thousand and $ 4.8 million for the years ended december 31 , 2019 , 2018 and 2017 . total loans includes income from discontinued operations for the years ended december 31 , 2018 and 2017 . ( 2 ) includes average balance of fhlb and federal reserve bank stock at cost and average time deposits with other financial institutions . ( 3 ) includes average balance of boli of $ 108.1 million , $ 105.8 million and $ 103.6 million for the years ended december 31 , 2019 , 2018 and 2017 . ( 4 ) net interest income divided by average interest-earning assets . 41 rate/volume analysis the following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities . information is provided on changes attributable to ( i ) changes in volume multiplied by the prior rate and ( ii ) changes in rate multiplied by the prior volume . changes attributable to both rate and volume which can not be segregated have been allocated proportionately to the change due to volume and the change due to rate . story_separator_special_tag the decrease was mainly due to the aforementioned sale of mortgage servicing rights on $ 3.55 billion in unpaid principal balances of conventional mortgage loans and reduced loan repurchase settlement activities . 45 restructuring expense was $ 4.3 million for the year ended december 31 , 2019 and consisted of severance and retention costs associated with the exit from our third-party mortgage origination and brokered single family lending business and ceo and cfo transitions during 2019. for the year ended december 31 , 2018 , restructuring expense was $ 4.4 million and consisted of severance-related costs as a result of the reduction in workforce that was previously implemented in 2018 to reduce our workforce by approximately 9 % of total staff . all other expenses were $ 14.7 million for the year ended december 31 , 2019 , a decrease of $ 621 thousand , or 4.0 % , from $ 15.4 million for the year ended december 31 , 2018 . the decrease was mainly due to lower provision for unfunded loan commitments and overall expense reductions . loss on investments in alternative energy partnerships was $ 1.7 million for the year ended december 31 , 2019 , a decrease of $ 3.4 million from $ 5.0 million for the year ended december 31 , 2018 . the decrease in loss was mainly due to decreased loss sharing allocations resulting in lower hypothetical liquidation at book value ( hlbv ) losses . income tax expense for the years ended december 31 , 2019 , 2018 and 2017 , income tax expense ( benefit ) from continuing operations was $ 4.2 million , $ 4.8 million and $ ( 26.6 ) million , respectively , and the effective tax rate was 15.1 percent , 10.3 percent and ( 98.8 ) percent , respectively . our effective tax rate of continuing operations for the year ended december 31 , 2019 was higher than the effective tax rate of continuing operations for the year ended december 31 , 2018 mainly due to the reduction in the recognition of tax credits on investments in alternative energy partnerships , which were $ 3.4 million for the year ended december 31 , 2019 , compared to $ 9.6 million for the year ended december 31 , 2018 . the reduction in tax credits received by the bank is due to fewer investments in alternative energy partnerships . we use the flow-through income statement method to account for the tax credits earned on investments in alternative energy partnerships . under this method , the tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments is recognized as additional tax expense in the year they are earned . for additional information , see note 14 to consolidated financial statements included in `` item 8. financial statements and supplementary data `` of this annual report on form 10-k. 46 financial condition investment securities investment securities that we have the ability and the intent to hold to maturity are classified as held-to-maturity . all other securities are classified as available-for-sale . investment securities classified as available-for-sale are carried at their estimated fair values with the changes in fair values recorded in accumulated other comprehensive income , net of tax , as a component of stockholders ' equity . at december 31 , 2019 , 2018 and 2017 , all of our investment securities were classified as available-for-sale . the primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk , including credit risk , reinvestment risk , liquidity risk and interest rate risk . certain investment securities provide a source of liquidity as collateral for fhlb advances , federal reserve discount window capacity , repurchase agreements and for certain public deposits . the following table presents the amortized cost and fair value of the investment securities portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income ( loss ) as of the dates indicated : replace_table_token_11_th securities available-for-sale were $ 912.6 million at december 31 , 2019 , a decrease of $ 1.08 billion , or 54.2 % , from $ 1.99 billion at december 31 , 2018 . the decrease was mainly due to sales of $ 1.20 billion , principal payments of $ 36.5 million , and calls and pay-offs of $ 53.1 million , partially offset by purchases of $ 195.3 million during the year ended december 31 , 2019 . securities available-for-sale had a net unrealized loss of $ 16.9 million and $ 34.2 million at december 31 , 2019 and 2018 . 47 during the year ended december 31 , 2019 , in response to a changing interest rate environment we repositioned our securities available-for-sale portfolio by reducing the overall duration through sales of certain longer-duration and fixed-rate mortgage-backed securities . additionally , we continued to strategically reduce our collateralized loan obligations exposure . a portion of the funds from sales of investment securities during 2019 and other available cash balances were reinvested into a mix of security classes , resulting in an overall shorter duration for the securities portfolio . as of december 31 , 2019 , our securities portfolio included $ 718.4 million of clos , $ 91.3 million of agency collateralized mortgage obligations , $ 36.5 million of agency mortgage-backed securities , $ 52.7 million of municipal securities , and $ 13.6 million of corporate debt securities . clos totaled $ 718.4 million and $ 1.42 billion at december 31 , 2019 and 2018 . the $ 703.2 million decrease between periods was due primarily to call and sale activities . clos are floating rate debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries . underlying loans are generally secured by a company 's assets such as inventory
| liquidity management we are required to maintain sufficient liquidity to ensure a safe and sound operation . liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans . historically , we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations , including potential deposit outflows , and dividend payments . cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained . banc of california , n.a . the bank 's liquidity , represented by cash and cash equivalents and securities available-for-sale , is a product of its operating , investing , and financing activities . the bank 's primary sources of funds are deposits ; payments ( including interest and principal ) on outstanding loans and investment securities ; sales of loans , investment securities and other short-term investments ; and funds provided from operations . while scheduled payments from the amortization of loans and investment securities , and maturing investment securities and short-term investments are relatively predictable sources of funds , deposit flows and loan prepayments are greatly influenced by general interest rates , economic conditions , and competition . in addition , the bank invests excess funds in short-term interest-earning assets , which provide liquidity to meet lending requirements . the bank also generates cash through borrowings . the bank mainly utilizes fhlb advances and securities sold under repurchase agreements to leverage its capital base , to provide funds for its lending activities , as a source of liquidity , and to enhance its interest rate risk management . the bank also has the ability to obtain brokered deposits and collect deposits through its wholesale and treasury operations . liquidity management is both a daily and long-term function of business management . any excess liquidity is typically invested in federal funds or investment securities .
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38 cloud and mobility businesses are going through a massive change in their it strategies as they look to drive more business value , agility , and better customer experiences , while cloud and mobility are becoming increasingly important , as evidenced by the following trends : ● business internet traffic continues to increase every year ; ● data and applications are increasingly moving to the cloud ; ● more and more users are working remotely ; ● buyers continue to move away from traditional on-premise solutions ; ● mature and legacy on premise deployments are reaching end of life and are increasingly being replaced by cloud and saas alternatives ; ● it security staffing shortages ; ● increasingly fast , sophisticated , expensive , and high-profile attacks target organizations of all sizes ; ● compliance and regulatory mandates ; ● heightened cybercrime activity among commercial enterprises and nation states ; ● automation is increasingly considered critical to accelerating detection and protection ; ● the need to simplify operations through vendor consolidation . these are some of the reasons why we believe cyren 's vision for 100 % cloud security is compelling to it security teams looking to protect their businesses in today 's cloud-centric mobile-first world . investments in operations , research and development and sales and marketing our cost of revenues , research and development expenses , and sales and marketing expenses are all significant contributing factors to our operating losses . over time , we expect that our utilization of our cloud infrastructure will increase and provide the opportunity for improved gross margins . our investments in research and development are required in order to enhance and improve our solutions . in the future , we expect to lower the rate of r & d investment as a percentage of revenue . the return on our sales and marketing investment is tied to attracting new customers and enhancing our business with existing customers , thereby lowering the overall sales and marketing costs as a percent of revenues . during 2020 we reduced our overall headcount in order to reduce expenses , and we believe managing future headcount and expense growth will be key in improving our gross and operating margins over time . growing our enterprise business although all of our services are subscription services , our enterprise offerings are typically invoiced up front for an annual contract amount , or the full multi-year contract amount , at the start of the term . as a result , this business is expected to provide a larger immediate contribution to cash flow and better return on investment . as this enterprise business grows as a portion of our overall revenues , we expect to increase deferred revenue and our operating results and cash flow to improve , which will make us less reliant on other sources of capital in the future . 39 components of our operating results revenue we derive revenues from the sale of real-time cloud-based services for each of cyren 's email security , web security , antimalware , and advanced threat protection offerings . we sell all of our solutions as subscription services , either to oems and service providers or directly or indirectly to enterprises . cost of revenue personnel costs , which consist of salaries , benefits , bonuses , and stock-based compensation for employees that operate our network and provide support services to our customers , as well as data center costs , are the most significant components of our cost of revenues . other costs include third party contractors , royalties for use of third-party technologies , amortization of intangibles and depreciation of data center equipment . we expect these costs may increase in absolute dollars as we continue to optimize our cloud infrastructure and our support services , but should reduce as a percentage of overall revenue . operating expenses our operating expenses consist of research and development , sales and marketing , and general and administrative expenses . personnel costs , which consist of salaries , benefits , bonuses , and stock-based compensation , are the most significant component of our operating expenses . operating expenses also include allocated overhead costs for facilities , it , and depreciation . we expect operating expenses to increase in absolute dollars as we continue to grow . research and development . research and development expenses consists primarily of personnel costs , outsourced engineering , and threat analysis services . we believe these investments are crucial for our ability to continue to enhance the functionality of our services , as well as to develop and introduce new services to the market . we expect research and development expenses may increase in 2021 as we support newly released products in 2020. development costs related to internal use technology that supports our security services are capitalized on the balance sheet , while other development costs are expensed as they are incurred . sales and marketing . sales and marketing expenses primarily include personnel costs , sales commissions , marketing activities , and travel associated with sales and marketing . we market and sell our services worldwide through our sales organization and distribution channels . we capitalize sales commissions paid to internal sales personnel and amortize these expenses over an estimated period of benefit that reflects the expected future revenue streams . we reduced sales and marketing expense in 2020 but anticipate that we may need to increase investment in these areas related to new products launched in 2020 and enhance our sales and marketing efforts to support our further growth . our sales personnel are typically not immediately productive , and therefore the increase in expenses we incur when adding personnel is not immediately accompanied by increased revenue and in some cases may not result in increased revenue if these new sales personnel are unsuccessful in becoming productive . general and administrative . story_separator_special_tag we also issued to the placement agent or its designees warrants ( “ placement agent warrants ” ) to purchase up to 720,000 ordinary shares ( the “ warrant shares ” ) , representing 6 % of the aggregate number of ordinary shares sold in the offering . the placement agent warrants have an exercise price equal to $ 1.4375 , or 125 % of the offering price , per ordinary share and will be exercisable commencing on august 16 , 2021 for five years from the effective date of the offering . 45 earn-out consideration in conjunction with the 2012 acquisition of eleven , the company entered into an earn-out agreement with the former shareholders that would pay additional consideration based on the revenue performance for the years ending 2012-2015. subsequently in 2014 the company had a legal dispute regarding the amount and timing of the earn-out payments and had entered into arbitral proceedings with the former shareholders of eleven . on march 9 , 2017 , the company received the arbitral judgement . pursuant to the judgement , the earn-out consideration balance was increased to reflect additional legal expenses and interest expenses covering the period up to december 31 , 2016. during 2017 and 2018 , the company continued to accrue interest on the unpaid earn-out consideration balance . such interest is reflected in the consolidated statements of operations under financial expenses , net . in may 2018 , the company made a partial payment of the earn-out consideration to five of the six former shareholders , in an amount of $ 604 thousand . the earn-out consideration balance presented on the company 's balance sheet as of december 31 , 2018 reflects the complete remaining liability relating to the earn-out , including accrued interest . subsequent to the reporting period , in february 2019 , the parties agreed to resolve all pending claims , and on february 28 , 2019 the company paid approximately $ 2.7 million to settle the earn-out consideration in full . for additional information , please refer to note 7b ( i ) of the consolidated financial statements included elsewhere in this annual report . registration statements in connection with our private placement to warburg pincus in november 2017 , in which we issued approximately 10.6 million ordinary shares for $ 1.85 per share , we and warburg pincus entered into a registration rights agreement , which , among other things , provides warburg pincus with three demand registration rights , piggyback and shelf registration rights . the demand registration rights may be exercised starting august 6 , 2018 , subject to certain customary blackout periods . in connection with issuance of the convertible debentures , we entered into a registration rights agreement with the purchasers . pursuant to that agreement , we filed a registration statement on form s-3 with the sec covering the resale of our ordinary shares that are issuable to the purchasers upon any conversion of the convertible debentures or as interest payments . on september 21 , 2018 , we filed a shelf registration statement on form f-3 with the sec , which we converted to a form s-3 on august 16 , 2019. this registration statement enables us to issue debt securities , ordinary shares , warrants or subscription rights up to an aggregate amount of $ 50 million . under the rules governing shelf registration statements , we will file a prospectus supplement with the sec which describes the amount and type of securities being offered each time we issue securities under this registration statement . no securities were issued under the registration statement on form f-3 . in november 2019 , we issued shares as part of our rights offerings and in february 2021 , we issued shares in the registered direct offering using our form s-3 as described above . off-balance sheet arrangements not applicable . critical accounting policies and estimates this section is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( “ u.s . gaap ” ) . the preparation of these financial statements requires management to make estimates , judgements and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes . actual results could differ from those estimates . on an ongoing basis , the company 's management evaluates estimates , including those related to fair value and useful lives of intangible assets , fair value of earn-out liabilities , valuation allowance on deferred tax assets , income tax uncertainties , fair values of stock-based awards , other contingent liabilities and estimates used in applying the revenue recognition policy . such estimates are based on historical experience and on various other assumptions that are believed to be reasonable , the results of which form the basis for making judgments about the carrying values of assets and liabilities . the critical accounting policies requiring estimates , assumptions , and judgements that we believe have the most significant impact on our consolidated financial statements are described below . 46 intangible assets intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives , which range from 1 to 20 years . acquired customer contracts and relationships are amortized over their estimated useful lives in proportion to the economic benefits realized . this accounting policy results in accelerated amortization of such customer contracts and relationships arrangements as compared to the straight-line method . technology , intellectual property , and trademarks are amortized over their estimated useful lives on a straight-line basis . impairment of long-lived assets the company 's long-lived assets and identifiable intangibles are reviewed for impairment in accordance with asc 360 “ property , plant and equipment ” , whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . recoverability of these assets is measured by
| liquidity management we are required to maintain sufficient liquidity to ensure a safe and sound operation . liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans . historically , we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations , including potential deposit outflows , and dividend payments . cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained . banc of california , n.a . the bank 's liquidity , represented by cash and cash equivalents and securities available-for-sale , is a product of its operating , investing , and financing activities . the bank 's primary sources of funds are deposits ; payments ( including interest and principal ) on outstanding loans and investment securities ; sales of loans , investment securities and other short-term investments ; and funds provided from operations . while scheduled payments from the amortization of loans and investment securities , and maturing investment securities and short-term investments are relatively predictable sources of funds , deposit flows and loan prepayments are greatly influenced by general interest rates , economic conditions , and competition . in addition , the bank invests excess funds in short-term interest-earning assets , which provide liquidity to meet lending requirements . the bank also generates cash through borrowings . the bank mainly utilizes fhlb advances and securities sold under repurchase agreements to leverage its capital base , to provide funds for its lending activities , as a source of liquidity , and to enhance its interest rate risk management . the bank also has the ability to obtain brokered deposits and collect deposits through its wholesale and treasury operations . liquidity management is both a daily and long-term function of business management . any excess liquidity is typically invested in federal funds or investment securities .
| 0 |
38 cloud and mobility businesses are going through a massive change in their it strategies as they look to drive more business value , agility , and better customer experiences , while cloud and mobility are becoming increasingly important , as evidenced by the following trends : ● business internet traffic continues to increase every year ; ● data and applications are increasingly moving to the cloud ; ● more and more users are working remotely ; ● buyers continue to move away from traditional on-premise solutions ; ● mature and legacy on premise deployments are reaching end of life and are increasingly being replaced by cloud and saas alternatives ; ● it security staffing shortages ; ● increasingly fast , sophisticated , expensive , and high-profile attacks target organizations of all sizes ; ● compliance and regulatory mandates ; ● heightened cybercrime activity among commercial enterprises and nation states ; ● automation is increasingly considered critical to accelerating detection and protection ; ● the need to simplify operations through vendor consolidation . these are some of the reasons why we believe cyren 's vision for 100 % cloud security is compelling to it security teams looking to protect their businesses in today 's cloud-centric mobile-first world . investments in operations , research and development and sales and marketing our cost of revenues , research and development expenses , and sales and marketing expenses are all significant contributing factors to our operating losses . over time , we expect that our utilization of our cloud infrastructure will increase and provide the opportunity for improved gross margins . our investments in research and development are required in order to enhance and improve our solutions . in the future , we expect to lower the rate of r & d investment as a percentage of revenue . the return on our sales and marketing investment is tied to attracting new customers and enhancing our business with existing customers , thereby lowering the overall sales and marketing costs as a percent of revenues . during 2020 we reduced our overall headcount in order to reduce expenses , and we believe managing future headcount and expense growth will be key in improving our gross and operating margins over time . growing our enterprise business although all of our services are subscription services , our enterprise offerings are typically invoiced up front for an annual contract amount , or the full multi-year contract amount , at the start of the term . as a result , this business is expected to provide a larger immediate contribution to cash flow and better return on investment . as this enterprise business grows as a portion of our overall revenues , we expect to increase deferred revenue and our operating results and cash flow to improve , which will make us less reliant on other sources of capital in the future . 39 components of our operating results revenue we derive revenues from the sale of real-time cloud-based services for each of cyren 's email security , web security , antimalware , and advanced threat protection offerings . we sell all of our solutions as subscription services , either to oems and service providers or directly or indirectly to enterprises . cost of revenue personnel costs , which consist of salaries , benefits , bonuses , and stock-based compensation for employees that operate our network and provide support services to our customers , as well as data center costs , are the most significant components of our cost of revenues . other costs include third party contractors , royalties for use of third-party technologies , amortization of intangibles and depreciation of data center equipment . we expect these costs may increase in absolute dollars as we continue to optimize our cloud infrastructure and our support services , but should reduce as a percentage of overall revenue . operating expenses our operating expenses consist of research and development , sales and marketing , and general and administrative expenses . personnel costs , which consist of salaries , benefits , bonuses , and stock-based compensation , are the most significant component of our operating expenses . operating expenses also include allocated overhead costs for facilities , it , and depreciation . we expect operating expenses to increase in absolute dollars as we continue to grow . research and development . research and development expenses consists primarily of personnel costs , outsourced engineering , and threat analysis services . we believe these investments are crucial for our ability to continue to enhance the functionality of our services , as well as to develop and introduce new services to the market . we expect research and development expenses may increase in 2021 as we support newly released products in 2020. development costs related to internal use technology that supports our security services are capitalized on the balance sheet , while other development costs are expensed as they are incurred . sales and marketing . sales and marketing expenses primarily include personnel costs , sales commissions , marketing activities , and travel associated with sales and marketing . we market and sell our services worldwide through our sales organization and distribution channels . we capitalize sales commissions paid to internal sales personnel and amortize these expenses over an estimated period of benefit that reflects the expected future revenue streams . we reduced sales and marketing expense in 2020 but anticipate that we may need to increase investment in these areas related to new products launched in 2020 and enhance our sales and marketing efforts to support our further growth . our sales personnel are typically not immediately productive , and therefore the increase in expenses we incur when adding personnel is not immediately accompanied by increased revenue and in some cases may not result in increased revenue if these new sales personnel are unsuccessful in becoming productive . general and administrative . story_separator_special_tag we also issued to the placement agent or its designees warrants ( “ placement agent warrants ” ) to purchase up to 720,000 ordinary shares ( the “ warrant shares ” ) , representing 6 % of the aggregate number of ordinary shares sold in the offering . the placement agent warrants have an exercise price equal to $ 1.4375 , or 125 % of the offering price , per ordinary share and will be exercisable commencing on august 16 , 2021 for five years from the effective date of the offering . 45 earn-out consideration in conjunction with the 2012 acquisition of eleven , the company entered into an earn-out agreement with the former shareholders that would pay additional consideration based on the revenue performance for the years ending 2012-2015. subsequently in 2014 the company had a legal dispute regarding the amount and timing of the earn-out payments and had entered into arbitral proceedings with the former shareholders of eleven . on march 9 , 2017 , the company received the arbitral judgement . pursuant to the judgement , the earn-out consideration balance was increased to reflect additional legal expenses and interest expenses covering the period up to december 31 , 2016. during 2017 and 2018 , the company continued to accrue interest on the unpaid earn-out consideration balance . such interest is reflected in the consolidated statements of operations under financial expenses , net . in may 2018 , the company made a partial payment of the earn-out consideration to five of the six former shareholders , in an amount of $ 604 thousand . the earn-out consideration balance presented on the company 's balance sheet as of december 31 , 2018 reflects the complete remaining liability relating to the earn-out , including accrued interest . subsequent to the reporting period , in february 2019 , the parties agreed to resolve all pending claims , and on february 28 , 2019 the company paid approximately $ 2.7 million to settle the earn-out consideration in full . for additional information , please refer to note 7b ( i ) of the consolidated financial statements included elsewhere in this annual report . registration statements in connection with our private placement to warburg pincus in november 2017 , in which we issued approximately 10.6 million ordinary shares for $ 1.85 per share , we and warburg pincus entered into a registration rights agreement , which , among other things , provides warburg pincus with three demand registration rights , piggyback and shelf registration rights . the demand registration rights may be exercised starting august 6 , 2018 , subject to certain customary blackout periods . in connection with issuance of the convertible debentures , we entered into a registration rights agreement with the purchasers . pursuant to that agreement , we filed a registration statement on form s-3 with the sec covering the resale of our ordinary shares that are issuable to the purchasers upon any conversion of the convertible debentures or as interest payments . on september 21 , 2018 , we filed a shelf registration statement on form f-3 with the sec , which we converted to a form s-3 on august 16 , 2019. this registration statement enables us to issue debt securities , ordinary shares , warrants or subscription rights up to an aggregate amount of $ 50 million . under the rules governing shelf registration statements , we will file a prospectus supplement with the sec which describes the amount and type of securities being offered each time we issue securities under this registration statement . no securities were issued under the registration statement on form f-3 . in november 2019 , we issued shares as part of our rights offerings and in february 2021 , we issued shares in the registered direct offering using our form s-3 as described above . off-balance sheet arrangements not applicable . critical accounting policies and estimates this section is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( “ u.s . gaap ” ) . the preparation of these financial statements requires management to make estimates , judgements and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes . actual results could differ from those estimates . on an ongoing basis , the company 's management evaluates estimates , including those related to fair value and useful lives of intangible assets , fair value of earn-out liabilities , valuation allowance on deferred tax assets , income tax uncertainties , fair values of stock-based awards , other contingent liabilities and estimates used in applying the revenue recognition policy . such estimates are based on historical experience and on various other assumptions that are believed to be reasonable , the results of which form the basis for making judgments about the carrying values of assets and liabilities . the critical accounting policies requiring estimates , assumptions , and judgements that we believe have the most significant impact on our consolidated financial statements are described below . 46 intangible assets intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives , which range from 1 to 20 years . acquired customer contracts and relationships are amortized over their estimated useful lives in proportion to the economic benefits realized . this accounting policy results in accelerated amortization of such customer contracts and relationships arrangements as compared to the straight-line method . technology , intellectual property , and trademarks are amortized over their estimated useful lives on a straight-line basis . impairment of long-lived assets the company 's long-lived assets and identifiable intangibles are reviewed for impairment in accordance with asc 360 “ property , plant and equipment ” , whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . recoverability of these assets is measured by
| cash flows from operating activities in 2020 , net cash used in operating activities was $ 8.4 million and was primarily due to a net loss of $ 17.3 million adjusted for non-cash activity of $ 2.8 million amortization of intangible assets , $ 2.3 million depreciation of property and equipment , $ 2.4 million stock-based compensation expenses , $ 1.5 million amortization of deferred commissions , $ 2.1 million in amortization of operating lease right-of-use assets associated with the adoption of asc 842 effective january 1 , 2019 , a $ 1.3 million increase in trade receivables , net and offset by a $ 1.9 million decrease in deferred revenues , a decrease in deferred commissions of $ 1.1 million , a decrease in trade payables of $ 0.4 , and a decrease in operating lease liabilities of $ 1.6 million . in 2019 , net cash used in operating activities was $ 6.9 million and was primarily due to a net loss of $ 18.0 million adjusted for non-cash activity of $ 3.8 million amortization of intangible assets , $ 1.9 million depreciation of property and equipment , $ 2.4 million stock-based compensation expenses , $ 1.2 million amortization of deferred commissions , $ 1.3 million in amortization of operating lease right-of-use assets associated with the adoption of asc 842 effective january 1 , 2019 , $ 2.9 million increasein deferred revenues , $ 1.5 million increase in trade receivables , net and offset by a decrease in deferred commissions of $ 1.0 million , a decrease in trade payables of $ 0.7 and a decrease of $ 1.0 in employee and payroll accruals , accrued expenses and other liabilities and a decrease in operating lease liabilities of $ 1.2 million .
| 1 |
in 2019 , we completed a small , first-in-human , clinical-proof-of-concept , open-label phase 2a study of pti-125 in the u.s. , with substantial support from the national institute on aging ( nia ) , a division of the nih . treatment with pti-125 for 28 days significantly improved key biomarkers of alzheimer 's pathology , neurodegeneration and neuroinflammation ( p < 0.001 ) . biomarkers effects were seen in all patients in both csf and plasma . to our knowledge , no other drug candidate has improved an entire panel of biomarkers of in patients with alzheimer 's disease . a confirmatory , randomized , placebo-controlled , multi-center phase 2b study of pti-125 in alzheimer 's disease is on-going as of march 2020. we expect to announce phase 2b results in approximately mid- 2020 . our diagnostic effort , called savadx , is an early-stage program focused on detecting alzheimer 's disease from a small sample of blood , possibly years before the overt appearance of clinical symptoms . we are developing savadx as a fast , accurate and quantitative blood-based investigational biomarker/diagnostic to detect and monitor alzheimer 's disease . t he goal is to make the detection of alzheimer 's disease as simple as getting a blood test . alzheimer 's disease is a progressive neurodegenerative disorder that affects cognition , function and behavior . an estimated 5.8 million americans are living with alzheimer 's disease in 20 20 , according to the alzheimer 's association , a non-profit organization . t here are no disease -modifying drug therapies to treat the disease . 63 pti-125 and savadx were both discovered and designed in-house and were characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date . we own exclusive , worldwide rights to these drug assets and related technologies , without royalty obligations to any third party . our patent protection in this area currently runs through 2034 . financial overview we have yet to generate any revenues from product sales . we have an accumulated deficit of $ 168.6 million at december 31 , 2019. these losses have resulted principally from costs incurred in connection with research and development activities , salaries and other personnel-related costs and general corporate expenses . research and development activities include costs of preclinical and clinical studies as well as clinical supplies associated with our product candidates . salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees and non-employees . our operating results may fluctuate substantially from period to period as a result of the timing of preclinical activities , enrollment rates of clinical studies for our product candidates and our need for clinical supplies . we believe that our cash and cash equivalents at december 31 , 2019 , will enable us to fund our operating expenses for at least the next 12 months . in addition , we may seek in the future to fund our operations through additional public or private equity or debt financings or other sources . however , we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all . if we are unable to obtain financing or reach profitability , the related lack of liquidity will have a material adverse effect on our operations and future prospects . we expect to continue to use significant cash resources in our operations for the next several years . our cash requirements for operating activities and capital expenditures may increase substantially in the future as we : · conduct preclinical and clinical studies for our product candidates ; · seek regulatory approvals for our product candidates ; · develop , formulate , manufacture and commercialize our product candidates ; · implement additional internal systems and develop new infrastructure ; · acquire or in-license additional products or technologies , or expand the use of our technology ; · maintain , defend and expand the scope of our intellectual property ; and · hire additional personnel . product revenue will depend on our ability to receive regulatory approvals for , and successfully market , our product candidates . if our development efforts result in regulatory approval and successful commercialization of our product candidates , we will generate revenue from direct sales of our drugs and or , if we license our drugs to future collaborators , from the receipt of license fees and royalties from sales of licensed products . we conduct our research and development programs through a combination of internal and collaborative programs . we rely on arrangements with universities , our collaborators , cros and clinical research sites for a significant portion of our product development efforts . 64 the following table summarizes expenses which have been reduced for reimbursements received for nih grants ( in thousands ) : replace_table_token_1_th research and development expenses include compensation , contractor fees and supplies as well as allocated common costs . contractor fees and supplies generally include expenses for preclinical studies and clinical studies and costs for formulation and manufacturing activities . other common costs include the allocation of common costs such as facilities . during the year ended december 31 , 2019 and 2018 , we received $ 4.7 million and $ 3.0 million from research grants from the nih . these reimbursements were recorded as a reduction to our research and development expenses . our technology has been applied across certain of our portfolio of product candidates . story_separator_special_tag 2019-12 , income taxes ( topic 740 ) simplifying accounting for income taxes as part of its initiative to reduce complexity in the accounting standards . the guidance amended certain disclosure requirements that had become redundant , outdated or superseded . additionally , this guidance amends accounting for the interim period effects of changes in tax laws or rates , and simplifies aspects of the accounting for franchise taxes . the guidance is effective for annual periods beginning after december 15 , 2020 , and is applicable for the company in fiscal 2021. early adoption is permitted . the company does not anticipate that this guidance will have a material impact on its consolidated financial statements . 66 in november 2018 , the fasb issued asu no . 2018-18 , collaborative arrangements ( topic 808 ) : clarifying the interaction between topic 808 and topic 606. the amendments in this update provide guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard . the amendments in this update are effective for interim and annual periods for the company beginning on january 1 , 2020. the company does not anticipate that this guidance will have a material impact on its consolidated financial statements . in august 2018 , the fasb issued asu no . 2018-13 , fair value measurement ( topic 820 ) - disclosure framework - changes to the disclosure requirements for fair value measurement ( asu 2018-13 ) , which is designed to improve the effectiveness of disclosures by removing , modifying and adding disclosures related to fair value measurements . asu 2018-13 is effective for fiscal years beginning after december 15 , 2019 , including interim periods within those fiscal years . the company is currently evaluating the impact of asu 2018-13 on its consolidated financial statements . results of operations research and development expense research and development expense consist primarily of costs of drug development work associated with our product candidates , including : · preclinical testing , · clinical studies , · clinical supplies and related formulation and design costs , and · compensation and other personnel-related expenses . research and development expenses decreased to $ 1.6 million in 2019 from $ 3.0 million in 2018 , representing a 47 % decrease . this decrease was attributable to reimbursements of $ 4.7 million received from research grants in 2019 from the nih and recorded as a reduction to research and development expense , as compared to $ 3.0 million in recorded reimbursements in 2018 , and decreased non-cash stock-related compensation expenses of $ 0.5 million in 2019 compared to $ 1.0 million in 2018 , offset by $ 0.8 million in increased research and development expenses compared to the prior year due to costs incurred for our phase 2 clinical programs . we expect research and development expense to fluctuate in future periods as we continue our development efforts . we expect our development efforts to result in our product candidates progressing through various stages of clinical studies . our research and development expenses may fluctuate from period to period due to the timing and scope of our development activities and the results of clinical studies and preclinical studies . general and administrative expense general and administrative expenses consist of personnel costs , allocated expenses and other expenses for outside professional services , including legal , human resources , audit and accounting services . personnel costs consist of salaries , bonus , benefits and stock-based compensation . allocated expenses consist primarily of facility costs . we incur expenses associated with operating as a public company , including expenses related to compliance with the rules and regulations of the sec and nasdaq , additional insurance expenses , additional audit expenses , investor relations activities , sox compliance expenses and other administrative expenses and professional services . general and administrative expense decreased to $ 3.4 million in 2019 from $ 3.7 million in 2018 , representing an 8 % decrease . this was due primarily to decreases in non-cash stock-based compensation expenses offsetting an increase in compensation costs from the hiring of a chief financial officer in october 2018 . general and administrative expenses included non-cash stock-based compensation expenses of $ 0.8 million in 2019 compared to $ 1.4 million in 2018. we expect other general and administrative expense for 2020 will be consistent with 2019 . 67 interest income interest and other income , net , was $ 328,000 in 2019 compared to $ 105,000 in 2018. the increase was due primarily to higher cash balances from our august 2018 stock offering as well as fluctuations in interest rates . story_separator_special_tag roman ; font-size : 10pt `` > 68 net cash used in operating activities was $ 2.5 million for 2019 , resulting primarily from a $ 4.6 million net loss incurred partially offset by $ 1.3 million of stock-based compensation expense and $ 0.8 million from changes in operating assets and liabilities . net cash used in operating activities was $ 4.8 million for 2018 , resulting primarily from a $ 6.6 million net loss incurred partially offset by $ 2.4 million of stock-based compensation expense . net cash used in operating activities also included $ 0.7 million of cash used from changes in operating assets and liabilities . cash used in investing activities was $ 18,000 for 2019 from purchases of computer equipment . there was no cash from investing activities in 2018 . net cash provided by financing activities was $ 5.8 million consisting of $ 5.9 million proceeds from exercise of common stock warrants partially offset by $ 0.1 million in offering expenses related the 2018 sale of common stock and warrants . net cash provided by financing activities was $ 14.1 million in 2018 consisting of net proceeds from the
| cash flows from operating activities in 2020 , net cash used in operating activities was $ 8.4 million and was primarily due to a net loss of $ 17.3 million adjusted for non-cash activity of $ 2.8 million amortization of intangible assets , $ 2.3 million depreciation of property and equipment , $ 2.4 million stock-based compensation expenses , $ 1.5 million amortization of deferred commissions , $ 2.1 million in amortization of operating lease right-of-use assets associated with the adoption of asc 842 effective january 1 , 2019 , a $ 1.3 million increase in trade receivables , net and offset by a $ 1.9 million decrease in deferred revenues , a decrease in deferred commissions of $ 1.1 million , a decrease in trade payables of $ 0.4 , and a decrease in operating lease liabilities of $ 1.6 million . in 2019 , net cash used in operating activities was $ 6.9 million and was primarily due to a net loss of $ 18.0 million adjusted for non-cash activity of $ 3.8 million amortization of intangible assets , $ 1.9 million depreciation of property and equipment , $ 2.4 million stock-based compensation expenses , $ 1.2 million amortization of deferred commissions , $ 1.3 million in amortization of operating lease right-of-use assets associated with the adoption of asc 842 effective january 1 , 2019 , $ 2.9 million increasein deferred revenues , $ 1.5 million increase in trade receivables , net and offset by a decrease in deferred commissions of $ 1.0 million , a decrease in trade payables of $ 0.7 and a decrease of $ 1.0 in employee and payroll accruals , accrued expenses and other liabilities and a decrease in operating lease liabilities of $ 1.2 million .
| 0 |
in 2019 , we completed a small , first-in-human , clinical-proof-of-concept , open-label phase 2a study of pti-125 in the u.s. , with substantial support from the national institute on aging ( nia ) , a division of the nih . treatment with pti-125 for 28 days significantly improved key biomarkers of alzheimer 's pathology , neurodegeneration and neuroinflammation ( p < 0.001 ) . biomarkers effects were seen in all patients in both csf and plasma . to our knowledge , no other drug candidate has improved an entire panel of biomarkers of in patients with alzheimer 's disease . a confirmatory , randomized , placebo-controlled , multi-center phase 2b study of pti-125 in alzheimer 's disease is on-going as of march 2020. we expect to announce phase 2b results in approximately mid- 2020 . our diagnostic effort , called savadx , is an early-stage program focused on detecting alzheimer 's disease from a small sample of blood , possibly years before the overt appearance of clinical symptoms . we are developing savadx as a fast , accurate and quantitative blood-based investigational biomarker/diagnostic to detect and monitor alzheimer 's disease . t he goal is to make the detection of alzheimer 's disease as simple as getting a blood test . alzheimer 's disease is a progressive neurodegenerative disorder that affects cognition , function and behavior . an estimated 5.8 million americans are living with alzheimer 's disease in 20 20 , according to the alzheimer 's association , a non-profit organization . t here are no disease -modifying drug therapies to treat the disease . 63 pti-125 and savadx were both discovered and designed in-house and were characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date . we own exclusive , worldwide rights to these drug assets and related technologies , without royalty obligations to any third party . our patent protection in this area currently runs through 2034 . financial overview we have yet to generate any revenues from product sales . we have an accumulated deficit of $ 168.6 million at december 31 , 2019. these losses have resulted principally from costs incurred in connection with research and development activities , salaries and other personnel-related costs and general corporate expenses . research and development activities include costs of preclinical and clinical studies as well as clinical supplies associated with our product candidates . salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees and non-employees . our operating results may fluctuate substantially from period to period as a result of the timing of preclinical activities , enrollment rates of clinical studies for our product candidates and our need for clinical supplies . we believe that our cash and cash equivalents at december 31 , 2019 , will enable us to fund our operating expenses for at least the next 12 months . in addition , we may seek in the future to fund our operations through additional public or private equity or debt financings or other sources . however , we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all . if we are unable to obtain financing or reach profitability , the related lack of liquidity will have a material adverse effect on our operations and future prospects . we expect to continue to use significant cash resources in our operations for the next several years . our cash requirements for operating activities and capital expenditures may increase substantially in the future as we : · conduct preclinical and clinical studies for our product candidates ; · seek regulatory approvals for our product candidates ; · develop , formulate , manufacture and commercialize our product candidates ; · implement additional internal systems and develop new infrastructure ; · acquire or in-license additional products or technologies , or expand the use of our technology ; · maintain , defend and expand the scope of our intellectual property ; and · hire additional personnel . product revenue will depend on our ability to receive regulatory approvals for , and successfully market , our product candidates . if our development efforts result in regulatory approval and successful commercialization of our product candidates , we will generate revenue from direct sales of our drugs and or , if we license our drugs to future collaborators , from the receipt of license fees and royalties from sales of licensed products . we conduct our research and development programs through a combination of internal and collaborative programs . we rely on arrangements with universities , our collaborators , cros and clinical research sites for a significant portion of our product development efforts . 64 the following table summarizes expenses which have been reduced for reimbursements received for nih grants ( in thousands ) : replace_table_token_1_th research and development expenses include compensation , contractor fees and supplies as well as allocated common costs . contractor fees and supplies generally include expenses for preclinical studies and clinical studies and costs for formulation and manufacturing activities . other common costs include the allocation of common costs such as facilities . during the year ended december 31 , 2019 and 2018 , we received $ 4.7 million and $ 3.0 million from research grants from the nih . these reimbursements were recorded as a reduction to our research and development expenses . our technology has been applied across certain of our portfolio of product candidates . story_separator_special_tag 2019-12 , income taxes ( topic 740 ) simplifying accounting for income taxes as part of its initiative to reduce complexity in the accounting standards . the guidance amended certain disclosure requirements that had become redundant , outdated or superseded . additionally , this guidance amends accounting for the interim period effects of changes in tax laws or rates , and simplifies aspects of the accounting for franchise taxes . the guidance is effective for annual periods beginning after december 15 , 2020 , and is applicable for the company in fiscal 2021. early adoption is permitted . the company does not anticipate that this guidance will have a material impact on its consolidated financial statements . 66 in november 2018 , the fasb issued asu no . 2018-18 , collaborative arrangements ( topic 808 ) : clarifying the interaction between topic 808 and topic 606. the amendments in this update provide guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard . the amendments in this update are effective for interim and annual periods for the company beginning on january 1 , 2020. the company does not anticipate that this guidance will have a material impact on its consolidated financial statements . in august 2018 , the fasb issued asu no . 2018-13 , fair value measurement ( topic 820 ) - disclosure framework - changes to the disclosure requirements for fair value measurement ( asu 2018-13 ) , which is designed to improve the effectiveness of disclosures by removing , modifying and adding disclosures related to fair value measurements . asu 2018-13 is effective for fiscal years beginning after december 15 , 2019 , including interim periods within those fiscal years . the company is currently evaluating the impact of asu 2018-13 on its consolidated financial statements . results of operations research and development expense research and development expense consist primarily of costs of drug development work associated with our product candidates , including : · preclinical testing , · clinical studies , · clinical supplies and related formulation and design costs , and · compensation and other personnel-related expenses . research and development expenses decreased to $ 1.6 million in 2019 from $ 3.0 million in 2018 , representing a 47 % decrease . this decrease was attributable to reimbursements of $ 4.7 million received from research grants in 2019 from the nih and recorded as a reduction to research and development expense , as compared to $ 3.0 million in recorded reimbursements in 2018 , and decreased non-cash stock-related compensation expenses of $ 0.5 million in 2019 compared to $ 1.0 million in 2018 , offset by $ 0.8 million in increased research and development expenses compared to the prior year due to costs incurred for our phase 2 clinical programs . we expect research and development expense to fluctuate in future periods as we continue our development efforts . we expect our development efforts to result in our product candidates progressing through various stages of clinical studies . our research and development expenses may fluctuate from period to period due to the timing and scope of our development activities and the results of clinical studies and preclinical studies . general and administrative expense general and administrative expenses consist of personnel costs , allocated expenses and other expenses for outside professional services , including legal , human resources , audit and accounting services . personnel costs consist of salaries , bonus , benefits and stock-based compensation . allocated expenses consist primarily of facility costs . we incur expenses associated with operating as a public company , including expenses related to compliance with the rules and regulations of the sec and nasdaq , additional insurance expenses , additional audit expenses , investor relations activities , sox compliance expenses and other administrative expenses and professional services . general and administrative expense decreased to $ 3.4 million in 2019 from $ 3.7 million in 2018 , representing an 8 % decrease . this was due primarily to decreases in non-cash stock-based compensation expenses offsetting an increase in compensation costs from the hiring of a chief financial officer in october 2018 . general and administrative expenses included non-cash stock-based compensation expenses of $ 0.8 million in 2019 compared to $ 1.4 million in 2018. we expect other general and administrative expense for 2020 will be consistent with 2019 . 67 interest income interest and other income , net , was $ 328,000 in 2019 compared to $ 105,000 in 2018. the increase was due primarily to higher cash balances from our august 2018 stock offering as well as fluctuations in interest rates . story_separator_special_tag roman ; font-size : 10pt `` > 68 net cash used in operating activities was $ 2.5 million for 2019 , resulting primarily from a $ 4.6 million net loss incurred partially offset by $ 1.3 million of stock-based compensation expense and $ 0.8 million from changes in operating assets and liabilities . net cash used in operating activities was $ 4.8 million for 2018 , resulting primarily from a $ 6.6 million net loss incurred partially offset by $ 2.4 million of stock-based compensation expense . net cash used in operating activities also included $ 0.7 million of cash used from changes in operating assets and liabilities . cash used in investing activities was $ 18,000 for 2019 from purchases of computer equipment . there was no cash from investing activities in 2018 . net cash provided by financing activities was $ 5.8 million consisting of $ 5.9 million proceeds from exercise of common stock warrants partially offset by $ 0.1 million in offering expenses related the 2018 sale of common stock and warrants . net cash provided by financing activities was $ 14.1 million in 2018 consisting of net proceeds from the
| liquidity and capital resources since inception , we have financed our operations primarily through public and private stock offerings , payments received under collaborative agreements and interest earned on our investments . we intend to continue to use our capital resources to fund research and development activities , capital expenditures , working capital requirements and other general corporate purposes . as of december 31 , 2019 , cash and cash equivalents totaled $ 23.1 million . 2018 registered direct offering on august 17 , 2018 , we completed a common stock offering pursuant to which certain investors purchased 8.9 million shares of common stock and warrants at a price of $ 1.275 per share . net proceeds of the offering were approximately $ 10 . 1 million after deducting offering expenses . the warrants are exercisable for 8.9 million shares of common stock at $ 1.25 per share . subject to certain ownership limitations described in the warrants , the warrants were immediately exercisable and will remain exercisable until february 17 , 2021. the warrants will be exercisable on a “ cashless ” basis in certain circumstances , including while there is no effective registration statement registering the shares of common stock issuable upon exercise of the warrants at any time until the expiry of the warrants .
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as of december 31 , 2014 , our operations have been funded primarily by $ 105.1 million in equity investments from venture investors , $ 219.3 million from public investors , $ 64.2 million in equity investments from our collaboration partners and $ 216.8 million in upfront payments , milestones , and net research and development payments from our collaboration partners . we estimate that we have spent approximately $ 122.3 million on research and development for the three year period from 2012 through 2014. we expect to continue to incur significant expenses and increasing operating losses over at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities , as we : conduct clinical trials for dalantercept and ace-083 ; 63 continue our preclinical studies and potential clinical development efforts of our existing preclinical therapeutic candidates ; continue research activities for the discovery of new therapeutic candidates ; manufacture therapeutic candidates for our preclinical studies and clinical trials ; seek regulatory approval for our therapeutic candidates ; and operate as a public company . we will not generate revenue from product sales unless and until we or a partner successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates , which we expect will take a number of years and is subject to significant uncertainty . all current and future development and commercialization costs for sotatercept and luspatercept are paid by celgene . if we obtain regulatory approval for dalantercept , ace-083 or any future therapeutic candidate , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution to the extent that such costs are not paid by future partners . we will seek to fund our operations through the sale of equity , debt financings or other sources , including potential additional collaborations . however , we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such other arrangements as , and when , needed , we may have to significantly delay , scale back or discontinue the development or commercialization of one or more of our therapeutic candidates . our ability to generate product revenue and become profitable depends upon our and our partners ' ability to successfully commercialize products . we expect to incur losses for the foreseeable future , and we expect these losses to increase as we continue our development of , and seek regulatory approvals for , our therapeutic candidates and potentially begin to commercialize any approved products . for a description of the numerous risks and uncertainties associated with product development , see `` risk factors `` . financial operations overview revenue collaboration revenue we have not generated any revenue from the sale of products . our revenue to date has been predominantly derived from collaboration revenue , which includes license and milestone revenues and cost sharing revenue , generated through collaboration and license agreements with partners for the development and commercialization of our therapeutic candidates . cost sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and , potentially , co-promotion activities , under our collaboration agreements . cost sharing revenue is recognized in the period that the related activities are performed . to the extent that we reimburse collaborators for costs incurred in connection with activities performed by them , we record these costs as a reduction of cost-sharing revenue . contract manufacturing revenue we have generated contract manufacturing revenue in the past but have no current contract manufacturing arrangements . contract manufacturing revenue consists of revenue received for producing bulk drug substance for third parties other than our partners . costs and expenses research and development expenses research and development expenses consist primarily of costs directly incurred by us for the development of our therapeutic candidates , which include : direct employee-related expenses , including salaries , benefits , travel and stock-based compensation expense of our research and development personnel ; expenses incurred under agreements with clinical research organizations , or cros , and investigative sites that will conduct our clinical trials ; 64 the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes ; allocated facilities , depreciation , and other expenses , which include rent and maintenance of facilities , insurance and other supplies ; expenses associated with obtaining and maintaining patents ; and costs associated with preclinical activities and regulatory compliance . research and development costs are expensed as incurred . costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . we can not determine with certainty the duration and completion costs of the current or future clinical trials of our therapeutic candidates or if , when , or to what extent we will generate revenues from the commercialization and sale of any of our therapeutic candidates for which we or any partner obtain regulatory approval . we or our partners may never succeed in achieving regulatory approval for any of our therapeutic candidates . the duration , costs and timing of clinical trials and development of our therapeutic candidates will depend on a variety of factors , including : the scope , rate of progress , and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; future clinical trial results ; potential changes in government regulation ; and the timing and receipt of any regulatory approvals . story_separator_special_tag we determine the estimates of clinical activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers as to the progress or stage of completion of trials or services , as of the end of each reporting period , pursuant to contracts with numerous clinical trial centers and cros and the agreed upon fee to be paid for such services . the significant factors considered in estimating accruals include the number of patients enrolled and the percentage of work completed to date . costs of setting up clinical trial sites for participation in the trials that are paid for in advance are expensed over the estimated set-up period . while the set-up periods vary from one arrangement to another , such set-up periods generally take approximately three months . set-up activities include clinical site identification , institutional review board , or irb , submissions , regulatory submissions , clinical investigator kick-off meetings and pre-study site visits . clinical trial site costs related to patient enrollments are accrued as patients are entered into the trial . stock-based compensation we account for our stock-based awards in accordance with asc topic 718 , compensation—stock compensation , or asc 718 , which requires all stock-based payments to employees , including grants of employee stock options and modifications to existing stock options , to be recognized in the statements of operations and comprehensive income ( loss ) based on their fair values . we recognize the compensation cost of awards subject to service-based vesting conditions over the requisite service period , which is generally equal to the vesting term . for awards subject to both performance and service-based vesting conditions , we recognize compensation cost using an accelerated recognition method when it is probable that the performance condition will be achieved . we account for stock-based awards to non-employees using the fair value method . stock options granted to non-employees are subject to periodic revaluation over their vesting terms and stock-based compensation cost is recognized using an accelerated recognition method . we estimate the fair value of our stock-based awards to employees and non-employees using the black-scholes option pricing model , which requires the input of highly subjective assumptions , including ( 1 ) the expected volatility of our stock , ( 2 ) the expected term of the award , ( 3 ) the risk-free interest rate and ( 4 ) expected dividends . due to the lack of a public market for our common stock prior to the completion of our initial public offering in september 2013 , and resulting lack of company-specific historical and implied volatility data , we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded . for these analyses , we have selected companies with characteristics that we believe are comparable to ours , including enterprise value , risk profiles , position within the industry , and with historical share price information sufficient to meet the expected life of the stock-based awards . we compute the historical volatility data using the daily closing prices for the selected companies ' shares during the equivalent period as the calculated expected term of our stock-based awards . we will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available . we have estimated the expected life of our employee stock options using the `` simplified `` method , whereby , the expected life equals the average of the vesting term and the original contractual term of the option . the risk-free interest rates for periods within the expected life of the option are based on the u.s. treasury yield curve in effect during the period the options were granted . we also estimate forfeitures at the time of grant , and revise those estimates in subsequent periods if actual forfeitures differ from estimates . we use historical data to estimate pre-vesting option forfeitures to the extent that actual forfeitures differ from our estimates , the difference is recorded as a cumulative adjustment in the period the estimates were revised . stock-based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest . for the years ended december 31 , 2014 , 2013 and 2012 , we used a forfeiture rate of 4 % , 4 % , and 5 % , respectively . stock-based compensation totaled approximately $ 4.8 million , $ 2.2 million , and $ 1.2 million for the years ended december 31 , 2014 , 2013 and 2012 , respectively . we expect the impact of our stock-based compensation expense for stock-based awards granted to employees and non-employees to grow in future periods due to the potential increases in the value of our common stock and headcount . warrants to purchase preferred stock and common stock as of december 31 , 2014 , we had warrants outstanding to purchase 422,104 shares of common stock , of which warrants to purchase 409,470 shares of our common stock contain a provision requiring an adjustment to the number of shares in the event we issue common stock , or securities convertible into or exercisable for common stock , at a price per share lower than the warrant exercise price . the anti-dilution feature requires the warrants to be classified as liabilities and measured at fair value , with changes in fair value recognized as a component of other income ( expense ) . the fair value of the warrants to 69 purchase common stock on the date of issuance and on each re-measurement date for those warrants to purchase common stock classified as liabilities was estimated using either the monte carlo simulation framework , which incorporates future financing events over the remaining life of the warrants to purchase common stock , or for certain re-measurement dates including december 31 , 2013 and 2014
| liquidity and capital resources since inception , we have financed our operations primarily through public and private stock offerings , payments received under collaborative agreements and interest earned on our investments . we intend to continue to use our capital resources to fund research and development activities , capital expenditures , working capital requirements and other general corporate purposes . as of december 31 , 2019 , cash and cash equivalents totaled $ 23.1 million . 2018 registered direct offering on august 17 , 2018 , we completed a common stock offering pursuant to which certain investors purchased 8.9 million shares of common stock and warrants at a price of $ 1.275 per share . net proceeds of the offering were approximately $ 10 . 1 million after deducting offering expenses . the warrants are exercisable for 8.9 million shares of common stock at $ 1.25 per share . subject to certain ownership limitations described in the warrants , the warrants were immediately exercisable and will remain exercisable until february 17 , 2021. the warrants will be exercisable on a “ cashless ” basis in certain circumstances , including while there is no effective registration statement registering the shares of common stock issuable upon exercise of the warrants at any time until the expiry of the warrants .
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as of december 31 , 2014 , our operations have been funded primarily by $ 105.1 million in equity investments from venture investors , $ 219.3 million from public investors , $ 64.2 million in equity investments from our collaboration partners and $ 216.8 million in upfront payments , milestones , and net research and development payments from our collaboration partners . we estimate that we have spent approximately $ 122.3 million on research and development for the three year period from 2012 through 2014. we expect to continue to incur significant expenses and increasing operating losses over at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities , as we : conduct clinical trials for dalantercept and ace-083 ; 63 continue our preclinical studies and potential clinical development efforts of our existing preclinical therapeutic candidates ; continue research activities for the discovery of new therapeutic candidates ; manufacture therapeutic candidates for our preclinical studies and clinical trials ; seek regulatory approval for our therapeutic candidates ; and operate as a public company . we will not generate revenue from product sales unless and until we or a partner successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates , which we expect will take a number of years and is subject to significant uncertainty . all current and future development and commercialization costs for sotatercept and luspatercept are paid by celgene . if we obtain regulatory approval for dalantercept , ace-083 or any future therapeutic candidate , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution to the extent that such costs are not paid by future partners . we will seek to fund our operations through the sale of equity , debt financings or other sources , including potential additional collaborations . however , we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such other arrangements as , and when , needed , we may have to significantly delay , scale back or discontinue the development or commercialization of one or more of our therapeutic candidates . our ability to generate product revenue and become profitable depends upon our and our partners ' ability to successfully commercialize products . we expect to incur losses for the foreseeable future , and we expect these losses to increase as we continue our development of , and seek regulatory approvals for , our therapeutic candidates and potentially begin to commercialize any approved products . for a description of the numerous risks and uncertainties associated with product development , see `` risk factors `` . financial operations overview revenue collaboration revenue we have not generated any revenue from the sale of products . our revenue to date has been predominantly derived from collaboration revenue , which includes license and milestone revenues and cost sharing revenue , generated through collaboration and license agreements with partners for the development and commercialization of our therapeutic candidates . cost sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and , potentially , co-promotion activities , under our collaboration agreements . cost sharing revenue is recognized in the period that the related activities are performed . to the extent that we reimburse collaborators for costs incurred in connection with activities performed by them , we record these costs as a reduction of cost-sharing revenue . contract manufacturing revenue we have generated contract manufacturing revenue in the past but have no current contract manufacturing arrangements . contract manufacturing revenue consists of revenue received for producing bulk drug substance for third parties other than our partners . costs and expenses research and development expenses research and development expenses consist primarily of costs directly incurred by us for the development of our therapeutic candidates , which include : direct employee-related expenses , including salaries , benefits , travel and stock-based compensation expense of our research and development personnel ; expenses incurred under agreements with clinical research organizations , or cros , and investigative sites that will conduct our clinical trials ; 64 the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes ; allocated facilities , depreciation , and other expenses , which include rent and maintenance of facilities , insurance and other supplies ; expenses associated with obtaining and maintaining patents ; and costs associated with preclinical activities and regulatory compliance . research and development costs are expensed as incurred . costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . we can not determine with certainty the duration and completion costs of the current or future clinical trials of our therapeutic candidates or if , when , or to what extent we will generate revenues from the commercialization and sale of any of our therapeutic candidates for which we or any partner obtain regulatory approval . we or our partners may never succeed in achieving regulatory approval for any of our therapeutic candidates . the duration , costs and timing of clinical trials and development of our therapeutic candidates will depend on a variety of factors , including : the scope , rate of progress , and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; future clinical trial results ; potential changes in government regulation ; and the timing and receipt of any regulatory approvals . story_separator_special_tag we determine the estimates of clinical activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers as to the progress or stage of completion of trials or services , as of the end of each reporting period , pursuant to contracts with numerous clinical trial centers and cros and the agreed upon fee to be paid for such services . the significant factors considered in estimating accruals include the number of patients enrolled and the percentage of work completed to date . costs of setting up clinical trial sites for participation in the trials that are paid for in advance are expensed over the estimated set-up period . while the set-up periods vary from one arrangement to another , such set-up periods generally take approximately three months . set-up activities include clinical site identification , institutional review board , or irb , submissions , regulatory submissions , clinical investigator kick-off meetings and pre-study site visits . clinical trial site costs related to patient enrollments are accrued as patients are entered into the trial . stock-based compensation we account for our stock-based awards in accordance with asc topic 718 , compensation—stock compensation , or asc 718 , which requires all stock-based payments to employees , including grants of employee stock options and modifications to existing stock options , to be recognized in the statements of operations and comprehensive income ( loss ) based on their fair values . we recognize the compensation cost of awards subject to service-based vesting conditions over the requisite service period , which is generally equal to the vesting term . for awards subject to both performance and service-based vesting conditions , we recognize compensation cost using an accelerated recognition method when it is probable that the performance condition will be achieved . we account for stock-based awards to non-employees using the fair value method . stock options granted to non-employees are subject to periodic revaluation over their vesting terms and stock-based compensation cost is recognized using an accelerated recognition method . we estimate the fair value of our stock-based awards to employees and non-employees using the black-scholes option pricing model , which requires the input of highly subjective assumptions , including ( 1 ) the expected volatility of our stock , ( 2 ) the expected term of the award , ( 3 ) the risk-free interest rate and ( 4 ) expected dividends . due to the lack of a public market for our common stock prior to the completion of our initial public offering in september 2013 , and resulting lack of company-specific historical and implied volatility data , we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded . for these analyses , we have selected companies with characteristics that we believe are comparable to ours , including enterprise value , risk profiles , position within the industry , and with historical share price information sufficient to meet the expected life of the stock-based awards . we compute the historical volatility data using the daily closing prices for the selected companies ' shares during the equivalent period as the calculated expected term of our stock-based awards . we will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available . we have estimated the expected life of our employee stock options using the `` simplified `` method , whereby , the expected life equals the average of the vesting term and the original contractual term of the option . the risk-free interest rates for periods within the expected life of the option are based on the u.s. treasury yield curve in effect during the period the options were granted . we also estimate forfeitures at the time of grant , and revise those estimates in subsequent periods if actual forfeitures differ from estimates . we use historical data to estimate pre-vesting option forfeitures to the extent that actual forfeitures differ from our estimates , the difference is recorded as a cumulative adjustment in the period the estimates were revised . stock-based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest . for the years ended december 31 , 2014 , 2013 and 2012 , we used a forfeiture rate of 4 % , 4 % , and 5 % , respectively . stock-based compensation totaled approximately $ 4.8 million , $ 2.2 million , and $ 1.2 million for the years ended december 31 , 2014 , 2013 and 2012 , respectively . we expect the impact of our stock-based compensation expense for stock-based awards granted to employees and non-employees to grow in future periods due to the potential increases in the value of our common stock and headcount . warrants to purchase preferred stock and common stock as of december 31 , 2014 , we had warrants outstanding to purchase 422,104 shares of common stock , of which warrants to purchase 409,470 shares of our common stock contain a provision requiring an adjustment to the number of shares in the event we issue common stock , or securities convertible into or exercisable for common stock , at a price per share lower than the warrant exercise price . the anti-dilution feature requires the warrants to be classified as liabilities and measured at fair value , with changes in fair value recognized as a component of other income ( expense ) . the fair value of the warrants to 69 purchase common stock on the date of issuance and on each re-measurement date for those warrants to purchase common stock classified as liabilities was estimated using either the monte carlo simulation framework , which incorporates future financing events over the remaining life of the warrants to purchase common stock , or for certain re-measurement dates including december 31 , 2013 and 2014
| net cash used in operating activities was $ 53.2 million for the year ended december 31 , 2014 , and consisted primarily of a net loss of $ 51.3 million adjusted for non-cash items including a decrease in fair value of warrants of $ 5.0 million , stock-based compensation expense of $ 4.8 million , depreciation and amortization of $ 1.1 million , payments of deferred interest of $ 0.5 million , and a net decrease due to changes in operating assets and liabilities of $ 2.3 million . the significant items in the change in operating assets and liabilities include a decrease in deferred revenue of $ 1.7 million for the celgene collaboration . other components of the change in operating assets and liabilities include a decrease in collaboration receivables of $ 0.2 million , a decrease in deferred rent of $ 0.5 million , a decrease in accounts payable of $ 0.2 million , and an increase in prepaid and other current assets of $ 0.3 million . net cash used in operating activities was $ 19.6 million for the year ended december 31 , 2013 , and consisted primarily of a net loss of $ 21.9 million adjusted for non-cash items including an increase in fair value of warrants of $ 26.9 million , stock-based compensation expense of $ 2.2 million , depreciation and amortization of $ 0.9 million , forgiveness of the related party receivable of $ 0.2 million , accretion of deferred interest of $ 0.3 million , and amortization of deferred debt issuance costs of $ 0.2 million , and a net decrease due to changes in operating assets and liabilities of $ 28.5 million .
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our lead product , zulresso ( brexanolone ) injection , is a proprietary intravenous , or iv , formulation of brexanolone . brexanolone is chemically identical to allopregnanolone , a naturally occurring neuroactive steroid that acts as a positive allosteric modulator of gaba a receptors . in march 2019 , the fda approved zulresso for the treatment of ppd in adults . we launched zulresso commercially in the u.s. beginning on june 24 , 2019 , after completion of controlled substance scheduling of brexanolone by the dea and incorporation of the scheduling into the fda-approved label and other product information . the dea placed zulresso into schedule iv of the controlled substances act . ppd is one of the most common medical complications during and after pregnancy . because of the risk of serious harm resulting from excessive sedation or sudden loss of consciousness during the zulresso infusion , zulresso must be administered in a medically-supervised healthcare setting that has been certified under a risk evaluation and mitigation strategy , or rems , program and meets the other requirements of the rems program , including requirements related to monitoring of the patient during the infusion . patients who are prescribed zulresso are required to enroll in a registry which may allow us to compile additional information to further our understanding of the risk of excessive sedation or sudden loss of consciousness during administration of zulresso and management of the risk . given the mode and setting of administration of zulresso and the requirements of the rems program , we expect use of zulresso will , at least initially , be focused primarily on women with severe ppd . we estimate that about 20 % to 30 % of women diagnosed with ppd fall into this category . 83 our next most advanced product candidate is zuranolone ( sage-217 ) , an oral compound that is currently in phase 3 clinical development for ppd and major depressive disorder , or mdd . zuranolone is a novel neuroactive steroid that , like brexanolone , is a positive allosteric modulator of gaba a receptors , targeting both synaptic and extrasynaptic gaba a receptors . the fda has granted breakthrough therapy designation and fast track designation to zuranolone in the treatment of mdd . to date , we have completed three pivotal clinical trials of zuranolone , two in mdd and one in ppd . the first completed pivotal trial evaluating zuranolone in the treatment of mdd and the pivotal trial evaluating zuranolone in the treatment of ppd both met their primary endpoints . on december 5 , 2019 , we reported top-line results from the pivotal phase 3 clinical trial evaluating the effect of zuranolone on depressive symptoms in adults with mdd , known as the mountain study , in which patients received a two-week course of zuranolone or placebo followed by four weeks of blinded follow-up , with an open-label extension to continue to follow patients for up to six months . the mountain study did not meet its primary endpoint of a statistically significant reduction from baseline compared to placebo in the hamd-17 total score at day 15. zuranolone 30 mg , given once-daily as an oral treatment , was associated with a mean reduction of 12.6 in the hamd-17 total score compared to 11.2 for placebo ( p=0.115 ) . patients in the zuranolone 30 mg group achieved statistically significant reductions in the hamd-17 total score at days 3 , 8 and 12 ( p < 0.018 for each timepoint ) . the most common adverse events ( ≥5 % ) in either zuranolone group were headache , dizziness , somnolence , fatigue , diarrhea , sedation and nausea . we are in the process of applying learnings from the pivotal program to date and ongoing feedback from the fda to evaluate the development and regulatory path forward for zuranolone and to inform next steps in advancing the program , including next steps with respect to existing trials . phase 3 trials that have been commenced include the following : - the shoreline study is an open-label , long-term phase 3 clinical trial in mdd evaluating the safety of as-needed repeat treatment with zuranolone in which patients receive an initial two-week course of zuranolone and as needed retreatment for up to one year . enrollment of patients receiving the 30mg dose in the shoreline study was completed in the third quarter of 2019 , and we expect to report top-line results as to those patients in 2020. we are assessing the potential to add an additional cohort of patients to this trial to evaluate a higher dose . - the redwood study is a placebo-controlled phase 3 clinical trial in mdd evaluating the efficacy ( time to first relapse ) and long-term safety of fixed interval zuranolone monotherapy maintenance treatment ( treatment without traditional antidepressants ) in which randomized patients receive a two-week course of zuranolone or placebo every two months until the first relapse for up to one year . dosing commenced in this trial in the third quarter of 2019 , however we paused further enrollment and dosing in this trial in december 2019 as we evaluate the overall development and regulatory path forward for zuranolone and consider potential amendments to the trial or other next steps for the pivotal program . - the rainforest study is a placebo-controlled polysomnography phase 3 clinical trial of zuranolone in patients with mdd who have co-morbid insomnia . we have paused this trial as we evaluate the overall development and regulatory path forward for zuranolone and consider potential amendments to the trial or other next steps for the pivotal program . in addition to zuranolone , we have a portfolio of other novel compounds that target gaba a receptors . sage-324 is a novel gaba a receptor positive allosteric modulator with preclinical pharmacokinetic and pharmacodynamic properties that suggest suitability for chronic oral dosing . story_separator_special_tag for example , if the fda or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or for regulatory approval , or if we experience significant delays in enrollment in any of our clinical trials or need to enroll additional patients , we could be required to expend significant additional financial resources and time on the completion of clinical development . any failure to complete any stage of the development of any potential product candidates in a timely manner could have a material adverse effect on our operations , financial position and liquidity . a discussion of some of the risks and uncertainties associated with not completing our programs on schedule , or at all , and the potential consequences of failing to do so , are set forth in part i , item 1a of annual report under the heading “ risk factors ” . selling , general and administrative expenses selling , general and administrative expenses consist primarily of personnel costs , including salaries , benefits and travel expenses for our executive , finance , business , commercial , corporate development and other administrative 88 functions ; and stock-based compensation expense . selling , g eneral and administrative expenses also include facilities and other related expenses , including rent , depreciation , maintenance of facilities , insurance and supplies ; professional fees for expenses incurred under agreements with third parties relating to the commercialization of zulresso ; and for public relations , audit , tax and legal services , including legal expenses to pursue patent protection of our intellectual property . we anticipate that we will continue to incur significant selling , general and administrative expenses , including payroll and related expenses , as we continue to support our commercial activities associated with zulresso and the other aspects of our business and operations . we also expect that selling , general and administrative expenses will increase in the future if we are successful in our development efforts and are preparing for potential commercialization of our current or future product candidates , if approved . we also anticipate significant expenses associated with general operations , including costs related to accounting and legal services , director and officer insurance premiums , facilities and other corporate infrastructure and office-related costs , such as information technology costs . critical accounting policies and significant judgments and estimates our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the u.s. 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 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 . our actual results may differ from these estimates under different assumptions and conditions . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report , we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition effective january 1 , 2017 , we adopted accounting standards codification , or asc , topic 606 , revenue from contracts with customers , or topic 606. this standard applies to all contracts with customers , except for contracts that are within the scope of other standards , such as collaboration arrangements and leases . the adoption of topic 606 had no impact on our consolidated financial statements as we did not have any revenue prior to adoption . we received approval of zulresso from the fda in march 2019 and subsequently began to record revenues from product sales in june 2019. prior to the second quarter of 2019 , all of our revenues were derived from our collaboration agreement with shionogi . the terms of our collaboration agreement include consideration such as non-refundable license fees , reimbursement of any development costs we incur on behalf of shionogi , payments due upon the achievement of clinical and pre-clinical performance-based development milestones , regulatory milestones , manufacturing services to supply drug product for clinical trials , and sales-based milestones and royalties on product sales . under topic 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services . to determine revenue recognition for arrangements that an entity determines are within the scope of topic 606 , the entity performs the following five steps : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price , including variable consideration , if any ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . for contracts determined to be within the scope of topic 606 , we assess whether the goods or services promised within each contract are distinct to identify those that are performance obligations . arrangements that include rights to additional goods or services that are exercisable at a customer 's discretion are generally considered options . we assess if these options provide a material right to the customer and if so , they are considered performance obligations . the exercise of a material right may be accounted for as a contract modification or as a continuation
| net cash used in operating activities was $ 53.2 million for the year ended december 31 , 2014 , and consisted primarily of a net loss of $ 51.3 million adjusted for non-cash items including a decrease in fair value of warrants of $ 5.0 million , stock-based compensation expense of $ 4.8 million , depreciation and amortization of $ 1.1 million , payments of deferred interest of $ 0.5 million , and a net decrease due to changes in operating assets and liabilities of $ 2.3 million . the significant items in the change in operating assets and liabilities include a decrease in deferred revenue of $ 1.7 million for the celgene collaboration . other components of the change in operating assets and liabilities include a decrease in collaboration receivables of $ 0.2 million , a decrease in deferred rent of $ 0.5 million , a decrease in accounts payable of $ 0.2 million , and an increase in prepaid and other current assets of $ 0.3 million . net cash used in operating activities was $ 19.6 million for the year ended december 31 , 2013 , and consisted primarily of a net loss of $ 21.9 million adjusted for non-cash items including an increase in fair value of warrants of $ 26.9 million , stock-based compensation expense of $ 2.2 million , depreciation and amortization of $ 0.9 million , forgiveness of the related party receivable of $ 0.2 million , accretion of deferred interest of $ 0.3 million , and amortization of deferred debt issuance costs of $ 0.2 million , and a net decrease due to changes in operating assets and liabilities of $ 28.5 million .
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our lead product , zulresso ( brexanolone ) injection , is a proprietary intravenous , or iv , formulation of brexanolone . brexanolone is chemically identical to allopregnanolone , a naturally occurring neuroactive steroid that acts as a positive allosteric modulator of gaba a receptors . in march 2019 , the fda approved zulresso for the treatment of ppd in adults . we launched zulresso commercially in the u.s. beginning on june 24 , 2019 , after completion of controlled substance scheduling of brexanolone by the dea and incorporation of the scheduling into the fda-approved label and other product information . the dea placed zulresso into schedule iv of the controlled substances act . ppd is one of the most common medical complications during and after pregnancy . because of the risk of serious harm resulting from excessive sedation or sudden loss of consciousness during the zulresso infusion , zulresso must be administered in a medically-supervised healthcare setting that has been certified under a risk evaluation and mitigation strategy , or rems , program and meets the other requirements of the rems program , including requirements related to monitoring of the patient during the infusion . patients who are prescribed zulresso are required to enroll in a registry which may allow us to compile additional information to further our understanding of the risk of excessive sedation or sudden loss of consciousness during administration of zulresso and management of the risk . given the mode and setting of administration of zulresso and the requirements of the rems program , we expect use of zulresso will , at least initially , be focused primarily on women with severe ppd . we estimate that about 20 % to 30 % of women diagnosed with ppd fall into this category . 83 our next most advanced product candidate is zuranolone ( sage-217 ) , an oral compound that is currently in phase 3 clinical development for ppd and major depressive disorder , or mdd . zuranolone is a novel neuroactive steroid that , like brexanolone , is a positive allosteric modulator of gaba a receptors , targeting both synaptic and extrasynaptic gaba a receptors . the fda has granted breakthrough therapy designation and fast track designation to zuranolone in the treatment of mdd . to date , we have completed three pivotal clinical trials of zuranolone , two in mdd and one in ppd . the first completed pivotal trial evaluating zuranolone in the treatment of mdd and the pivotal trial evaluating zuranolone in the treatment of ppd both met their primary endpoints . on december 5 , 2019 , we reported top-line results from the pivotal phase 3 clinical trial evaluating the effect of zuranolone on depressive symptoms in adults with mdd , known as the mountain study , in which patients received a two-week course of zuranolone or placebo followed by four weeks of blinded follow-up , with an open-label extension to continue to follow patients for up to six months . the mountain study did not meet its primary endpoint of a statistically significant reduction from baseline compared to placebo in the hamd-17 total score at day 15. zuranolone 30 mg , given once-daily as an oral treatment , was associated with a mean reduction of 12.6 in the hamd-17 total score compared to 11.2 for placebo ( p=0.115 ) . patients in the zuranolone 30 mg group achieved statistically significant reductions in the hamd-17 total score at days 3 , 8 and 12 ( p < 0.018 for each timepoint ) . the most common adverse events ( ≥5 % ) in either zuranolone group were headache , dizziness , somnolence , fatigue , diarrhea , sedation and nausea . we are in the process of applying learnings from the pivotal program to date and ongoing feedback from the fda to evaluate the development and regulatory path forward for zuranolone and to inform next steps in advancing the program , including next steps with respect to existing trials . phase 3 trials that have been commenced include the following : - the shoreline study is an open-label , long-term phase 3 clinical trial in mdd evaluating the safety of as-needed repeat treatment with zuranolone in which patients receive an initial two-week course of zuranolone and as needed retreatment for up to one year . enrollment of patients receiving the 30mg dose in the shoreline study was completed in the third quarter of 2019 , and we expect to report top-line results as to those patients in 2020. we are assessing the potential to add an additional cohort of patients to this trial to evaluate a higher dose . - the redwood study is a placebo-controlled phase 3 clinical trial in mdd evaluating the efficacy ( time to first relapse ) and long-term safety of fixed interval zuranolone monotherapy maintenance treatment ( treatment without traditional antidepressants ) in which randomized patients receive a two-week course of zuranolone or placebo every two months until the first relapse for up to one year . dosing commenced in this trial in the third quarter of 2019 , however we paused further enrollment and dosing in this trial in december 2019 as we evaluate the overall development and regulatory path forward for zuranolone and consider potential amendments to the trial or other next steps for the pivotal program . - the rainforest study is a placebo-controlled polysomnography phase 3 clinical trial of zuranolone in patients with mdd who have co-morbid insomnia . we have paused this trial as we evaluate the overall development and regulatory path forward for zuranolone and consider potential amendments to the trial or other next steps for the pivotal program . in addition to zuranolone , we have a portfolio of other novel compounds that target gaba a receptors . sage-324 is a novel gaba a receptor positive allosteric modulator with preclinical pharmacokinetic and pharmacodynamic properties that suggest suitability for chronic oral dosing . story_separator_special_tag for example , if the fda or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or for regulatory approval , or if we experience significant delays in enrollment in any of our clinical trials or need to enroll additional patients , we could be required to expend significant additional financial resources and time on the completion of clinical development . any failure to complete any stage of the development of any potential product candidates in a timely manner could have a material adverse effect on our operations , financial position and liquidity . a discussion of some of the risks and uncertainties associated with not completing our programs on schedule , or at all , and the potential consequences of failing to do so , are set forth in part i , item 1a of annual report under the heading “ risk factors ” . selling , general and administrative expenses selling , general and administrative expenses consist primarily of personnel costs , including salaries , benefits and travel expenses for our executive , finance , business , commercial , corporate development and other administrative 88 functions ; and stock-based compensation expense . selling , g eneral and administrative expenses also include facilities and other related expenses , including rent , depreciation , maintenance of facilities , insurance and supplies ; professional fees for expenses incurred under agreements with third parties relating to the commercialization of zulresso ; and for public relations , audit , tax and legal services , including legal expenses to pursue patent protection of our intellectual property . we anticipate that we will continue to incur significant selling , general and administrative expenses , including payroll and related expenses , as we continue to support our commercial activities associated with zulresso and the other aspects of our business and operations . we also expect that selling , general and administrative expenses will increase in the future if we are successful in our development efforts and are preparing for potential commercialization of our current or future product candidates , if approved . we also anticipate significant expenses associated with general operations , including costs related to accounting and legal services , director and officer insurance premiums , facilities and other corporate infrastructure and office-related costs , such as information technology costs . critical accounting policies and significant judgments and estimates our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the u.s. 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 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 . our actual results may differ from these estimates under different assumptions and conditions . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report , we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements . revenue recognition effective january 1 , 2017 , we adopted accounting standards codification , or asc , topic 606 , revenue from contracts with customers , or topic 606. this standard applies to all contracts with customers , except for contracts that are within the scope of other standards , such as collaboration arrangements and leases . the adoption of topic 606 had no impact on our consolidated financial statements as we did not have any revenue prior to adoption . we received approval of zulresso from the fda in march 2019 and subsequently began to record revenues from product sales in june 2019. prior to the second quarter of 2019 , all of our revenues were derived from our collaboration agreement with shionogi . the terms of our collaboration agreement include consideration such as non-refundable license fees , reimbursement of any development costs we incur on behalf of shionogi , payments due upon the achievement of clinical and pre-clinical performance-based development milestones , regulatory milestones , manufacturing services to supply drug product for clinical trials , and sales-based milestones and royalties on product sales . under topic 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services . to determine revenue recognition for arrangements that an entity determines are within the scope of topic 606 , the entity performs the following five steps : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price , including variable consideration , if any ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . for contracts determined to be within the scope of topic 606 , we assess whether the goods or services promised within each contract are distinct to identify those that are performance obligations . arrangements that include rights to additional goods or services that are exercisable at a customer 's discretion are generally considered options . we assess if these options provide a material right to the customer and if so , they are considered performance obligations . the exercise of a material right may be accounted for as a contract modification or as a continuation
| liquidity and capital resources prior to the second quarter of 2019 , we had not generated revenue from product sales . we began to generate revenue from product sales in the second quarter of 2019 in conjunction with the launch of our first product , zulresso , which commenced on june 24 , 2019. prior to the second quarter of 2019 , all of our revenue had been derived from our collaboration with shionogi . to date , we have incurred recurring net losses . as of december 31 , 2019 , we had an accumulated deficit of $ 1.6 billion . from our inception through december 31 , 2019 , we received net proceeds of $ 2.2 billion from the sales of redeemable convertible preferred stock , the issuance of convertible notes and the sales of common stock in our initial public offering in july 2014 and follow-on offerings in april 2015 , january 2016 , september 2016 , november 2017 , february 2018 and february 2019. on february 13 , 2018 , we completed the sale of 4,032,012 shares of our common stock in a follow-on underwritten public offering at a price to the public of $ 164.00 per share , resulting in net proceeds of $ 631.2 million after deducting commissions and underwriting discounts and offering costs paid by us .
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in addition to direct sales , we have targeted original equipment manufacturer ( “ oem ” ) and private label partnerships in order to accelerate adoption of silicon nitride , both in the spinal space , and also in future markets such as hip and knee replacements , dental , extremities , trauma , and sports medicine . existing biomaterials , based on plastics , metals , and bone grafts have well-recognized limitations that we believe are addressed by silicon nitride , and we are uniquely positioned to convert existing , successful implant designs made by other companies into silicon nitride . we believe oem and private label partnerships will allow us to work with a variety of partners , accelerate the adoption of silicon nitride , and realize incremental revenue at improved operating margins , when compared to the cost-intensive direct sales model . 54 we believe that silicon nitride addresses many of the biomaterial-related limitations in fields such as hip and knee replacements , dental implants , sports medicine , extremities , and trauma surgery . we further believe that the inherent material properties of silicon nitride , and the ability to formulate the material in a variety of compositions , combined with precise control of the surface properties of the material , opens up a number of commercial opportunities across orthopedic surgery , neurological surgery , maxillofacial surgery , and other medical disciplines . we operate a 30,000 square foot manufacturing facility at our corporate headquarters in salt lake city , utah , and we believe we are the only vertically integrated silicon nitride medical device manufacturer in the world . components of our results of operations we manage our business within one reportable segment , which is consistent with how our management reviews our business , makes investment and resource allocation decisions and assesses operating performance . product revenue we derive our product revenue primarily from the sale of spinal fusion and fixation devices and related products used in the treatment of spine disorders . our product revenue is generated from sales to three types of customers : ( 1 ) surgeons and hospitals ; ( 2 ) stocking distributors ; and ( 3 ) private label customers . most of our products are sold on a consignment basis through a network of independent sales distributors ; however , we also sell our products to independent stocking distributors and private label customers . product revenue is recognized when all four of the following criteria are met : ( 1 ) persuasive evidence that an arrangement exists ; ( 2 ) delivery of the products has occurred ; ( 3 ) the selling price of the product is fixed or determinable ; and ( 4 ) collectability is reasonably assured . we generate the majority of our revenue from the sale of inventory that is consigned to independent sales distributors that sell our products to surgeons and hospitals . for these products , we recognize revenue at the time we are notified the product has been used or implanted and all other revenue recognition criteria have been met . for all other transactions , we recognize revenue when title and risk of loss transfer to the stocking distributor or private label customers , and all other revenue recognition criteria have been met . we generally recognize revenue from sales to stocking distributors and private label customers at the time the product is shipped to the distributor . stocking distributors and private label customers , who sell the products to their customers , take title to the products and assume all risks of ownership at time of shipment . our stocking distributors and private label customers are obligated to pay within specified terms regardless of when , if ever , they sell the products . our policy is to classify shipping and handling costs billed to customers as an offset to total shipping expense in the statement of operations , primarily within sales and marketing . in general , our customers do not have any rights of return or exchange . we believe our product revenue will increase due to our sales and marketing efforts and as we continue to introduce new products into the market . we expect that our product revenue will continue to be primarily attributable to sales of our products in the united states . cost of revenue the expenses that are included in cost of revenue include all direct product costs if we obtained the product from third-party manufacturers and our in-house manufacturing costs for the products we manufacture . we obtain our non-silicon nitride products , including our metal products , from third-party manufacturers , while we currently manufacture our silicon-nitride products in-house . specific provisions for excess or obsolete inventory are also included in cost of revenue . in addition , we pay royalties attributable to the sale of specific products to some of our surgeon advisors that assisted us in the design , regulatory clearance or commercialization of a particular product . these payments are recorded as cost of revenue . in addition , during 2016 we incurred impairment charges relating to the ceramic equipment used to manufacture implants . 55 gross profit our gross profit measures our product revenue relative to our cost of revenue . we expect our gross profit to decrease as we expand the penetration of our silicon nitride technology platform through oem and private label partnerships , which offer additional avenues for the adoption of silicon nitride , but they are not an area of focus at the moment . research and development expenses our research and development costs are expensed as incurred . research and development costs consist of engineering , product development , clinical trials , test-part manufacturing , testing , developing and validating the manufacturing process , manufacturing , facility and regulatory-related costs . story_separator_special_tag during 2016 , the entire principal amount of the first and second exchange notes , $ 0.3 million of the third exchange note , and the interest related to the first , second , and third exchange notes was converted into 145,227 shares of common stock . in july 2016 , we paid riverside $ 0.8 million to redeem in full the remaining principal balance of the third exchange note . the debt discounts associated with the converted debt was recorded to interest expense . 62 off-balance sheet arrangements we do not have any off-balance sheet arrangements , as defined in item 303 ( a ) ( 4 ) of regulation s-k. related-party transactions for a description of our related-party transactions , see “ certain relationships and related party transactions . ” seasonality and backlog our business is generally not seasonal in nature . our sales generally consist of products that are in stock with us or maintained at hospitals or with our sales distributors . accordingly , we do not have a backlog of sales orders . critical accounting policies and estimates a summary of our significant accounting policies and estimates is discussed in management 's discussion and analysis of financial condition and results of operations and in note 1 to our consolidated financial statements included in our annual report on form 10-k for the year ended december 31 , 2016. there have been no material changes to those policies for the year ended december 31 , 2017. the preparation of the consolidated financial statements in accordance with u.s. generally accepted accounting principles requires us to make judgments , estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities . significant areas of uncertainty that require judgments , estimates and assumptions include the accounting for income taxes and other contingencies as well as valuation of derivative liabilities , asset impairment and collectability of accounts receivable . we use historical and other information that we consider to be relevant to make these judgments and estimates . however , actual results may differ from those estimates and assumptions that are used to prepare our consolidated financial statements . revenue recognition we derive our product revenue primarily from the sale of spinal fusion devices and related products used in the treatment of spine disorders . our product revenue is generated from sales to three types of customers : ( 1 ) surgeons and hospitals ; ( 2 ) stocking distributors ; and ( 3 ) private label customers . most of our products are sold on a consignment basis through a network of independent sales distributors ; however , we also sell our products to independent stocking distributors and private label customers . product revenue is recognized when all four of the following criteria are met : ( 1 ) persuasive evidence that an arrangement exists ; ( 2 ) delivery of the products has occurred ; ( 3 ) the selling price of the product is fixed or determinable ; and ( 4 ) collectability is reasonably assured . we generate the majority of our revenue from the sale of inventory that is consigned to independent sales distributors that facilitate sales of our products to surgeons and hospitals . for these products , we recognize revenue at the time we are notified the product has been used or implanted and all other revenue recognition criteria have been met . for all other transactions , we recognize revenue when title and risk of loss transfer to the stocking distributor or private label customer , and all other revenue recognition criteria have been met . we generally recognize revenue from sales to stocking distributors at the time the product is shipped to the distributor . stocking distributors , who sell the products to their customers , take title to the products and assume all risks of ownership at time of shipment . our stocking distributors are obligated to pay within specified terms regardless of when , if ever , they sell the products . in general , our customers do not have any rights of return or exchange . accounts receivable and allowance for doubtful accounts the majority of our accounts receivable is composed of amounts due from hospitals or surgical centers . accounts receivable are carried at invoiced amount less an allowance for doubtful accounts . on a regular basis , we evaluate accounts receivable and estimate an allowance for doubtful accounts , as needed , based on various factors such as customers ' current credit conditions , length of time past due , and the general economy as a whole . receivables are written off against the allowance when they are deemed uncollectible . 63 inventories inventories are stated at the lower of cost or net realizable value , with cost for manufactured inventory determined under the standard costs , which approximate actual costs , determined on the first-in first-out ( “ fifo ” ) method . manufactured inventory consists of raw material , direct labor and manufacturing overhead cost components . inventories purchased from third-party manufacturers are stated at the lower of cost or market using the first-in , first-out method . we review the carrying value of inventory on a periodic basis for excess or obsolete items , and records any write-down as a cost of revenue , as necessary . it is reasonably possible that we may be required to make adjustments to the carrying value of inventory in future periods . inventory write-downs for excess or obsolete inventory are recorded as a cost of revenue . we hold consigned inventory at distributor and other customer locations where revenue recognition criteria have not yet been achieved . long-lived assets and goodwill we periodically evaluate the carrying value of definite-lived intangibles when events or changes in circumstances indicate that the carrying value may not be recoverable . factors we consider important which could trigger an impairment review include , but are not limited to ,
| liquidity and capital resources prior to the second quarter of 2019 , we had not generated revenue from product sales . we began to generate revenue from product sales in the second quarter of 2019 in conjunction with the launch of our first product , zulresso , which commenced on june 24 , 2019. prior to the second quarter of 2019 , all of our revenue had been derived from our collaboration with shionogi . to date , we have incurred recurring net losses . as of december 31 , 2019 , we had an accumulated deficit of $ 1.6 billion . from our inception through december 31 , 2019 , we received net proceeds of $ 2.2 billion from the sales of redeemable convertible preferred stock , the issuance of convertible notes and the sales of common stock in our initial public offering in july 2014 and follow-on offerings in april 2015 , january 2016 , september 2016 , november 2017 , february 2018 and february 2019. on february 13 , 2018 , we completed the sale of 4,032,012 shares of our common stock in a follow-on underwritten public offering at a price to the public of $ 164.00 per share , resulting in net proceeds of $ 631.2 million after deducting commissions and underwriting discounts and offering costs paid by us .
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in addition to direct sales , we have targeted original equipment manufacturer ( “ oem ” ) and private label partnerships in order to accelerate adoption of silicon nitride , both in the spinal space , and also in future markets such as hip and knee replacements , dental , extremities , trauma , and sports medicine . existing biomaterials , based on plastics , metals , and bone grafts have well-recognized limitations that we believe are addressed by silicon nitride , and we are uniquely positioned to convert existing , successful implant designs made by other companies into silicon nitride . we believe oem and private label partnerships will allow us to work with a variety of partners , accelerate the adoption of silicon nitride , and realize incremental revenue at improved operating margins , when compared to the cost-intensive direct sales model . 54 we believe that silicon nitride addresses many of the biomaterial-related limitations in fields such as hip and knee replacements , dental implants , sports medicine , extremities , and trauma surgery . we further believe that the inherent material properties of silicon nitride , and the ability to formulate the material in a variety of compositions , combined with precise control of the surface properties of the material , opens up a number of commercial opportunities across orthopedic surgery , neurological surgery , maxillofacial surgery , and other medical disciplines . we operate a 30,000 square foot manufacturing facility at our corporate headquarters in salt lake city , utah , and we believe we are the only vertically integrated silicon nitride medical device manufacturer in the world . components of our results of operations we manage our business within one reportable segment , which is consistent with how our management reviews our business , makes investment and resource allocation decisions and assesses operating performance . product revenue we derive our product revenue primarily from the sale of spinal fusion and fixation devices and related products used in the treatment of spine disorders . our product revenue is generated from sales to three types of customers : ( 1 ) surgeons and hospitals ; ( 2 ) stocking distributors ; and ( 3 ) private label customers . most of our products are sold on a consignment basis through a network of independent sales distributors ; however , we also sell our products to independent stocking distributors and private label customers . product revenue is recognized when all four of the following criteria are met : ( 1 ) persuasive evidence that an arrangement exists ; ( 2 ) delivery of the products has occurred ; ( 3 ) the selling price of the product is fixed or determinable ; and ( 4 ) collectability is reasonably assured . we generate the majority of our revenue from the sale of inventory that is consigned to independent sales distributors that sell our products to surgeons and hospitals . for these products , we recognize revenue at the time we are notified the product has been used or implanted and all other revenue recognition criteria have been met . for all other transactions , we recognize revenue when title and risk of loss transfer to the stocking distributor or private label customers , and all other revenue recognition criteria have been met . we generally recognize revenue from sales to stocking distributors and private label customers at the time the product is shipped to the distributor . stocking distributors and private label customers , who sell the products to their customers , take title to the products and assume all risks of ownership at time of shipment . our stocking distributors and private label customers are obligated to pay within specified terms regardless of when , if ever , they sell the products . our policy is to classify shipping and handling costs billed to customers as an offset to total shipping expense in the statement of operations , primarily within sales and marketing . in general , our customers do not have any rights of return or exchange . we believe our product revenue will increase due to our sales and marketing efforts and as we continue to introduce new products into the market . we expect that our product revenue will continue to be primarily attributable to sales of our products in the united states . cost of revenue the expenses that are included in cost of revenue include all direct product costs if we obtained the product from third-party manufacturers and our in-house manufacturing costs for the products we manufacture . we obtain our non-silicon nitride products , including our metal products , from third-party manufacturers , while we currently manufacture our silicon-nitride products in-house . specific provisions for excess or obsolete inventory are also included in cost of revenue . in addition , we pay royalties attributable to the sale of specific products to some of our surgeon advisors that assisted us in the design , regulatory clearance or commercialization of a particular product . these payments are recorded as cost of revenue . in addition , during 2016 we incurred impairment charges relating to the ceramic equipment used to manufacture implants . 55 gross profit our gross profit measures our product revenue relative to our cost of revenue . we expect our gross profit to decrease as we expand the penetration of our silicon nitride technology platform through oem and private label partnerships , which offer additional avenues for the adoption of silicon nitride , but they are not an area of focus at the moment . research and development expenses our research and development costs are expensed as incurred . research and development costs consist of engineering , product development , clinical trials , test-part manufacturing , testing , developing and validating the manufacturing process , manufacturing , facility and regulatory-related costs . story_separator_special_tag during 2016 , the entire principal amount of the first and second exchange notes , $ 0.3 million of the third exchange note , and the interest related to the first , second , and third exchange notes was converted into 145,227 shares of common stock . in july 2016 , we paid riverside $ 0.8 million to redeem in full the remaining principal balance of the third exchange note . the debt discounts associated with the converted debt was recorded to interest expense . 62 off-balance sheet arrangements we do not have any off-balance sheet arrangements , as defined in item 303 ( a ) ( 4 ) of regulation s-k. related-party transactions for a description of our related-party transactions , see “ certain relationships and related party transactions . ” seasonality and backlog our business is generally not seasonal in nature . our sales generally consist of products that are in stock with us or maintained at hospitals or with our sales distributors . accordingly , we do not have a backlog of sales orders . critical accounting policies and estimates a summary of our significant accounting policies and estimates is discussed in management 's discussion and analysis of financial condition and results of operations and in note 1 to our consolidated financial statements included in our annual report on form 10-k for the year ended december 31 , 2016. there have been no material changes to those policies for the year ended december 31 , 2017. the preparation of the consolidated financial statements in accordance with u.s. generally accepted accounting principles requires us to make judgments , estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities . significant areas of uncertainty that require judgments , estimates and assumptions include the accounting for income taxes and other contingencies as well as valuation of derivative liabilities , asset impairment and collectability of accounts receivable . we use historical and other information that we consider to be relevant to make these judgments and estimates . however , actual results may differ from those estimates and assumptions that are used to prepare our consolidated financial statements . revenue recognition we derive our product revenue primarily from the sale of spinal fusion devices and related products used in the treatment of spine disorders . our product revenue is generated from sales to three types of customers : ( 1 ) surgeons and hospitals ; ( 2 ) stocking distributors ; and ( 3 ) private label customers . most of our products are sold on a consignment basis through a network of independent sales distributors ; however , we also sell our products to independent stocking distributors and private label customers . product revenue is recognized when all four of the following criteria are met : ( 1 ) persuasive evidence that an arrangement exists ; ( 2 ) delivery of the products has occurred ; ( 3 ) the selling price of the product is fixed or determinable ; and ( 4 ) collectability is reasonably assured . we generate the majority of our revenue from the sale of inventory that is consigned to independent sales distributors that facilitate sales of our products to surgeons and hospitals . for these products , we recognize revenue at the time we are notified the product has been used or implanted and all other revenue recognition criteria have been met . for all other transactions , we recognize revenue when title and risk of loss transfer to the stocking distributor or private label customer , and all other revenue recognition criteria have been met . we generally recognize revenue from sales to stocking distributors at the time the product is shipped to the distributor . stocking distributors , who sell the products to their customers , take title to the products and assume all risks of ownership at time of shipment . our stocking distributors are obligated to pay within specified terms regardless of when , if ever , they sell the products . in general , our customers do not have any rights of return or exchange . accounts receivable and allowance for doubtful accounts the majority of our accounts receivable is composed of amounts due from hospitals or surgical centers . accounts receivable are carried at invoiced amount less an allowance for doubtful accounts . on a regular basis , we evaluate accounts receivable and estimate an allowance for doubtful accounts , as needed , based on various factors such as customers ' current credit conditions , length of time past due , and the general economy as a whole . receivables are written off against the allowance when they are deemed uncollectible . 63 inventories inventories are stated at the lower of cost or net realizable value , with cost for manufactured inventory determined under the standard costs , which approximate actual costs , determined on the first-in first-out ( “ fifo ” ) method . manufactured inventory consists of raw material , direct labor and manufacturing overhead cost components . inventories purchased from third-party manufacturers are stated at the lower of cost or market using the first-in , first-out method . we review the carrying value of inventory on a periodic basis for excess or obsolete items , and records any write-down as a cost of revenue , as necessary . it is reasonably possible that we may be required to make adjustments to the carrying value of inventory in future periods . inventory write-downs for excess or obsolete inventory are recorded as a cost of revenue . we hold consigned inventory at distributor and other customer locations where revenue recognition criteria have not yet been achieved . long-lived assets and goodwill we periodically evaluate the carrying value of definite-lived intangibles when events or changes in circumstances indicate that the carrying value may not be recoverable . factors we consider important which could trigger an impairment review include , but are not limited to ,
| net cash used in operating activities net cash used in operating activities was $ 4.7 million in 2017 , compared to $ 7.2 million used in 2016 , a decrease of $ 2.5 million . offset by the decrease in the net loss , and related non-cash add backs to the net loss , the decrease in cash used for operating activities during 2017 was primarily due to changes in the movement of working capital items during 2017 as compared to the same period in 2016 as follows : a $ 0.7 million decrease in trade accounts receivable , a $ 0.1 increase in prepaid expenses and other current assets , a $ 0.5 million decrease in inventories and a $ 1.1 million increase in accounts payable and accrued liabilities . net cash provided by investing activities net cash used in investing activities was $ 1.1 million during 2017 , compared to $ 0.6 million used in investing activities during the same period in 2016 , an increase of $ 0.5 million . the increase in cash used in investing activities during 2017 was due to increased purchases of property and equipment . net cash provided by financing activities net cash used in financing activities was $ 0.6 million during 2017 , compared to $ 3.2 million provided during the same period in 2016 , an increase of $ 3.8 million . the $ 3.8 million increase in 2017 was primarily due to a $ 3.0 million decrease in cash generated from the issuance of common and preferred stock , a $ 4.6 million decrease in cash generated from the issuance of derivative warrant liabilities , which was offset by an increase in net debt proceeds of $ 4.0 million .
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for our gene therapy program , we have partnered with st. jude children 's research hospital ( “ st . jude ” ) in the development of a first-in-class ex vivo lentiviral treatment of x-linked severe combined immunodeficiency ( “ xscid ” ) and for our car t therapies we have partnered with the city of hope national medical center ( “ coh ” ) , fred hutchinson cancer research center ( “ fred hutch ” ) and nationwide children 's hospital ( “ nationwide ” ) . gene therapy in partnership with st. jude and the national institutes of health ( “ nih ” ) , our gene therapy program is being conducted under an exclusive license to develop a potentially curative treatment for xscid , a rare genetic immune system condition also known as bubble boy disease in which affected patients do not live beyond infancy without treatment . this first-in-class ex vivo lentiviral gene therapy is currently in two phase 1/2 clinical trials involving two different autologous cell products : a multicenter trial of the mb-107 product in newly diagnosed infants sponsored by st. jude and a single-center trial of the mb-207 product in previously transplanted patients sponsored by the nih . 61 in may 2020 , we submitted an investigational new drug ( “ ind ” ) application with the fda to initiate a registrational multicenter phase 2 clinical trial of mb-107 in newly diagnosed infants with xscid who are under the age of two . in response , the fda identified chemistry , manufacturing , and control ( “ cmc ” ) hold issues that mustang satisfactorily addressed in a december 2020 submission to the fda , and the cmc hold was removed in january 2021. the trial is expected to enroll 10 patients who , together with 15 patients enrolled in the current multicenter trial led by st. jude , will be compared with 25 matched historical control patients who have undergone hematopoietic stem cell transplant ( “ hsct ” ) . the primary efficacy endpoint will be event-free survival and we are targeting topline data from the trial in the second half of 2022 . we further expect to file an ind in the second quarter of 2021 for a registrational multicenter phase 2 clinical trial of lentiviral gene therapy in previously transplanted xscid patients ( mb-207 ) . we anticipate enrolling 20 patients , and we are targeting topline data for this trial in the first half of 2023 . car t therapies our pipeline of car t therapies is being developed under exclusive licenses from several world class research institutions . our strategy is to license these technologies , support preclinical and clinical research activities by our partners and transfer the underlying technology to our cell processing facility located in worcester , massachusetts , to conduct our own clinical trials . we are developing car t therapies for hematologic malignancies in partnership with coh targeting cd123 ( mb-102 ) and cs1 ( mb-104 ) and with fred hutch targeting cd20 ( mb-106 ) . phase 1 clinical trials sponsored by coh for mb-102 and mb-104 and by fred hutch for mb-106 are underway . in the third quarter of 2019 the fda approved our ind application to initiate a multi-center phase 1/2 clinical trial of mb-102 , and our clinical trial began enrollment in 2020 for the treatment of patients with blastic plasmacytoid dendritic cell neoplasm . we expect to file an ind for mb-106 in the first quarter of 2021 and to initiate our own phase 1/2 clinical trial shortly thereafter for the treatment of patients with non-hodgkin lymphoma and chronic lymphocytic leukemia . we plan to file an ind for a multicenter phase 1/2 trial for mb-104 for the treatment of patients with multiple myeloma once coh has established a safe and effective dose . we are also developing car t therapies for solid tumors in partnership with coh targeting il13r α 2 ( mb-101 ) , her2 ( mb-103 ) and psca ( mb-105 ) . in addition , we have partnered with nationwide for the c134 oncolytic virus ( mb-108 ) in order to enhance the activity of mb-101 for the treatment of patients with glioblastoma multiforme ( “ gbm ” ) . phase 1 clinical trials sponsored by coh for mb-101 , mb-103 and mb-105 are underway . a phase 1 clinical trial sponsored by the university of alabama at birmingham ( “ uab ” ) for mb-108 began during the third quarter of 2019 and , in the fourth quarter of 2021 , we plan to file an ind for the combination of mb-101 and mb-108 for the treatment of patients with gbm . we also plan to file inds and initiate our own clinical trials for mb-103 for the treatment of patients with metastatic breast cancer to brain and for mb-105 for the treatment of patients with prostate and pancreatic cancer . recent events mb-106 ( cd20 car t for non-hodgkin lymphoma and chronic lymphocytic leukemia ) in february 2020 , we announced that the first subject treated with the optimized mb-106 ( cd20-targeted , autologous car t cell therapy ) manufacturing process , developed in collaboration with fred hutch , achieved a complete response at the lowest starting dose in an ongoing phase 1/2 clinical trial . the trial is evaluating the safety and efficacy of mb-106 in subjects with relapsed or refractory b-cell non-hodgkin lymphomas and chronic lymphocytic leukemia . in december 2020 , at the 62 nd american society of hematology annual meeting , mustang and fred hutch announced interim data in patients with relapsed or refractory b-cell nhl from the ongoing phase 1/2 clinical trial of mb-106 at fred hutch . story_separator_special_tag public offering of common stock on june 11 , 2020 , we announced the pricing of an underwritten public offering , whereby we sold 10,769,231 shares of common stock , ( plus a 30-day option to purchase up to an additional 1,615,384 shares of common stock , which was partially exercised ) at a price of $ 3.25 per share for gross proceeds of approximately $ 37.2 million , before deducting underwriting discounts and commissions and offering expenses . in connection with the public offering , the company paid aggregate fees of approximately $ 2.4 million for net proceeds of approximately $ 34.8 million . 64 authorized shares on november 11 , 2020 , the company 's board adopted resolutions of the board to ratify , approve and recommend stockholder approval of an amendment to the company 's amended and restated certificate of incorporation , as amended , to revise article iv , section a thereof in order to effect an increase in the authorized number of shares of the company 's common stock , par value $ 0.0001 , from 85 million to 125 million ( the “ amendment ” ) . on november 11 , 2020 , the company received approval of the amendment by written consent in lieu of a meeting from the holders of a majority of issued and outstanding shares of the company 's common and preferred stock . the increase in authorized shares to 125 million became effective on december 4 , 2020. to date , we have not received approval for the sale of our product candidates in any market and , therefore , have not generated any product sales from our product candidates . in addition , we have incurred substantial operating losses since our inception , and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable . as of december 31 , 2020 , we have an accumulated deficit of $ 185.5 million . we are a majority-controlled subsidiary of fortress biotech , inc. ( “ fortress ” ) . as a “ controlled company ” we rely on the exemption provided by nasdaq listing rule 5615 ( c ) ( 2 ) , which permits us to maintain less than a majority of independent directors on our board . critical accounting policies and use of estimates see note 2 to our financial statements . results of operations comparison of the years ended december 31 , 2020 and 2019 replace_table_token_1_th research and development expenses research and development expenses primarily consist of personnel related expenses , including salaries , benefits , travel , and other related expenses , stock-based compensation , payments made to third parties for license , sponsored research and milestone costs related to in-licensed products and technology , payments made to third party contract research organizations for preclinical and clinical studies , investigative sites for clinical trials , consultants , the cost of acquiring and manufacturing clinical trial materials , costs associated with regulatory filings , laboratory costs and other supplies . research and development expense increased by approximately $ 7.2 million from $ 30.0 million for the year ended december 31 , 2019 to $ 37.2 million for the year ended december 31 , 2020. the increase in research and development expense for the year ended december 31 , 2020 was primarily attributable to the following : ● $ 2.9 million for increased research and development employee compensation costs , including stock compensation , as we continue to increase research and development headcount to support development of our clinical programs ; ● $ 2.5 million for increased lentiviral vector manufacturing to support mustang-sponsored clinical trials ; 65 ● $ 1.6 million for increased costs for sponsored research and clinical trial agreements with our academic partners ; ● approximately $ 1.4 million for increased other costs including consulting , outside services , laboratory supplies and depreciation ; and ● offset by approximately $ 1.2 million for decreased costs for third-party contract research organizations . research and development expenses - licenses acquired increased by $ 3.8 million from $ 6.3 million for the year ended december 31 , 2019 to $ 10.1 million for the year ended december 31 , 2020. the increase in research and development expenses - licenses acquired for the year ended december 31 , 2020 was primarily attributable to the following : ● approximately $ 2.7 million for the annual stock dividend to fortress ; ● $ 1.3 million related to our licenses with coh ; ● $ 0.3 million related to our cd20 license with fred hutch ; ● $ 0.1 million related to our lentiboost tm license with sirion ; and ● offset by approximately $ 0.5 million for decreased costs related to our licenses with nationwide , ucla and csl behring ( calimmune ) . we expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates , reflecting increasing costs associated with the following : ● employee-related expenses , which include salaries and benefits ; ● license fees and milestone payments related to in-licensed products and technology ; ● expenses incurred under agreements with contract research organizations , investigative sites and consultants that conduct our clinical trials and our preclinical activities ; ● facility expenses , which include rent , utilities and maintenance costs ; ● the cost of acquiring and manufacturing clinical trial materials ; and ● costs associated with non-clinical activities , and regulatory approvals . general and administrative expenses general and administrative expenses consist primarily of salaries and related expenses , including stock-based compensation , for executives and other administrative personnel , recruitment expenses , professional fees and other corporate expenses , including investor relations , legal activities including patent fees , and facilities-related expenses . general and administrative expense decreased by approximately $ 0.1 million from $ 9.6 million for
| net cash used in operating activities net cash used in operating activities was $ 4.7 million in 2017 , compared to $ 7.2 million used in 2016 , a decrease of $ 2.5 million . offset by the decrease in the net loss , and related non-cash add backs to the net loss , the decrease in cash used for operating activities during 2017 was primarily due to changes in the movement of working capital items during 2017 as compared to the same period in 2016 as follows : a $ 0.7 million decrease in trade accounts receivable , a $ 0.1 increase in prepaid expenses and other current assets , a $ 0.5 million decrease in inventories and a $ 1.1 million increase in accounts payable and accrued liabilities . net cash provided by investing activities net cash used in investing activities was $ 1.1 million during 2017 , compared to $ 0.6 million used in investing activities during the same period in 2016 , an increase of $ 0.5 million . the increase in cash used in investing activities during 2017 was due to increased purchases of property and equipment . net cash provided by financing activities net cash used in financing activities was $ 0.6 million during 2017 , compared to $ 3.2 million provided during the same period in 2016 , an increase of $ 3.8 million . the $ 3.8 million increase in 2017 was primarily due to a $ 3.0 million decrease in cash generated from the issuance of common and preferred stock , a $ 4.6 million decrease in cash generated from the issuance of derivative warrant liabilities , which was offset by an increase in net debt proceeds of $ 4.0 million .
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for our gene therapy program , we have partnered with st. jude children 's research hospital ( “ st . jude ” ) in the development of a first-in-class ex vivo lentiviral treatment of x-linked severe combined immunodeficiency ( “ xscid ” ) and for our car t therapies we have partnered with the city of hope national medical center ( “ coh ” ) , fred hutchinson cancer research center ( “ fred hutch ” ) and nationwide children 's hospital ( “ nationwide ” ) . gene therapy in partnership with st. jude and the national institutes of health ( “ nih ” ) , our gene therapy program is being conducted under an exclusive license to develop a potentially curative treatment for xscid , a rare genetic immune system condition also known as bubble boy disease in which affected patients do not live beyond infancy without treatment . this first-in-class ex vivo lentiviral gene therapy is currently in two phase 1/2 clinical trials involving two different autologous cell products : a multicenter trial of the mb-107 product in newly diagnosed infants sponsored by st. jude and a single-center trial of the mb-207 product in previously transplanted patients sponsored by the nih . 61 in may 2020 , we submitted an investigational new drug ( “ ind ” ) application with the fda to initiate a registrational multicenter phase 2 clinical trial of mb-107 in newly diagnosed infants with xscid who are under the age of two . in response , the fda identified chemistry , manufacturing , and control ( “ cmc ” ) hold issues that mustang satisfactorily addressed in a december 2020 submission to the fda , and the cmc hold was removed in january 2021. the trial is expected to enroll 10 patients who , together with 15 patients enrolled in the current multicenter trial led by st. jude , will be compared with 25 matched historical control patients who have undergone hematopoietic stem cell transplant ( “ hsct ” ) . the primary efficacy endpoint will be event-free survival and we are targeting topline data from the trial in the second half of 2022 . we further expect to file an ind in the second quarter of 2021 for a registrational multicenter phase 2 clinical trial of lentiviral gene therapy in previously transplanted xscid patients ( mb-207 ) . we anticipate enrolling 20 patients , and we are targeting topline data for this trial in the first half of 2023 . car t therapies our pipeline of car t therapies is being developed under exclusive licenses from several world class research institutions . our strategy is to license these technologies , support preclinical and clinical research activities by our partners and transfer the underlying technology to our cell processing facility located in worcester , massachusetts , to conduct our own clinical trials . we are developing car t therapies for hematologic malignancies in partnership with coh targeting cd123 ( mb-102 ) and cs1 ( mb-104 ) and with fred hutch targeting cd20 ( mb-106 ) . phase 1 clinical trials sponsored by coh for mb-102 and mb-104 and by fred hutch for mb-106 are underway . in the third quarter of 2019 the fda approved our ind application to initiate a multi-center phase 1/2 clinical trial of mb-102 , and our clinical trial began enrollment in 2020 for the treatment of patients with blastic plasmacytoid dendritic cell neoplasm . we expect to file an ind for mb-106 in the first quarter of 2021 and to initiate our own phase 1/2 clinical trial shortly thereafter for the treatment of patients with non-hodgkin lymphoma and chronic lymphocytic leukemia . we plan to file an ind for a multicenter phase 1/2 trial for mb-104 for the treatment of patients with multiple myeloma once coh has established a safe and effective dose . we are also developing car t therapies for solid tumors in partnership with coh targeting il13r α 2 ( mb-101 ) , her2 ( mb-103 ) and psca ( mb-105 ) . in addition , we have partnered with nationwide for the c134 oncolytic virus ( mb-108 ) in order to enhance the activity of mb-101 for the treatment of patients with glioblastoma multiforme ( “ gbm ” ) . phase 1 clinical trials sponsored by coh for mb-101 , mb-103 and mb-105 are underway . a phase 1 clinical trial sponsored by the university of alabama at birmingham ( “ uab ” ) for mb-108 began during the third quarter of 2019 and , in the fourth quarter of 2021 , we plan to file an ind for the combination of mb-101 and mb-108 for the treatment of patients with gbm . we also plan to file inds and initiate our own clinical trials for mb-103 for the treatment of patients with metastatic breast cancer to brain and for mb-105 for the treatment of patients with prostate and pancreatic cancer . recent events mb-106 ( cd20 car t for non-hodgkin lymphoma and chronic lymphocytic leukemia ) in february 2020 , we announced that the first subject treated with the optimized mb-106 ( cd20-targeted , autologous car t cell therapy ) manufacturing process , developed in collaboration with fred hutch , achieved a complete response at the lowest starting dose in an ongoing phase 1/2 clinical trial . the trial is evaluating the safety and efficacy of mb-106 in subjects with relapsed or refractory b-cell non-hodgkin lymphomas and chronic lymphocytic leukemia . in december 2020 , at the 62 nd american society of hematology annual meeting , mustang and fred hutch announced interim data in patients with relapsed or refractory b-cell nhl from the ongoing phase 1/2 clinical trial of mb-106 at fred hutch . story_separator_special_tag public offering of common stock on june 11 , 2020 , we announced the pricing of an underwritten public offering , whereby we sold 10,769,231 shares of common stock , ( plus a 30-day option to purchase up to an additional 1,615,384 shares of common stock , which was partially exercised ) at a price of $ 3.25 per share for gross proceeds of approximately $ 37.2 million , before deducting underwriting discounts and commissions and offering expenses . in connection with the public offering , the company paid aggregate fees of approximately $ 2.4 million for net proceeds of approximately $ 34.8 million . 64 authorized shares on november 11 , 2020 , the company 's board adopted resolutions of the board to ratify , approve and recommend stockholder approval of an amendment to the company 's amended and restated certificate of incorporation , as amended , to revise article iv , section a thereof in order to effect an increase in the authorized number of shares of the company 's common stock , par value $ 0.0001 , from 85 million to 125 million ( the “ amendment ” ) . on november 11 , 2020 , the company received approval of the amendment by written consent in lieu of a meeting from the holders of a majority of issued and outstanding shares of the company 's common and preferred stock . the increase in authorized shares to 125 million became effective on december 4 , 2020. to date , we have not received approval for the sale of our product candidates in any market and , therefore , have not generated any product sales from our product candidates . in addition , we have incurred substantial operating losses since our inception , and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable . as of december 31 , 2020 , we have an accumulated deficit of $ 185.5 million . we are a majority-controlled subsidiary of fortress biotech , inc. ( “ fortress ” ) . as a “ controlled company ” we rely on the exemption provided by nasdaq listing rule 5615 ( c ) ( 2 ) , which permits us to maintain less than a majority of independent directors on our board . critical accounting policies and use of estimates see note 2 to our financial statements . results of operations comparison of the years ended december 31 , 2020 and 2019 replace_table_token_1_th research and development expenses research and development expenses primarily consist of personnel related expenses , including salaries , benefits , travel , and other related expenses , stock-based compensation , payments made to third parties for license , sponsored research and milestone costs related to in-licensed products and technology , payments made to third party contract research organizations for preclinical and clinical studies , investigative sites for clinical trials , consultants , the cost of acquiring and manufacturing clinical trial materials , costs associated with regulatory filings , laboratory costs and other supplies . research and development expense increased by approximately $ 7.2 million from $ 30.0 million for the year ended december 31 , 2019 to $ 37.2 million for the year ended december 31 , 2020. the increase in research and development expense for the year ended december 31 , 2020 was primarily attributable to the following : ● $ 2.9 million for increased research and development employee compensation costs , including stock compensation , as we continue to increase research and development headcount to support development of our clinical programs ; ● $ 2.5 million for increased lentiviral vector manufacturing to support mustang-sponsored clinical trials ; 65 ● $ 1.6 million for increased costs for sponsored research and clinical trial agreements with our academic partners ; ● approximately $ 1.4 million for increased other costs including consulting , outside services , laboratory supplies and depreciation ; and ● offset by approximately $ 1.2 million for decreased costs for third-party contract research organizations . research and development expenses - licenses acquired increased by $ 3.8 million from $ 6.3 million for the year ended december 31 , 2019 to $ 10.1 million for the year ended december 31 , 2020. the increase in research and development expenses - licenses acquired for the year ended december 31 , 2020 was primarily attributable to the following : ● approximately $ 2.7 million for the annual stock dividend to fortress ; ● $ 1.3 million related to our licenses with coh ; ● $ 0.3 million related to our cd20 license with fred hutch ; ● $ 0.1 million related to our lentiboost tm license with sirion ; and ● offset by approximately $ 0.5 million for decreased costs related to our licenses with nationwide , ucla and csl behring ( calimmune ) . we expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates , reflecting increasing costs associated with the following : ● employee-related expenses , which include salaries and benefits ; ● license fees and milestone payments related to in-licensed products and technology ; ● expenses incurred under agreements with contract research organizations , investigative sites and consultants that conduct our clinical trials and our preclinical activities ; ● facility expenses , which include rent , utilities and maintenance costs ; ● the cost of acquiring and manufacturing clinical trial materials ; and ● costs associated with non-clinical activities , and regulatory approvals . general and administrative expenses general and administrative expenses consist primarily of salaries and related expenses , including stock-based compensation , for executives and other administrative personnel , recruitment expenses , professional fees and other corporate expenses , including investor relations , legal activities including patent fees , and facilities-related expenses . general and administrative expense decreased by approximately $ 0.1 million from $ 9.6 million for
| liquidity and capital resources the company has incurred substantial operating losses and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable . as of december 31 , 2020 , the company had an accumulated deficit of $ 185.5 million . the company has funded its operations to date primarily through the sale of equity and its venture debt financing agreement ( the `` loan agreement '' ) with horizon technology finance corporation ( `` horizon '' ) , herein referred to as the `` horizon notes . '' in september 2020 , we repaid the horizon notes in full all amounts that were outstanding under the loan agreement , which was comprised of $ 15.0 million face value of the outstanding notes , $ 112,500 accrued and unpaid interest , a $ 750,000 loan termination fee and prepayment penalties of $ 550,000. the company expects to continue to use the proceeds from previous financing transactions primarily for general corporate purposes , including financing the company 's growth , developing new or existing product candidates , and funding capital expenditures , acquisitions and investments . the company currently anticipates that its cash and cash equivalents balances at december 31 , 2020 , are sufficient to fund its anticipated operating cash requirements for at least one year from the date of this form 10-k. from january 1 , 2021 through march 18 , 2021 , the company issued approximately 10.6 million shares of common stock at an average price of $ 4.24 per share for gross proceeds of $ 44.9 million under the atm agreement . the company will be required to expend significant funds in order to advance the development of its product candidates .
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we are aggressively pursuing the profitable expansion opportunities that exist outside the us , including disciplined growth and scale in our more mature markets , and faster expansion in key emerging markets like china . our global consumer products group ( cpg ) represents another important profitable growth opportunity for us . during the second quarter , we successfully transitioned our packaged coffee and tea businesses to an in-house direct model , away from the previous distribution arrangement . this model now gives us total control over the sell-in and distribution to retailers of these products . we also aggressively pursued the opportunities beyond our more 22 traditional store experience to offer consumers new coffee and other products in multiple forms , across new categories , and through diverse channels , leveraging our strong brand and established retail store base . examples include the ongoing global expansion of our successful starbucks via ® ready brew product and starbucks- and tazo-branded k-cup ® portion packs which were added to the lineup at the start of fiscal 2012. cpg contributed 7 % of total net revenues in fiscal 2011. looking toward the future , we recently announced a reorganization of our leadership structure that took effect at the beginning of fiscal 2012. the new structure will enable us to accelerate our global , multi-brand , multi-channel strategy , and to leverage the talent , experience and expertise resident in our senior leadership team . in this new structure , one president will oversee all operations within each of three distinct regions with responsibility for the performance of company-operated stores , as well as for working with licensed and joint-venture business partners in each market within their respective region . the region president will also be responsible for working with starbucks global consumer products and foodservice teams to further develop those businesses and execute against our growth plan within the region . the three new regions will be 1 ) americas , inclusive of the us , canada , and latin america , 2 ) china and asia pacific , and 3 ) europe , middle east , and africa , collectively referred to as the emea region . fiscal 2012 the view ahead for fiscal year 2012 , we expect moderate revenue growth driven by mid single-digit increased comparable store sales , new store openings and strong growth in the cpg business . licensed stores will comprise between one-half and two-thirds of new store openings in the americas , emea and china and asia pacific regions . we expect modest consolidated operating margin and eps improvement compared to fiscal 2011 , given our current revenue expectations , along with ongoing spend related to our expanding cpg in-house direct distribution model and higher commodity costs . we expect increased capital expenditures in fiscal 2012 compared to fiscal 2011 , reflecting additional investments in store renovations and in manufacturing capacity . operating segment overview through the end of fiscal 2011 , starbucks had three reportable operating segments : us , international , and cpg . our seattle 's best coffee operating segment is reported in other , along with our digital ventures business and unallocated corporate expenses that pertain to corporate administrative functions that support our operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments . the us and international segments both include company-operated stores and licensed retail stores . licensed stores generally have a higher operating margin than company-operated stores . under the licensed model , starbucks receives a reduced share of the total store revenues , but this is more than offset by the reduction in its share of costs as these are primarily borne by the licensee . the international segment has a higher relative share of licensed stores versus company-operated stores compared to the us segment ; however , the us segment has been operating significantly longer than the international segment and has developed deeper awareness of , and attachment to , the starbucks brand and stores among its customer base . as a result , the more mature us segment has significantly more stores , and higher total revenues than the international segment . average sales per store are also higher in the us due to various factors including length of time in market and local income levels . further , certain market costs , particularly occupancy costs , are lower in the us segment compared to the average for the international segment , which comprise a more diverse group of operations . as a result of the relative strength of the brand in the us segment , the number of stores , the higher unit volumes , and the lower market costs , the us segment , despite its higher relative percentage of company-operated stores , has a higher operating margin than the less-developed international segment . starbucks international store base continues to expand and we continue to focus on achieving sustainable growth from established international markets while at the same time investing in emerging markets , such as china . newer 23 international markets require a more extensive support organization , relative to the current levels of revenue and operating income . the cpg and seattle 's best coffee segments include packaged coffee and tea and other branded products operations worldwide , as well as the us foodservice business . in prior years through the first several months of fiscal 2011 , we sold a selection of starbucks and seattle 's best coffee branded packaged coffees and tazo ® teas in grocery and warehouse club stores throughout the us and to grocery stores in canada , the uk and other european countries through a distribution arrangement with kraft foods global , inc. kraft managed the distribution , marketing , advertising and promotion of these products as a part of that arrangement . story_separator_special_tag the increase in comparable store sales was due to a 5 % increase in transactions ( contributing approximately $ 78 million ) , and a 1 % increase in average value per transaction ( contributing approximately $ 21 million ) . cost of sales including occupancy costs as a percentage of total revenues decreased by 310 basis points compared to the prior year . the decrease was primarily driven by lower costs for food and beverage components resulting from supply chain efficiencies ( approximately 120 basis points ) . also contributing to the decrease were lower occupancy costs as a percentage of total net revenues ( approximately 120 basis points ) primarily due to sales leverage . store operating expenses as a percent of related retail revenues decreased 70 basis points primarily due to reduced impairments in fiscal 2010 compared to fiscal 2009. restructuring charges include lease exit and related costs associated with the actions to rationalize our global store portfolio . restructuring charges in fiscal 2010 decreased slightly from 2009 due to the completion of our restructuring efforts internationally by the end of fiscal 2010 . 32 global consumer products group replace_table_token_21_th cpg net revenues increased primarily due to the launch of starbucks via ® ready brew ( approximately $ 22 million ) and the extra week in fiscal 2010 ( approximately $ 16 million ) . operating margin decreased 480 basis points over the prior year due primarily to increased starbucks via ® ready brew launch expenses . other replace_table_token_22_th substantially all of net revenues in other are generated from the seattle 's best coffee operating segment . the increase in revenues for seattle 's best coffee was primarily due to sales to new national accounts ( contributing approximately $ 13 million ) . operating expenses included in other relate to seattle 's best coffee and digital ventures as well as expenses pertaining to corporate administrative functions that support our operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments . total operating expenses increased $ 40.5 million primarily as a result of increased general and administrative expenses ( $ 80 million ) primarily due to higher performance-based compensation in 2010. this increase was partially offset by a decrease of $ 58 million in restructuring charges due to the completion of our restructuring activities within the non-store support organization . 33 summarized quarterly financial information ( unaudited ; in millions , except eps ) replace_table_token_23_th ( 1 ) includes pretax restructuring charges of $ 18.3 million , $ 7.9 million , $ 20.4 million and $ 6.4 million for the first , second , third and fourth fiscal quarters respectively . financial condition , liquidity and capital resources investment overview starbucks cash and short-term investments were $ 2.1 billion and $ 1.4 billion and as of october 2 , 2011 and october 3 , 2010 , respectively . as of october 2 , 2011 , approximately $ 367.5 million of cash was held in foreign subsidiaries . of our cash held in foreign subsidiaries , $ 69.5 million is denominated in the us dollar . we actively manage our cash and short-term investments in order to internally fund operating needs domestically and internationally , make scheduled interest and principal payments on our borrowings , and return cash to shareholders through common stock cash dividend payments and share repurchases . our short-term investments consisted predominantly of us treasury securities , commercial paper , corporate bonds , and us agency securities . also included in our short-term investment portfolio are certificates of deposit placed through an account registry service ( cdars ) , with maturities ranging from 91 days to one year , which we began investing into during the fourth quarter of fiscal year 2011. the principal amounts of the individual certificates of deposit do not exceed the federal deposit insurance corporation limits . our portfolio of long-term available for sale securities consists predominantly of high investment-grade corporate bonds , diversified among industries and individual issuers , as well as certificates of deposits placed through cdars with maturities greater than 1 year . we also have investments in auction rate securities ( ars ) , all of which are classified as long-term . ars totaling $ 28 million and $ 41 million were outstanding as of october 2 , 2011 and october 3 , 2010 , respectively . the reduction in ars was due to $ 16 million in redemptions during the fiscal year , with all redemptions done at par . while the ongoing auction failures will limit the liquidity of these ars investments for some period of time , we do not believe this will materially impact our ability to fund our working capital needs , capital expenditures , shareholder dividends or other business requirements . borrowing capacity starbucks previous $ 1 billion unsecured credit facility ( the 2005 credit facility ) was available through november of 2010 , when we replaced the 2005 credit facility with a new $ 500 million unsecured credit facility ( the 2010 credit facility ) with various banks , of which $ 100 million may be used for issuances of letters of credit . the 2010 credit facility is available for working capital , capital expenditures and other corporate purposes , including acquisitions and share repurchases and is currently set to mature in november 2014. starbucks has the option , subject to negotiation and agreement with the related banks , to increase the maximum commitment amount by an additional $ 500 million . the interest rate for any borrowings under the credit facility , based on starbucks current ratings and fixed charge coverage ratio , is 1.075 % over libor . the specific spread over libor will depend upon 34 our long-term credit ratings assigned by moody 's and standard & poor 's rating agencies and our fixed charge coverage ratio . as with the
| liquidity and capital resources the company has incurred substantial operating losses and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable . as of december 31 , 2020 , the company had an accumulated deficit of $ 185.5 million . the company has funded its operations to date primarily through the sale of equity and its venture debt financing agreement ( the `` loan agreement '' ) with horizon technology finance corporation ( `` horizon '' ) , herein referred to as the `` horizon notes . '' in september 2020 , we repaid the horizon notes in full all amounts that were outstanding under the loan agreement , which was comprised of $ 15.0 million face value of the outstanding notes , $ 112,500 accrued and unpaid interest , a $ 750,000 loan termination fee and prepayment penalties of $ 550,000. the company expects to continue to use the proceeds from previous financing transactions primarily for general corporate purposes , including financing the company 's growth , developing new or existing product candidates , and funding capital expenditures , acquisitions and investments . the company currently anticipates that its cash and cash equivalents balances at december 31 , 2020 , are sufficient to fund its anticipated operating cash requirements for at least one year from the date of this form 10-k. from january 1 , 2021 through march 18 , 2021 , the company issued approximately 10.6 million shares of common stock at an average price of $ 4.24 per share for gross proceeds of $ 44.9 million under the atm agreement . the company will be required to expend significant funds in order to advance the development of its product candidates .
| 0 |
we are aggressively pursuing the profitable expansion opportunities that exist outside the us , including disciplined growth and scale in our more mature markets , and faster expansion in key emerging markets like china . our global consumer products group ( cpg ) represents another important profitable growth opportunity for us . during the second quarter , we successfully transitioned our packaged coffee and tea businesses to an in-house direct model , away from the previous distribution arrangement . this model now gives us total control over the sell-in and distribution to retailers of these products . we also aggressively pursued the opportunities beyond our more 22 traditional store experience to offer consumers new coffee and other products in multiple forms , across new categories , and through diverse channels , leveraging our strong brand and established retail store base . examples include the ongoing global expansion of our successful starbucks via ® ready brew product and starbucks- and tazo-branded k-cup ® portion packs which were added to the lineup at the start of fiscal 2012. cpg contributed 7 % of total net revenues in fiscal 2011. looking toward the future , we recently announced a reorganization of our leadership structure that took effect at the beginning of fiscal 2012. the new structure will enable us to accelerate our global , multi-brand , multi-channel strategy , and to leverage the talent , experience and expertise resident in our senior leadership team . in this new structure , one president will oversee all operations within each of three distinct regions with responsibility for the performance of company-operated stores , as well as for working with licensed and joint-venture business partners in each market within their respective region . the region president will also be responsible for working with starbucks global consumer products and foodservice teams to further develop those businesses and execute against our growth plan within the region . the three new regions will be 1 ) americas , inclusive of the us , canada , and latin america , 2 ) china and asia pacific , and 3 ) europe , middle east , and africa , collectively referred to as the emea region . fiscal 2012 the view ahead for fiscal year 2012 , we expect moderate revenue growth driven by mid single-digit increased comparable store sales , new store openings and strong growth in the cpg business . licensed stores will comprise between one-half and two-thirds of new store openings in the americas , emea and china and asia pacific regions . we expect modest consolidated operating margin and eps improvement compared to fiscal 2011 , given our current revenue expectations , along with ongoing spend related to our expanding cpg in-house direct distribution model and higher commodity costs . we expect increased capital expenditures in fiscal 2012 compared to fiscal 2011 , reflecting additional investments in store renovations and in manufacturing capacity . operating segment overview through the end of fiscal 2011 , starbucks had three reportable operating segments : us , international , and cpg . our seattle 's best coffee operating segment is reported in other , along with our digital ventures business and unallocated corporate expenses that pertain to corporate administrative functions that support our operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments . the us and international segments both include company-operated stores and licensed retail stores . licensed stores generally have a higher operating margin than company-operated stores . under the licensed model , starbucks receives a reduced share of the total store revenues , but this is more than offset by the reduction in its share of costs as these are primarily borne by the licensee . the international segment has a higher relative share of licensed stores versus company-operated stores compared to the us segment ; however , the us segment has been operating significantly longer than the international segment and has developed deeper awareness of , and attachment to , the starbucks brand and stores among its customer base . as a result , the more mature us segment has significantly more stores , and higher total revenues than the international segment . average sales per store are also higher in the us due to various factors including length of time in market and local income levels . further , certain market costs , particularly occupancy costs , are lower in the us segment compared to the average for the international segment , which comprise a more diverse group of operations . as a result of the relative strength of the brand in the us segment , the number of stores , the higher unit volumes , and the lower market costs , the us segment , despite its higher relative percentage of company-operated stores , has a higher operating margin than the less-developed international segment . starbucks international store base continues to expand and we continue to focus on achieving sustainable growth from established international markets while at the same time investing in emerging markets , such as china . newer 23 international markets require a more extensive support organization , relative to the current levels of revenue and operating income . the cpg and seattle 's best coffee segments include packaged coffee and tea and other branded products operations worldwide , as well as the us foodservice business . in prior years through the first several months of fiscal 2011 , we sold a selection of starbucks and seattle 's best coffee branded packaged coffees and tazo ® teas in grocery and warehouse club stores throughout the us and to grocery stores in canada , the uk and other european countries through a distribution arrangement with kraft foods global , inc. kraft managed the distribution , marketing , advertising and promotion of these products as a part of that arrangement . story_separator_special_tag the increase in comparable store sales was due to a 5 % increase in transactions ( contributing approximately $ 78 million ) , and a 1 % increase in average value per transaction ( contributing approximately $ 21 million ) . cost of sales including occupancy costs as a percentage of total revenues decreased by 310 basis points compared to the prior year . the decrease was primarily driven by lower costs for food and beverage components resulting from supply chain efficiencies ( approximately 120 basis points ) . also contributing to the decrease were lower occupancy costs as a percentage of total net revenues ( approximately 120 basis points ) primarily due to sales leverage . store operating expenses as a percent of related retail revenues decreased 70 basis points primarily due to reduced impairments in fiscal 2010 compared to fiscal 2009. restructuring charges include lease exit and related costs associated with the actions to rationalize our global store portfolio . restructuring charges in fiscal 2010 decreased slightly from 2009 due to the completion of our restructuring efforts internationally by the end of fiscal 2010 . 32 global consumer products group replace_table_token_21_th cpg net revenues increased primarily due to the launch of starbucks via ® ready brew ( approximately $ 22 million ) and the extra week in fiscal 2010 ( approximately $ 16 million ) . operating margin decreased 480 basis points over the prior year due primarily to increased starbucks via ® ready brew launch expenses . other replace_table_token_22_th substantially all of net revenues in other are generated from the seattle 's best coffee operating segment . the increase in revenues for seattle 's best coffee was primarily due to sales to new national accounts ( contributing approximately $ 13 million ) . operating expenses included in other relate to seattle 's best coffee and digital ventures as well as expenses pertaining to corporate administrative functions that support our operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments . total operating expenses increased $ 40.5 million primarily as a result of increased general and administrative expenses ( $ 80 million ) primarily due to higher performance-based compensation in 2010. this increase was partially offset by a decrease of $ 58 million in restructuring charges due to the completion of our restructuring activities within the non-store support organization . 33 summarized quarterly financial information ( unaudited ; in millions , except eps ) replace_table_token_23_th ( 1 ) includes pretax restructuring charges of $ 18.3 million , $ 7.9 million , $ 20.4 million and $ 6.4 million for the first , second , third and fourth fiscal quarters respectively . financial condition , liquidity and capital resources investment overview starbucks cash and short-term investments were $ 2.1 billion and $ 1.4 billion and as of october 2 , 2011 and october 3 , 2010 , respectively . as of october 2 , 2011 , approximately $ 367.5 million of cash was held in foreign subsidiaries . of our cash held in foreign subsidiaries , $ 69.5 million is denominated in the us dollar . we actively manage our cash and short-term investments in order to internally fund operating needs domestically and internationally , make scheduled interest and principal payments on our borrowings , and return cash to shareholders through common stock cash dividend payments and share repurchases . our short-term investments consisted predominantly of us treasury securities , commercial paper , corporate bonds , and us agency securities . also included in our short-term investment portfolio are certificates of deposit placed through an account registry service ( cdars ) , with maturities ranging from 91 days to one year , which we began investing into during the fourth quarter of fiscal year 2011. the principal amounts of the individual certificates of deposit do not exceed the federal deposit insurance corporation limits . our portfolio of long-term available for sale securities consists predominantly of high investment-grade corporate bonds , diversified among industries and individual issuers , as well as certificates of deposits placed through cdars with maturities greater than 1 year . we also have investments in auction rate securities ( ars ) , all of which are classified as long-term . ars totaling $ 28 million and $ 41 million were outstanding as of october 2 , 2011 and october 3 , 2010 , respectively . the reduction in ars was due to $ 16 million in redemptions during the fiscal year , with all redemptions done at par . while the ongoing auction failures will limit the liquidity of these ars investments for some period of time , we do not believe this will materially impact our ability to fund our working capital needs , capital expenditures , shareholder dividends or other business requirements . borrowing capacity starbucks previous $ 1 billion unsecured credit facility ( the 2005 credit facility ) was available through november of 2010 , when we replaced the 2005 credit facility with a new $ 500 million unsecured credit facility ( the 2010 credit facility ) with various banks , of which $ 100 million may be used for issuances of letters of credit . the 2010 credit facility is available for working capital , capital expenditures and other corporate purposes , including acquisitions and share repurchases and is currently set to mature in november 2014. starbucks has the option , subject to negotiation and agreement with the related banks , to increase the maximum commitment amount by an additional $ 500 million . the interest rate for any borrowings under the credit facility , based on starbucks current ratings and fixed charge coverage ratio , is 1.075 % over libor . the specific spread over libor will depend upon 34 our long-term credit ratings assigned by moody 's and standard & poor 's rating agencies and our fixed charge coverage ratio . as with the
| use of cash we expect to use our cash and short-term investments , including any potential future borrowings under the credit facility and commercial paper program , to invest in our core businesses , including new product innovations and related marketing support , as well as other new business opportunities related to our core businesses . we believe that future cash flows generated from operations and existing cash and short-term investments both domestically and internationally will be sufficient to finance capital requirements for our core businesses in those respective markets as well as shareholder distributions for the foreseeable future . however , in the event that we need to repatriate all or a portion of our international cash to the us we would be subject to additional us income taxes . we may use our available cash resources to make proportionate capital contributions to our equity method and cost method investees . we may also seek strategic acquisitions to leverage existing capabilities and further build our business in support of our growth agenda . acquisitions may include increasing our ownership interests in our equity method and cost method investees . any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy . significant new joint ventures , acquisitions and or other new business opportunities may require additional outside funding . other than normal operating expenses , cash requirements for fiscal 2012 are expected to consist primarily of capital expenditures for remodeling and refurbishment of , and equipment upgrades for , existing company-operated stores ; systems and technology investments in the stores and in the support infrastructure ; new company-operated stores ; and additional investments in manufacturing capacity .
| 1 |
33 results of operations year ended december 31 , 2013 as compared to year ended december 31 , 2012 replace_table_token_12_th net revenue net revenue for the fiscal year 2013 , was $ 118,391,783 , representing an increase of $ 16,690,901 or 16 % over the same period in 2012. this increase was primarily attributable to the increase of revenue from all of our segments , specifically , ( i ) revenue from our bromine segment increased from $ 56,332,785 for the fiscal year 2012 to $ 60,488,886 for the same period in 2013 , an increase of approximately 7 % ; ( ii ) revenue from our crude salt segment increased from $ 11,143,848 for the fiscal year 2012 to $ 13,790,128 for the same period in 2013 , an increase of approximately 24 % ; and ( iii ) revenue from our chemical products segment increased from $ 34,224,249 for the fiscal year 2012 to $ 44,112,769 for the same period in 2013 , an increase of approximately 29 % . replace_table_token_13_th replace_table_token_14_th replace_table_token_15_th 34 bromine segment the increase in net revenue from our bromine segment was mainly due to the increase in the sales volume . the sales volume of bromine increased from 17,467 tonnes for the fiscal year 2012 to 20,149 tonnes for the same period in 2013 , an increase of 15 % . the major reason for the increase in the sales volume of bromine was mainly attributable to the bromine price being currently at a lower level , and our customers increase of their bromine inventories . the average selling price of bromine decreased from $ 3,225 per tonne for the fiscal year 2012 to $ 3,002 per tonne for the same period in 2013 , a decrease of 7 % . the major reason for the decrease in the selling price of bromine was mainly due to the continuing macro-economic tightening policy imposed by the prc government beginning in the second half of 2011 to slow down the economy , which has affected our customers ' industries . as a result , we needed to offer competitive selling prices to our customers to compete with other bromine manufacturers . the average selling price remained relatively stable at around $ 3,000 per tonne from the first quarter of 2013 to the fourth quarter of 2013. we expect the average selling price of bromine to remain at current levels through the first quarter of 2014 should the prc government 's macro-economic tightening policy remain in place . the table below shows the changes in the average selling price and changes in the sales volume of bromine for the fiscal year 2013 from the same period in 2012. fiscal year decrease /increase in net revenue of bromine as a result of : 2013 vs. 2012 decrease in average selling price $ ( 4,193,996 ) increase in sales volume $ 8,350,097 total effect on net revenue of bromine $ 4,156,101 crude salt segment the increase in net revenue from our crude salt segment was due to the increase in both the average selling price and sales volume . the average selling price of crude salt increased from $ 37.50 per tonne for the fiscal year 2012 to $ 40.45 per tonne for the same period in 2013 , an increase of 8 % . the sales volume also increased by 15 % from 297,206 tonnes for the fiscal year 2012 to 340,943 tonnes for the same period in 2013. the increase in both the average selling price and sales volume was mainly due to stable demand as crude salt is a basic and elementary material for the chemical industry . we noted an upward trend in the average selling price of crude salt since the third quarter of 2011 due to stable demand of crude salt . the average selling price increased from $ 37.50 per tonne in the fiscal year 2012 to $ 40.45 per tonne in the fiscal year 2013. we expect the average selling price of crude salt to remain at current levels through the first quarter of 2014. the table below shows the changes in the average selling price and changes in the sales volume of crude salt for the fiscal year 2013 from the same period in 2012. fiscal year increase in net revenue of crude salt as a result of : 2013 vs. 2012 increase in average selling price $ 941,784 increase in sales volume $ 1,704,495 total effect on net revenue of crude salt $ 2,646,279 35 chemical products segment replace_table_token_16_th net revenue from our chemical products segment increased from $ 34,224,249 for the fiscal year 2012 to $ 44,112,770 for the same period in 2013 , an increase of approximately 29 % . the increase was attributable to the strong demand for all of our chemical products . our oil and gas exploration chemicals are the most popular products within the chemical products segment , which contributed $ 24,964,035 ( or 56 % ) and $ 18,721,374 ( or 55 % ) of our chemical segment revenue for the fiscal year 2013 and 2012 , respectively , with an increase of $ 6,242,662 , or 33 % . net revenue from our paper manufacturing additives increased from $ 3,317,077 for the fiscal year 2012 to $ 4,748,932 for the same period in 2013 , an increase of approximately 43 % . net revenue from our pesticides manufacturing additives increased from $ 12,185,799 for the fiscal year 2012 to $ 14,399,803 for the same period in 2013 , an increase of approximately 18 % . story_separator_special_tag net income was $ 20,967,357 for the fiscal year 2013 , an increase of $ 5,971,855 ( or approximately 40 % ) as compared to the same period in 2012. this increase was primarily attributable to the overall increase in demand for our products and gain on the relocation of original factory no.3 . effective tax rate . our effective tax rates for the fiscal years 2013 and 2012 were 27 % and 27 % , respectively . the effective tax rate for the fiscal year 2013 of 27 % differs from the prc statutory income tax rate of 25 % due to ( i ) the us federal net operating loss incurred by the company ( contributed 1 % gap ) . and ( ii ) non-deductible expense in connection with the unrealized exchange loss for the company ( contributed 1 % gap ) . the effective tax rate for the fiscal year 2012 of 27 % differs from the prc statutory income tax rate of 25 % due to the us federal net operating loss incurred by the company ( contributed 2 % gap ) . story_separator_special_tag capital expenditures during the next twelve months . we may not be able to identify , successfully integrate or profitably manage any businesses or business segment we may acquire , or any expansion of our business . an expansion may involve a number of risks , including possible adverse effects on our operating results , diversion of management 's attention , inability to retain key personnel , risks associated with unanticipated events and the financial statement effect of potential impairment of acquired intangible assets , any of which could have a materially adverse effect on our condition and results of operations . in addition , if competition for acquisition candidates or operations were to increase , the cost of acquiring businesses could increase materially . we may effect an acquisition with a target business which may be financially unstable , under-managed , or in its early stages of development or growth . in addition , if competition for acquisition candidates or operations were to increase , the cost of acquiring businesses could increase materially . our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects . contractual obligations and commitments we have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements . additional information regarding our contractual obligations and commitments at december 31 , 2013 is provided in the notes to our consolidated financial statements . see “ notes to consolidated financial statements , note 21 - capital commitment and operating lease commitments . ” material off-balance sheet arrangements we do not currently have any off-balance sheet arrangements falling within the definition of item 303 ( a ) of regulation s-k. critical accounting policies and estimates our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states of america ( u.s. gaap ) , which requires us to make judgments , estimates and assumptions . see “ note 1 – nature of business and summary of significant accounting policies , ” in notes to the consolidated financial statements , which is included in “ item 8. financial statements and supplementary data , ” which describes our significant accounting policies and methods used in the preparation of our consolidated financial statements . the methods , estimates and judgments that we use in applying our accounting policies require us to make difficult and subjective judgments , often as a result of the need to make estimates regarding matters that are inherently uncertain . 43 our most critical estimates include : allowance for doubtful accounts , which impacts revenue ; the valuation of inventory , which impacts gross margins ; impairment of long-lived assets ; the valuation and recognition of share-based compensation , which impacts operating expenses ; and the recognition and measurement of current and deferred income taxes , which impact our provision for taxes . allowance for doubtful accounts we makes estimates of the uncollectibility of accounts receivable , especially analyzing accounts receivable and historical bad debts , customer concentrations , customer credit-worthiness , current economic trends and changes in customer payment terms , when evaluating the adequacy of the allowance for doubtful accounts . credit evaluations are undertaken for all major sale transactions before shipment is authorized . on a quarterly basis , we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts . if management were to make different judgments or utilize different estimates , material differences in the amount of our reported operating expenses could result . inventory valuation inventory is stated at the lower of cost or market , with cost determined on a first-in first-out basis . the carrying value of inventory is reduced for estimated obsolescence by the difference between its cost and the estimated market value based upon assumptions about future demand . we evaluate the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand . if actual future demand or market conditions are less favorable than those projected by management , additional inventory write-downs may be required in the future , which could have a material adverse effect on our results of operations . depreciation of property , plant and equipment property , plant and equipment are stated at cost less accumulated depreciation and any impairment losses . expenditures for new facilities or equipment , and major expenditures for betterment of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives . all other ordinary repair and maintenance costs are expensed as incurred . mineral rights are recorded at cost less accumulated depreciation and any impairment losses .
| use of cash we expect to use our cash and short-term investments , including any potential future borrowings under the credit facility and commercial paper program , to invest in our core businesses , including new product innovations and related marketing support , as well as other new business opportunities related to our core businesses . we believe that future cash flows generated from operations and existing cash and short-term investments both domestically and internationally will be sufficient to finance capital requirements for our core businesses in those respective markets as well as shareholder distributions for the foreseeable future . however , in the event that we need to repatriate all or a portion of our international cash to the us we would be subject to additional us income taxes . we may use our available cash resources to make proportionate capital contributions to our equity method and cost method investees . we may also seek strategic acquisitions to leverage existing capabilities and further build our business in support of our growth agenda . acquisitions may include increasing our ownership interests in our equity method and cost method investees . any decisions to increase such ownership interests will be driven by valuation and fit with our ownership strategy . significant new joint ventures , acquisitions and or other new business opportunities may require additional outside funding . other than normal operating expenses , cash requirements for fiscal 2012 are expected to consist primarily of capital expenditures for remodeling and refurbishment of , and equipment upgrades for , existing company-operated stores ; systems and technology investments in the stores and in the support infrastructure ; new company-operated stores ; and additional investments in manufacturing capacity .
| 0 |
33 results of operations year ended december 31 , 2013 as compared to year ended december 31 , 2012 replace_table_token_12_th net revenue net revenue for the fiscal year 2013 , was $ 118,391,783 , representing an increase of $ 16,690,901 or 16 % over the same period in 2012. this increase was primarily attributable to the increase of revenue from all of our segments , specifically , ( i ) revenue from our bromine segment increased from $ 56,332,785 for the fiscal year 2012 to $ 60,488,886 for the same period in 2013 , an increase of approximately 7 % ; ( ii ) revenue from our crude salt segment increased from $ 11,143,848 for the fiscal year 2012 to $ 13,790,128 for the same period in 2013 , an increase of approximately 24 % ; and ( iii ) revenue from our chemical products segment increased from $ 34,224,249 for the fiscal year 2012 to $ 44,112,769 for the same period in 2013 , an increase of approximately 29 % . replace_table_token_13_th replace_table_token_14_th replace_table_token_15_th 34 bromine segment the increase in net revenue from our bromine segment was mainly due to the increase in the sales volume . the sales volume of bromine increased from 17,467 tonnes for the fiscal year 2012 to 20,149 tonnes for the same period in 2013 , an increase of 15 % . the major reason for the increase in the sales volume of bromine was mainly attributable to the bromine price being currently at a lower level , and our customers increase of their bromine inventories . the average selling price of bromine decreased from $ 3,225 per tonne for the fiscal year 2012 to $ 3,002 per tonne for the same period in 2013 , a decrease of 7 % . the major reason for the decrease in the selling price of bromine was mainly due to the continuing macro-economic tightening policy imposed by the prc government beginning in the second half of 2011 to slow down the economy , which has affected our customers ' industries . as a result , we needed to offer competitive selling prices to our customers to compete with other bromine manufacturers . the average selling price remained relatively stable at around $ 3,000 per tonne from the first quarter of 2013 to the fourth quarter of 2013. we expect the average selling price of bromine to remain at current levels through the first quarter of 2014 should the prc government 's macro-economic tightening policy remain in place . the table below shows the changes in the average selling price and changes in the sales volume of bromine for the fiscal year 2013 from the same period in 2012. fiscal year decrease /increase in net revenue of bromine as a result of : 2013 vs. 2012 decrease in average selling price $ ( 4,193,996 ) increase in sales volume $ 8,350,097 total effect on net revenue of bromine $ 4,156,101 crude salt segment the increase in net revenue from our crude salt segment was due to the increase in both the average selling price and sales volume . the average selling price of crude salt increased from $ 37.50 per tonne for the fiscal year 2012 to $ 40.45 per tonne for the same period in 2013 , an increase of 8 % . the sales volume also increased by 15 % from 297,206 tonnes for the fiscal year 2012 to 340,943 tonnes for the same period in 2013. the increase in both the average selling price and sales volume was mainly due to stable demand as crude salt is a basic and elementary material for the chemical industry . we noted an upward trend in the average selling price of crude salt since the third quarter of 2011 due to stable demand of crude salt . the average selling price increased from $ 37.50 per tonne in the fiscal year 2012 to $ 40.45 per tonne in the fiscal year 2013. we expect the average selling price of crude salt to remain at current levels through the first quarter of 2014. the table below shows the changes in the average selling price and changes in the sales volume of crude salt for the fiscal year 2013 from the same period in 2012. fiscal year increase in net revenue of crude salt as a result of : 2013 vs. 2012 increase in average selling price $ 941,784 increase in sales volume $ 1,704,495 total effect on net revenue of crude salt $ 2,646,279 35 chemical products segment replace_table_token_16_th net revenue from our chemical products segment increased from $ 34,224,249 for the fiscal year 2012 to $ 44,112,770 for the same period in 2013 , an increase of approximately 29 % . the increase was attributable to the strong demand for all of our chemical products . our oil and gas exploration chemicals are the most popular products within the chemical products segment , which contributed $ 24,964,035 ( or 56 % ) and $ 18,721,374 ( or 55 % ) of our chemical segment revenue for the fiscal year 2013 and 2012 , respectively , with an increase of $ 6,242,662 , or 33 % . net revenue from our paper manufacturing additives increased from $ 3,317,077 for the fiscal year 2012 to $ 4,748,932 for the same period in 2013 , an increase of approximately 43 % . net revenue from our pesticides manufacturing additives increased from $ 12,185,799 for the fiscal year 2012 to $ 14,399,803 for the same period in 2013 , an increase of approximately 18 % . story_separator_special_tag net income was $ 20,967,357 for the fiscal year 2013 , an increase of $ 5,971,855 ( or approximately 40 % ) as compared to the same period in 2012. this increase was primarily attributable to the overall increase in demand for our products and gain on the relocation of original factory no.3 . effective tax rate . our effective tax rates for the fiscal years 2013 and 2012 were 27 % and 27 % , respectively . the effective tax rate for the fiscal year 2013 of 27 % differs from the prc statutory income tax rate of 25 % due to ( i ) the us federal net operating loss incurred by the company ( contributed 1 % gap ) . and ( ii ) non-deductible expense in connection with the unrealized exchange loss for the company ( contributed 1 % gap ) . the effective tax rate for the fiscal year 2012 of 27 % differs from the prc statutory income tax rate of 25 % due to the us federal net operating loss incurred by the company ( contributed 2 % gap ) . story_separator_special_tag capital expenditures during the next twelve months . we may not be able to identify , successfully integrate or profitably manage any businesses or business segment we may acquire , or any expansion of our business . an expansion may involve a number of risks , including possible adverse effects on our operating results , diversion of management 's attention , inability to retain key personnel , risks associated with unanticipated events and the financial statement effect of potential impairment of acquired intangible assets , any of which could have a materially adverse effect on our condition and results of operations . in addition , if competition for acquisition candidates or operations were to increase , the cost of acquiring businesses could increase materially . we may effect an acquisition with a target business which may be financially unstable , under-managed , or in its early stages of development or growth . in addition , if competition for acquisition candidates or operations were to increase , the cost of acquiring businesses could increase materially . our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects . contractual obligations and commitments we have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements . additional information regarding our contractual obligations and commitments at december 31 , 2013 is provided in the notes to our consolidated financial statements . see “ notes to consolidated financial statements , note 21 - capital commitment and operating lease commitments . ” material off-balance sheet arrangements we do not currently have any off-balance sheet arrangements falling within the definition of item 303 ( a ) of regulation s-k. critical accounting policies and estimates our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states of america ( u.s. gaap ) , which requires us to make judgments , estimates and assumptions . see “ note 1 – nature of business and summary of significant accounting policies , ” in notes to the consolidated financial statements , which is included in “ item 8. financial statements and supplementary data , ” which describes our significant accounting policies and methods used in the preparation of our consolidated financial statements . the methods , estimates and judgments that we use in applying our accounting policies require us to make difficult and subjective judgments , often as a result of the need to make estimates regarding matters that are inherently uncertain . 43 our most critical estimates include : allowance for doubtful accounts , which impacts revenue ; the valuation of inventory , which impacts gross margins ; impairment of long-lived assets ; the valuation and recognition of share-based compensation , which impacts operating expenses ; and the recognition and measurement of current and deferred income taxes , which impact our provision for taxes . allowance for doubtful accounts we makes estimates of the uncollectibility of accounts receivable , especially analyzing accounts receivable and historical bad debts , customer concentrations , customer credit-worthiness , current economic trends and changes in customer payment terms , when evaluating the adequacy of the allowance for doubtful accounts . credit evaluations are undertaken for all major sale transactions before shipment is authorized . on a quarterly basis , we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts . if management were to make different judgments or utilize different estimates , material differences in the amount of our reported operating expenses could result . inventory valuation inventory is stated at the lower of cost or market , with cost determined on a first-in first-out basis . the carrying value of inventory is reduced for estimated obsolescence by the difference between its cost and the estimated market value based upon assumptions about future demand . we evaluate the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand . if actual future demand or market conditions are less favorable than those projected by management , additional inventory write-downs may be required in the future , which could have a material adverse effect on our results of operations . depreciation of property , plant and equipment property , plant and equipment are stated at cost less accumulated depreciation and any impairment losses . expenditures for new facilities or equipment , and major expenditures for betterment of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives . all other ordinary repair and maintenance costs are expensed as incurred . mineral rights are recorded at cost less accumulated depreciation and any impairment losses .
| liquidity and capital resources as of december 31 , 2013 , cash and cash equivalents were $ 107,828,800 as compared to $ 65,241,035 as of december 31 , 2012. the components of this increase of $ 42,587,765 are reflected below . replace_table_token_23_th for the fiscal years 2013 and 2012 , we met our working capital and capital investment requirements mainly by using cash flows from operations and cash on hand . the company intends to continue to explore opportunities relating to bromine asset purchases and new bromine resource development . net cash provided by operating activities during the years ended december 31 , 2013 and 2012 , we had positive cash flow from operating activities of $ 40.2 million and $ 24.8 million respectively , primarily attributable to net income . 40 during the year ended december 31 , 2013 , cash flow from operating activities of $ 40.2 million exceeded our net income of $ 21.0 million due to non-cash charges in the amount of $ 26.1 million , mainly in the form of depreciation and amortization of property , plant and equipment , exchange loss on intercompany balances and stock-based compensation ; partially offset by cash used in working capital of $ 6.9 million , which mainly consisted of increase in accounts receivable and a decrease in retention payable and accounts payable , partially offset by the increase in taxes payable . during the year ended december 31 , 2012 , cash flow from operating activities of $ 24.8 million exceeded our net income of $ 15.0 million due to non-cash charges in the amount of $ 26.1 million , mainly in the form of stock-based compensation , depreciation and amortization of property , plant and equipment and write-off/impairment loss on property , plant and equipment , partially offset by cash used in working capital of $ 16.4 million for the fiscal year 2012 , mainly comprising accounts receivable , inventory and tax paid . accounts receivable cash collections on our accounts receivable had a major impact on our overall liquidity .
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we have also formed a new dental professional advisory board , made up of four founding members , who have made significant contributions to the specialties of periodontics , implantology , oral surgery , multi-stage restorative therapy , and peri-implantitis therapy . our goal is to refocus our energies on strengthening leadership , worldwide competitiveness and our professional customers and their patients . we completed two private placements in the latter half of 2014 totaling in net proceeds after offering expenses , of approximately $ 46.3 million . we used a portion of the proceeds to repay our lines of credit in july 2014. the remainder of the proceeds is being used for working capital and general corporate purposes . prior to these infusions of capital , the available borrowing capacity on our lines of credit with comerica bank and the net proceeds from the february 2014 equity transaction have been principal sources of liquidity during the first half of 2014. on april 10 , 2014 , we entered into a forbearance agreement that reduced our total aggregate available borrowings to $ 4.0 million . on may 5 , 2014 , june 3 , 2014 and july 9 , 2014 , we amended the forbearance agreement to extend the forbearance periods and paid fees associated with such amendments . on july 28 , 2014 , we paid in full all amounts due under the revolving lines of credit , including principal , accrued interest , and fees which totaled , in the aggregate , approximately $ 2.9 million , and the credit agreements were terminated . further discussion of the amendments is included in note 5 to the consolidated financial statements in part iv , item 15 of this annual report on form 10-k , which is incorporated herein by reference . 40 critical accounting policies the preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the united states requires us to make judgments , assumptions , and estimates that affect the amounts reported . the following is a summary of those accounting policies that we believe are necessary to understand and evaluate our reported financial results . revenue recognition . we sell our products in north america directly to customers through our direct sales force and through non-exclusive distributors . we sell our products internationally through exclusive and non-exclusive distributors as well as directly to customers in certain countries . sales are recorded upon shipment from our facility and payment of our invoices is generally due within 90 days or less . internationally , we primarily sell products through independent distributors . we record revenue based on four basic criteria that must be met before revenue can be recognized : ( i ) persuasive evidence of an arrangement exists ; ( ii ) delivery has occurred and title and the risks and rewards of ownership have been transferred to our customer , or services have been rendered ; ( iii ) the price is fixed or determinable ; and ( iv ) collectability is reasonably assured . revenue is recorded for all sales upon shipment assuming all other revenue recognition criteria are met . sales of our laser systems include separate deliverables consisting of the product , disposables used with the laser systems , installation , and training . we apply the relative selling price method , which requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method . this requires us to use estimated selling prices of each of the deliverables in the total arrangement . the sum of those prices is then compared to the arrangement , and any difference is applied to the separate deliverable ratably . this method also establishes a selling price hierarchy for determining the selling price of a deliverable , which includes : ( i ) vendor-specific objective evidence ( “ vsoe ” ) , if available , ( ii ) third-party evidence if vsoe is not available , and ( iii ) estimated selling price if neither vsoe nor third-party evidence is available . vsoe is determined based on the value we sell the undelivered element to a customer as a stand-alone product . revenue attributable to the undelivered elements is included in deferred revenue when the product is shipped and is recognized when the related service is performed . disposables not shipped at time of sale and installation services are typically shipped or installed within 30 days . training is included in deferred revenue when the product is shipped and is recognized when the related service is performed or upon the approximate expiration of time offered under the agreement . the adoption of the relative selling price method does not significantly change the value of revenue recognized . key judgments related to our revenue recognition include the collectability of payment from the customer , the satisfaction of all elements of the arrangement having been delivered , and that no additional customer credits and discounts are needed . we evaluate a customer 's credit-worthiness prior to the shipment of the product . based on our assessment of the available credit information , we may determine the credit risk is higher than normally acceptable , and we will either decline the purchase or defer the revenue until payment is reasonably assured . future obligations required at the time of sale may also cause us to defer the revenue until the obligation is satisfied . although all sales are final , we accept returns of products in certain , limited circumstances and record a provision for sales returns based on historical experience concurrent with the recognition of revenue . the sales returns allowance is recorded as a reduction of accounts receivable and revenue . story_separator_special_tag in connection with our initiative to measure and improve customer satisfaction , the warranty for waterlase systems purchased after january 1 , 2014 was extended from one year to two years , which added $ 519,000 to the cost of revenue during fiscal 2014. in the third quarter of fiscal 2013 , we recorded a provision of $ 1.0 million for excess and obsolete inventory related to negative market trends for certain products and the decreased velocity of certain elements of our inventory at that time . as a result , cost of revenue as a percentage of net revenue , remained consistent between fiscal 2014 and fiscal 2013 despite the decline in sales . gross profit . gross profit for fiscal 2014 was $ 18.2 million , or 38 % of net revenue , a decrease of approximately $ 3.4 million , or 16 % , as compared with gross profit of $ 21.5 million , or 38 % of net revenue , for fiscal 2013. gross profit for fiscal 2014 , as a percentage of net revenue , was consistent with fiscal 2013. operating expenses . operating expenses for fiscal 2014 were $ 36.1 million , or 76 % of net revenue , an increase of approximately $ 3.6 million , or 11 % , as compared with $ 32.5 million , or 58 % of net revenue , for fiscal 2013. we expect that operating expenses as a percentage of net revenue will decrease for the year ending december 31 , 2015 ( “ fiscal 2015 ” ) . the year-over-year increase in expense is explained in the following expense categories : 45 sales and marketing expense . sales and marketing expenses for fiscal 2014 decreased by $ 2.3 million , or 12 % , to $ 16.4 million , or 34 % of net revenue , as compared with $ 18.7 million , or 33 % of net revenue , for fiscal 2013. the decrease was primarily a result of decreased convention related expenses of $ 1.3 million , decreased commission expenses of $ 938,000 , and decreased media and advertising expenses of $ 923,000 , partially offset by increased payroll and consulting related expenses of $ 699,000. the mid-year shareholder litigation brought distractions and disruptions within management and the marketplace in connection with such litigation , as well as a lack of sales management . due to the working capital required for legal expenditures and professional fees in connection with the shareholder litigation , management made the decision to reduce sales and marketing expenditures . beginning in the second half of 2014 , we appointed new key personnel to lead our sales and marketing department , including a new senior vice president of worldwide sales and account management as well as a new vice president and chief marketing officer . furthermore , in the fourth quarter of 2014 , we enhanced our sales force domestically and internationally . as we continue to transform and sustain growth , we expect sales and marketing expenses to increase in fiscal 2015. general and administrative expense . general and administrative expenses for fiscal 2014 increased by $ 5.5 million , or 58 % , to $ 14.9 million , or 31 % of net revenue , as compared with $ 9.4 million , or 17 % of net revenue , for fiscal 2013. the increase to general and administrative expenses was primarily due to increased legal expenses and professional fees of $ 4.2 million , increased payroll and consulting related expenses of $ 520,000 , and an increase to our provision for doubtful accounts of $ 1.0 million , partially offset by decreased patent and patent defense costs of $ 297,000. we incurred legal expenses and professional fees of approximately $ 4.3 million at the direction of our former chairman and ceo in the shareholder litigation brought by oracle to resolve the dispute over our corporate governance and the composition of our board , as well as the proxy contest and new litigation , brought by the former chairman and ceo in july 2014 , which litigation was subsequently dismissed . we believe that the legal expenses and professional fees we incurred in 2014 are atypical and expect these expenses to decrease in fiscal 2015. engineering and development expense . engineering and development expenses for fiscal 2014 increased by $ 548,000 , or 14 % , to $ 4.6 million , or 10 % of net revenue , as compared with $ 4.0 million , or 7 % of net revenue , for fiscal 2013. the increase was primarily related to increased payroll , consulting and temporary labor expenses of $ 524,000 resulting from our efforts to accelerate innovation of our products and technologies beginning in the third quarter of fiscal 2014. we expect to increase our investment in engineering and development as we continue our efforts in new product development in the future . excise tax expense . beginning in 2013 , the affordable care act imposed a 2.3 % medical device excise tax on certain product sales to customers located in the u.s. excise tax expenses for fiscal 2014 was $ 307,000 , or 1 % of net revenue , as compared with $ 438,000 , or 1 % of net revenue , for fiscal 2013. the decrease of $ 131,000 , or 30 % , was directly associated with our decreased sales in the u.s. non-operating income ( loss ) ( loss ) gain on foreign currency transactions . we recognized a $ 415,000 loss on foreign currency transactions for fiscal 2014 compared to a $ 50,000 loss for fiscal 2013 due to exchange rate fluctuations primarily between the u.s. dollar and the euro . during fiscal 2014 , the euro fell approximately 12 % in translation value against the u.s. dollar . interest expense , net . interest expense consists primarily of interest on our revolving credit facilities , amortization of debt issuance costs and
| liquidity and capital resources as of december 31 , 2013 , cash and cash equivalents were $ 107,828,800 as compared to $ 65,241,035 as of december 31 , 2012. the components of this increase of $ 42,587,765 are reflected below . replace_table_token_23_th for the fiscal years 2013 and 2012 , we met our working capital and capital investment requirements mainly by using cash flows from operations and cash on hand . the company intends to continue to explore opportunities relating to bromine asset purchases and new bromine resource development . net cash provided by operating activities during the years ended december 31 , 2013 and 2012 , we had positive cash flow from operating activities of $ 40.2 million and $ 24.8 million respectively , primarily attributable to net income . 40 during the year ended december 31 , 2013 , cash flow from operating activities of $ 40.2 million exceeded our net income of $ 21.0 million due to non-cash charges in the amount of $ 26.1 million , mainly in the form of depreciation and amortization of property , plant and equipment , exchange loss on intercompany balances and stock-based compensation ; partially offset by cash used in working capital of $ 6.9 million , which mainly consisted of increase in accounts receivable and a decrease in retention payable and accounts payable , partially offset by the increase in taxes payable . during the year ended december 31 , 2012 , cash flow from operating activities of $ 24.8 million exceeded our net income of $ 15.0 million due to non-cash charges in the amount of $ 26.1 million , mainly in the form of stock-based compensation , depreciation and amortization of property , plant and equipment and write-off/impairment loss on property , plant and equipment , partially offset by cash used in working capital of $ 16.4 million for the fiscal year 2012 , mainly comprising accounts receivable , inventory and tax paid . accounts receivable cash collections on our accounts receivable had a major impact on our overall liquidity .
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we have also formed a new dental professional advisory board , made up of four founding members , who have made significant contributions to the specialties of periodontics , implantology , oral surgery , multi-stage restorative therapy , and peri-implantitis therapy . our goal is to refocus our energies on strengthening leadership , worldwide competitiveness and our professional customers and their patients . we completed two private placements in the latter half of 2014 totaling in net proceeds after offering expenses , of approximately $ 46.3 million . we used a portion of the proceeds to repay our lines of credit in july 2014. the remainder of the proceeds is being used for working capital and general corporate purposes . prior to these infusions of capital , the available borrowing capacity on our lines of credit with comerica bank and the net proceeds from the february 2014 equity transaction have been principal sources of liquidity during the first half of 2014. on april 10 , 2014 , we entered into a forbearance agreement that reduced our total aggregate available borrowings to $ 4.0 million . on may 5 , 2014 , june 3 , 2014 and july 9 , 2014 , we amended the forbearance agreement to extend the forbearance periods and paid fees associated with such amendments . on july 28 , 2014 , we paid in full all amounts due under the revolving lines of credit , including principal , accrued interest , and fees which totaled , in the aggregate , approximately $ 2.9 million , and the credit agreements were terminated . further discussion of the amendments is included in note 5 to the consolidated financial statements in part iv , item 15 of this annual report on form 10-k , which is incorporated herein by reference . 40 critical accounting policies the preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the united states requires us to make judgments , assumptions , and estimates that affect the amounts reported . the following is a summary of those accounting policies that we believe are necessary to understand and evaluate our reported financial results . revenue recognition . we sell our products in north america directly to customers through our direct sales force and through non-exclusive distributors . we sell our products internationally through exclusive and non-exclusive distributors as well as directly to customers in certain countries . sales are recorded upon shipment from our facility and payment of our invoices is generally due within 90 days or less . internationally , we primarily sell products through independent distributors . we record revenue based on four basic criteria that must be met before revenue can be recognized : ( i ) persuasive evidence of an arrangement exists ; ( ii ) delivery has occurred and title and the risks and rewards of ownership have been transferred to our customer , or services have been rendered ; ( iii ) the price is fixed or determinable ; and ( iv ) collectability is reasonably assured . revenue is recorded for all sales upon shipment assuming all other revenue recognition criteria are met . sales of our laser systems include separate deliverables consisting of the product , disposables used with the laser systems , installation , and training . we apply the relative selling price method , which requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method . this requires us to use estimated selling prices of each of the deliverables in the total arrangement . the sum of those prices is then compared to the arrangement , and any difference is applied to the separate deliverable ratably . this method also establishes a selling price hierarchy for determining the selling price of a deliverable , which includes : ( i ) vendor-specific objective evidence ( “ vsoe ” ) , if available , ( ii ) third-party evidence if vsoe is not available , and ( iii ) estimated selling price if neither vsoe nor third-party evidence is available . vsoe is determined based on the value we sell the undelivered element to a customer as a stand-alone product . revenue attributable to the undelivered elements is included in deferred revenue when the product is shipped and is recognized when the related service is performed . disposables not shipped at time of sale and installation services are typically shipped or installed within 30 days . training is included in deferred revenue when the product is shipped and is recognized when the related service is performed or upon the approximate expiration of time offered under the agreement . the adoption of the relative selling price method does not significantly change the value of revenue recognized . key judgments related to our revenue recognition include the collectability of payment from the customer , the satisfaction of all elements of the arrangement having been delivered , and that no additional customer credits and discounts are needed . we evaluate a customer 's credit-worthiness prior to the shipment of the product . based on our assessment of the available credit information , we may determine the credit risk is higher than normally acceptable , and we will either decline the purchase or defer the revenue until payment is reasonably assured . future obligations required at the time of sale may also cause us to defer the revenue until the obligation is satisfied . although all sales are final , we accept returns of products in certain , limited circumstances and record a provision for sales returns based on historical experience concurrent with the recognition of revenue . the sales returns allowance is recorded as a reduction of accounts receivable and revenue . story_separator_special_tag in connection with our initiative to measure and improve customer satisfaction , the warranty for waterlase systems purchased after january 1 , 2014 was extended from one year to two years , which added $ 519,000 to the cost of revenue during fiscal 2014. in the third quarter of fiscal 2013 , we recorded a provision of $ 1.0 million for excess and obsolete inventory related to negative market trends for certain products and the decreased velocity of certain elements of our inventory at that time . as a result , cost of revenue as a percentage of net revenue , remained consistent between fiscal 2014 and fiscal 2013 despite the decline in sales . gross profit . gross profit for fiscal 2014 was $ 18.2 million , or 38 % of net revenue , a decrease of approximately $ 3.4 million , or 16 % , as compared with gross profit of $ 21.5 million , or 38 % of net revenue , for fiscal 2013. gross profit for fiscal 2014 , as a percentage of net revenue , was consistent with fiscal 2013. operating expenses . operating expenses for fiscal 2014 were $ 36.1 million , or 76 % of net revenue , an increase of approximately $ 3.6 million , or 11 % , as compared with $ 32.5 million , or 58 % of net revenue , for fiscal 2013. we expect that operating expenses as a percentage of net revenue will decrease for the year ending december 31 , 2015 ( “ fiscal 2015 ” ) . the year-over-year increase in expense is explained in the following expense categories : 45 sales and marketing expense . sales and marketing expenses for fiscal 2014 decreased by $ 2.3 million , or 12 % , to $ 16.4 million , or 34 % of net revenue , as compared with $ 18.7 million , or 33 % of net revenue , for fiscal 2013. the decrease was primarily a result of decreased convention related expenses of $ 1.3 million , decreased commission expenses of $ 938,000 , and decreased media and advertising expenses of $ 923,000 , partially offset by increased payroll and consulting related expenses of $ 699,000. the mid-year shareholder litigation brought distractions and disruptions within management and the marketplace in connection with such litigation , as well as a lack of sales management . due to the working capital required for legal expenditures and professional fees in connection with the shareholder litigation , management made the decision to reduce sales and marketing expenditures . beginning in the second half of 2014 , we appointed new key personnel to lead our sales and marketing department , including a new senior vice president of worldwide sales and account management as well as a new vice president and chief marketing officer . furthermore , in the fourth quarter of 2014 , we enhanced our sales force domestically and internationally . as we continue to transform and sustain growth , we expect sales and marketing expenses to increase in fiscal 2015. general and administrative expense . general and administrative expenses for fiscal 2014 increased by $ 5.5 million , or 58 % , to $ 14.9 million , or 31 % of net revenue , as compared with $ 9.4 million , or 17 % of net revenue , for fiscal 2013. the increase to general and administrative expenses was primarily due to increased legal expenses and professional fees of $ 4.2 million , increased payroll and consulting related expenses of $ 520,000 , and an increase to our provision for doubtful accounts of $ 1.0 million , partially offset by decreased patent and patent defense costs of $ 297,000. we incurred legal expenses and professional fees of approximately $ 4.3 million at the direction of our former chairman and ceo in the shareholder litigation brought by oracle to resolve the dispute over our corporate governance and the composition of our board , as well as the proxy contest and new litigation , brought by the former chairman and ceo in july 2014 , which litigation was subsequently dismissed . we believe that the legal expenses and professional fees we incurred in 2014 are atypical and expect these expenses to decrease in fiscal 2015. engineering and development expense . engineering and development expenses for fiscal 2014 increased by $ 548,000 , or 14 % , to $ 4.6 million , or 10 % of net revenue , as compared with $ 4.0 million , or 7 % of net revenue , for fiscal 2013. the increase was primarily related to increased payroll , consulting and temporary labor expenses of $ 524,000 resulting from our efforts to accelerate innovation of our products and technologies beginning in the third quarter of fiscal 2014. we expect to increase our investment in engineering and development as we continue our efforts in new product development in the future . excise tax expense . beginning in 2013 , the affordable care act imposed a 2.3 % medical device excise tax on certain product sales to customers located in the u.s. excise tax expenses for fiscal 2014 was $ 307,000 , or 1 % of net revenue , as compared with $ 438,000 , or 1 % of net revenue , for fiscal 2013. the decrease of $ 131,000 , or 30 % , was directly associated with our decreased sales in the u.s. non-operating income ( loss ) ( loss ) gain on foreign currency transactions . we recognized a $ 415,000 loss on foreign currency transactions for fiscal 2014 compared to a $ 50,000 loss for fiscal 2013 due to exchange rate fluctuations primarily between the u.s. dollar and the euro . during fiscal 2014 , the euro fell approximately 12 % in translation value against the u.s. dollar . interest expense , net . interest expense consists primarily of interest on our revolving credit facilities , amortization of debt issuance costs and
| liquidity and capital resources at december 31 , 2014 , we had approximately $ 31.6 million in cash and cash equivalents . management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased . the increase in our cash and cash equivalents by $ 30.1 million from december 31 , 2013 was primarily due to cash provided by financing activities of $ 46.8 million , partially offset by net cash used in operating and investing activities of $ 16.2 million and $ 197,000 , respectively , and the effect of exchange rates on cash of $ 234,000. at december 31 , 2014 , we had approximately $ 38.6 million in working capital . our principal sources of liquidity at december 31 , 2014 , consisted of approximately $ 31.6 million in cash and cash equivalents and $ 9.0 million of net accounts receivable . on november 7 , 2014 , we completed a private placement with several institutional and individual investors , including certain of our directors and officers , under which we agreed to sell an aggregate of 14,162,873 unregistered shares of our common stock at the price of $ 2.39 per share , the closing price of our common stock on november 3 , 2014 , and warrants to purchase up to an aggregate of 9,205,862 unregistered shares of our common stock at an exercise price of $ 4.00 per share . gross proceeds from the sale were $ 35.0 million , and net proceeds , after offering expenses of approximately $ 235,000 , were approximately $ 34.8 million . the warrants become exercisable on may 7 , 2015 , six months after the closing of the private placement , and have a term of three years from the date of issuance . the proceeds are being used for working capital and general corporate purposes . on july 22 , 2014 , we entered into a private placement with several institutional and individual investors , and several of our directors and officers , wherein we sold 6,250,000 unregistered shares of common stock at a price of $ 1.92 per share .
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during 2014 , we committed to a plan to sell our international technology business and our hospital automation business from our technology solutions segment and certain small businesses from our distribution solutions segment . in the third quarter of 2014 , we recorded a non-cash pre-tax and after-tax impairment charge of $ 80 million to reduce the carrying value of our international technology business to its estimated net realizable value ( fair value less costs to sell ) . net income attributable to mckesson corporation was $ 1,263 million , $ 1,338 million and $ 1,403 million in 2014 , 2013 and 2012 , and diluted earnings per common share attributable to mckesson corporation were $ 5.41 , $ 5.59 and $ 5.59 . diluted earnings per common share attributable to mckesson corporation were favorably affected by decreases in our weighted average shares outstanding primarily due to the cumulative effect of share repurchases . on february 6 , 2014 , we completed the acquisition of 77.6 % of the then outstanding common shares of celesio and certain convertible bonds of celesio for cash consideration of $ 4.5 billion , net of cash acquired . upon the acquisition , our ownership of celesio 's fully diluted shares was 75.6 % and as required , we consolidated celesio 's debt with a fair value of $ 2.3 billion as a liability on our consolidated balance sheet . at march 31 , 2014 , we owned approximately 75.4 % of celesio 's outstanding and fully diluted common shares . the acquisition was funded by utilizing a senior bridge loan , our existing accounts receivable facility and cash on hand . celesio is an international wholesale and retail company and a provider of logistics and services to the pharmaceutical and healthcare sectors . celesio 's headquarters is in stuttgart , germany and it operates in 14 countries around the world . the acquisition of celesio expands our global geographic area ; the combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide . revenues : replace_table_token_6_th revenues for 2014 increased 13 % to $ 137.6 billion from 2013 and revenues for 2013 of $ 122.1 billion approximated 2012. increases in our revenues were primarily driven by our distribution solutions segment , which accounted for approximately 98 % of our consolidated revenues . 31 mckesson corporation financial review ( continued ) distribution solutions north america pharmaceutical distribution and services revenues increased in 2014 compared to 2013 primarily due to market growth , reflecting growing drug utilization and price increases , and our mix of business . these increases were partially offset by price deflation associated with brand to generics drug conversion . north america revenues for 2013 approximated 2012 primarily due to market growth and our mix of business , partially offset by price deflation associated with brand to generic drug conversions , the loss of customers and fewer sales days . international pharmaceutical distribution and services revenues of $ 4.8 billion in 2014 represents revenues from celesio , our majority-owned subsidiary , acquired in february 2014. medical-surgical distribution and services revenues increased in 2014 compared to 2013 primarily due to our acquisition of pss world medical in february 2013 and market growth . revenues for 2013 increased compared to 2012 primarily due to market growth , new customers and our acquisition of pss world medical . these 2013 increases were partially offset by five less sales days . technology solutions technology solutions revenues increased in 2014 compared to 2013 primarily due to small business acquisitions and a higher volume of claims processing . these increases were partially offset by a decrease in software product revenues . technology solutions revenues increased in 2013 compared to 2012 mainly due to acquisitions , higher volume of claims processing revenues and an increase in maintenance revenues from new and existing customers . gross profit : replace_table_token_7_th bp - basis points ( 1 ) gross profit for our distribution solutions segment for 2014 , 2013 and 2012 includes lifo charges of $ 311 million , $ 13 million and $ 11 million . gross profit increased 21 % to $ 8.3 billion in 2014 and 7 % to $ 6.8 billion in 2013. as a percentage of revenues , gross profit increased by 43 bp in 2014 and by 38 bp in 2013 . gross profit margin increased in 2014 and 2013 reflecting increases in both of our operating segments . 32 mckesson corporation financial review ( continued ) distribution solutions distribution solutions segment 's gross profit margin increased in 2014 compared to 2013 primarily due to our business acquisitions , growth in sales of higher margin generic drugs , and an increase in buy margin . buy margin primarily reflects volume and timing of compensation we receive from pharmaceutical manufacturers . these increases were partially offset by a decrease in sell margin and charges related to the lifo method of accounting for inventories , as further described below . additionally , gross profit was impacted by a $ 50 million charge for the reversal of a fair value step-up of inventory acquired as part of the celesio acquisition . gross profit margin increased in 2013 compared to 2012 primarily due to higher sales of generic drugs , business acquisitions , an increase in buy margin and antitrust settlement receipts , and a lower proportion of revenues within the segment attributed to lower-margin sales to customers ' warehouses . these increases were partially offset by a decrease in sell margin . our last-in , first-out ( “ lifo ” ) net inventory expense was $ 311 million in 2014 , $ 13 million in 2013 and $ 11 million in 2012 . our distribution solutions segment uses the lifo method of accounting for the majority of its inventories , which results in cost of sales that more closely reflects replacement cost than under other accounting methods . story_separator_special_tag the charge was primarily the result of the terms of the preliminary purchase offers received for all of the business during the third quarter of 2014. a portion of the impairment charge was attributed to goodwill and other long-lived assets and as a result , there was no tax benefit associated with this portion of the charge . the ultimate selling price of our international technology business may be higher or lower than our current assessment of fair value . in 2014 , we sold our hospital automation business for cash proceeds of $ 55 million , which approximates the business ' net book value . the results of operations for these businesses are included in income ( loss ) from discontinued operations for 2014 , 2013 and 2012. net loss attributable to noncontrolling interests : noncontrolling interests primarily represent the portion of celesio 's net profit or loss that is not allocable to mckesson corporation . at march 31 , 2014 , mckesson owned approximately 75.4 % of celesio 's common shares on an outstanding fully diluted basis . net income attributable to mckesson corporation : net income attributable to mckesson corporation was $ 1,263 million , $ 1,338 million and $ 1,403 million in 2014 , 2013 and 2012 and diluted earnings per common share were $ 5.41 , $ 5.59 and $ 5.59 . weighted average diluted common shares outstanding : diluted earnings per common share was calculated based on a weighted average number of shares outstanding of 233 million , 239 million and 251 million for 2014 , 2013 and 2012 . the decreases in the number of weighted average diluted common shares outstanding primarily reflect the cumulative effect of share repurchases , partially offset by the exercise and settlement of share-based awards . 38 mckesson corporation financial review ( continued ) foreign operations foreign operations accounted for 11.0 % , 8.2 % and 8.4 % of 2014 , 2013 and 2012 consolidated revenues . foreign operations are subject to certain risks , including currency fluctuations . we monitor our operations and adopt strategies responsive to changes in the economic and political environment in each of the countries in which we operate . additional information regarding our foreign operations is also included in financial note 25 , “ segments of business , ” to the consolidated financial statements appearing in this annual report on form 10-k. business combinations fiscal 2014 on february 6 , 2014 , we completed the acquisition of 77.6 % of the then outstanding common shares of celesio and certain convertible bonds of celesio for cash consideration of $ 4.5 billion , net of cash acquired ( the “ acquisition ” ) . upon the acquisition , our ownership of celesio 's fully diluted shares was 75.6 % and , as required , we consolidated celesio 's debt with a fair value of $ 2.3 billion as a liability on our consolidated balance sheet . the acquisition was funded by utilizing a senior bridge loan , our existing accounts receivable facility and cash on hand . celesio is an international wholesale and retail company and a provider of logistics and services to the pharmaceutical and healthcare sectors . celesio 's headquarters is in stuttgart , germany and it operates in 14 countries around the world . the acquisition of celesio expands our global geographic area ; the combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide . our acquisition of celesio was consummated through a series of transactions : 129.3 million of common shares of celesio were acquired from franz haniel & cie. gmbh ( “ haniel ” ) for cash consideration of 23.50 per common share or $ 4,128 million . 4,840 of the 7,000 convertible bonds issued by celesio in the nominal aggregate amount of 350 million due in october 2014 ( the “ 2014 bonds ” ) , and 2,180 of the 3,500 convertible bonds issued by celesio in the nominal amount of 350 million due in april 2018 ( the “ 2018 bonds ” ) were acquired from elliot international , l.p. , the liverpool limited partnership and elliot capital advisers , l.p. ( together , the “ elliot group ” ) for cash consideration of $ 951 million . the 2,180 acquired 2018 bonds were converted to 11.4 million common shares of celesio . 303 of the 2014 bonds and 216 of the 2018 bonds were acquired in private transactions for cash consideration of $ 63 million . 139 of the acquired 2018 bonds were converted to 0.7 million common shares of celesio . from february 7 , 2014 through march 31 , 2014 , we converted our remaining 2014 bonds and 2018 bonds into 11.9 million of celesio common shares . also during this time period , substantially all of the remaining 2014 bonds and 2018 bonds held by third parties were converted to 9 million celesio common shares valued at $ 313 million and approximately $ 30 million in cash . at march 31 , 2014 , we owned approximately 75.4 % of celesio 's outstanding and fully diluted common shares . in accordance with a business combination agreement that we entered into with celesio in january 2014 , on february 28 , 2014 and april 7 , 2014 we launched voluntary public tender offers for the common shares of celesio that remain outstanding for 23.50 per share . in april 2014 , the last of these tender offers expired and we acquired 1 million of additional common shares . we also intend to enter into a domination and profit and loss transfer agreement , with celesio as the dominated party , pursuant to sections 291 et seq . of the german stock corporation act ( aktiengesetz - aktg ) . such a domination and profit and loss transfer agreement does not require any further regulatory approval . fiscal 2013 in addition to our
| liquidity and capital resources at december 31 , 2014 , we had approximately $ 31.6 million in cash and cash equivalents . management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased . the increase in our cash and cash equivalents by $ 30.1 million from december 31 , 2013 was primarily due to cash provided by financing activities of $ 46.8 million , partially offset by net cash used in operating and investing activities of $ 16.2 million and $ 197,000 , respectively , and the effect of exchange rates on cash of $ 234,000. at december 31 , 2014 , we had approximately $ 38.6 million in working capital . our principal sources of liquidity at december 31 , 2014 , consisted of approximately $ 31.6 million in cash and cash equivalents and $ 9.0 million of net accounts receivable . on november 7 , 2014 , we completed a private placement with several institutional and individual investors , including certain of our directors and officers , under which we agreed to sell an aggregate of 14,162,873 unregistered shares of our common stock at the price of $ 2.39 per share , the closing price of our common stock on november 3 , 2014 , and warrants to purchase up to an aggregate of 9,205,862 unregistered shares of our common stock at an exercise price of $ 4.00 per share . gross proceeds from the sale were $ 35.0 million , and net proceeds , after offering expenses of approximately $ 235,000 , were approximately $ 34.8 million . the warrants become exercisable on may 7 , 2015 , six months after the closing of the private placement , and have a term of three years from the date of issuance . the proceeds are being used for working capital and general corporate purposes . on july 22 , 2014 , we entered into a private placement with several institutional and individual investors , and several of our directors and officers , wherein we sold 6,250,000 unregistered shares of common stock at a price of $ 1.92 per share .
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during 2014 , we committed to a plan to sell our international technology business and our hospital automation business from our technology solutions segment and certain small businesses from our distribution solutions segment . in the third quarter of 2014 , we recorded a non-cash pre-tax and after-tax impairment charge of $ 80 million to reduce the carrying value of our international technology business to its estimated net realizable value ( fair value less costs to sell ) . net income attributable to mckesson corporation was $ 1,263 million , $ 1,338 million and $ 1,403 million in 2014 , 2013 and 2012 , and diluted earnings per common share attributable to mckesson corporation were $ 5.41 , $ 5.59 and $ 5.59 . diluted earnings per common share attributable to mckesson corporation were favorably affected by decreases in our weighted average shares outstanding primarily due to the cumulative effect of share repurchases . on february 6 , 2014 , we completed the acquisition of 77.6 % of the then outstanding common shares of celesio and certain convertible bonds of celesio for cash consideration of $ 4.5 billion , net of cash acquired . upon the acquisition , our ownership of celesio 's fully diluted shares was 75.6 % and as required , we consolidated celesio 's debt with a fair value of $ 2.3 billion as a liability on our consolidated balance sheet . at march 31 , 2014 , we owned approximately 75.4 % of celesio 's outstanding and fully diluted common shares . the acquisition was funded by utilizing a senior bridge loan , our existing accounts receivable facility and cash on hand . celesio is an international wholesale and retail company and a provider of logistics and services to the pharmaceutical and healthcare sectors . celesio 's headquarters is in stuttgart , germany and it operates in 14 countries around the world . the acquisition of celesio expands our global geographic area ; the combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide . revenues : replace_table_token_6_th revenues for 2014 increased 13 % to $ 137.6 billion from 2013 and revenues for 2013 of $ 122.1 billion approximated 2012. increases in our revenues were primarily driven by our distribution solutions segment , which accounted for approximately 98 % of our consolidated revenues . 31 mckesson corporation financial review ( continued ) distribution solutions north america pharmaceutical distribution and services revenues increased in 2014 compared to 2013 primarily due to market growth , reflecting growing drug utilization and price increases , and our mix of business . these increases were partially offset by price deflation associated with brand to generics drug conversion . north america revenues for 2013 approximated 2012 primarily due to market growth and our mix of business , partially offset by price deflation associated with brand to generic drug conversions , the loss of customers and fewer sales days . international pharmaceutical distribution and services revenues of $ 4.8 billion in 2014 represents revenues from celesio , our majority-owned subsidiary , acquired in february 2014. medical-surgical distribution and services revenues increased in 2014 compared to 2013 primarily due to our acquisition of pss world medical in february 2013 and market growth . revenues for 2013 increased compared to 2012 primarily due to market growth , new customers and our acquisition of pss world medical . these 2013 increases were partially offset by five less sales days . technology solutions technology solutions revenues increased in 2014 compared to 2013 primarily due to small business acquisitions and a higher volume of claims processing . these increases were partially offset by a decrease in software product revenues . technology solutions revenues increased in 2013 compared to 2012 mainly due to acquisitions , higher volume of claims processing revenues and an increase in maintenance revenues from new and existing customers . gross profit : replace_table_token_7_th bp - basis points ( 1 ) gross profit for our distribution solutions segment for 2014 , 2013 and 2012 includes lifo charges of $ 311 million , $ 13 million and $ 11 million . gross profit increased 21 % to $ 8.3 billion in 2014 and 7 % to $ 6.8 billion in 2013. as a percentage of revenues , gross profit increased by 43 bp in 2014 and by 38 bp in 2013 . gross profit margin increased in 2014 and 2013 reflecting increases in both of our operating segments . 32 mckesson corporation financial review ( continued ) distribution solutions distribution solutions segment 's gross profit margin increased in 2014 compared to 2013 primarily due to our business acquisitions , growth in sales of higher margin generic drugs , and an increase in buy margin . buy margin primarily reflects volume and timing of compensation we receive from pharmaceutical manufacturers . these increases were partially offset by a decrease in sell margin and charges related to the lifo method of accounting for inventories , as further described below . additionally , gross profit was impacted by a $ 50 million charge for the reversal of a fair value step-up of inventory acquired as part of the celesio acquisition . gross profit margin increased in 2013 compared to 2012 primarily due to higher sales of generic drugs , business acquisitions , an increase in buy margin and antitrust settlement receipts , and a lower proportion of revenues within the segment attributed to lower-margin sales to customers ' warehouses . these increases were partially offset by a decrease in sell margin . our last-in , first-out ( “ lifo ” ) net inventory expense was $ 311 million in 2014 , $ 13 million in 2013 and $ 11 million in 2012 . our distribution solutions segment uses the lifo method of accounting for the majority of its inventories , which results in cost of sales that more closely reflects replacement cost than under other accounting methods . story_separator_special_tag the charge was primarily the result of the terms of the preliminary purchase offers received for all of the business during the third quarter of 2014. a portion of the impairment charge was attributed to goodwill and other long-lived assets and as a result , there was no tax benefit associated with this portion of the charge . the ultimate selling price of our international technology business may be higher or lower than our current assessment of fair value . in 2014 , we sold our hospital automation business for cash proceeds of $ 55 million , which approximates the business ' net book value . the results of operations for these businesses are included in income ( loss ) from discontinued operations for 2014 , 2013 and 2012. net loss attributable to noncontrolling interests : noncontrolling interests primarily represent the portion of celesio 's net profit or loss that is not allocable to mckesson corporation . at march 31 , 2014 , mckesson owned approximately 75.4 % of celesio 's common shares on an outstanding fully diluted basis . net income attributable to mckesson corporation : net income attributable to mckesson corporation was $ 1,263 million , $ 1,338 million and $ 1,403 million in 2014 , 2013 and 2012 and diluted earnings per common share were $ 5.41 , $ 5.59 and $ 5.59 . weighted average diluted common shares outstanding : diluted earnings per common share was calculated based on a weighted average number of shares outstanding of 233 million , 239 million and 251 million for 2014 , 2013 and 2012 . the decreases in the number of weighted average diluted common shares outstanding primarily reflect the cumulative effect of share repurchases , partially offset by the exercise and settlement of share-based awards . 38 mckesson corporation financial review ( continued ) foreign operations foreign operations accounted for 11.0 % , 8.2 % and 8.4 % of 2014 , 2013 and 2012 consolidated revenues . foreign operations are subject to certain risks , including currency fluctuations . we monitor our operations and adopt strategies responsive to changes in the economic and political environment in each of the countries in which we operate . additional information regarding our foreign operations is also included in financial note 25 , “ segments of business , ” to the consolidated financial statements appearing in this annual report on form 10-k. business combinations fiscal 2014 on february 6 , 2014 , we completed the acquisition of 77.6 % of the then outstanding common shares of celesio and certain convertible bonds of celesio for cash consideration of $ 4.5 billion , net of cash acquired ( the “ acquisition ” ) . upon the acquisition , our ownership of celesio 's fully diluted shares was 75.6 % and , as required , we consolidated celesio 's debt with a fair value of $ 2.3 billion as a liability on our consolidated balance sheet . the acquisition was funded by utilizing a senior bridge loan , our existing accounts receivable facility and cash on hand . celesio is an international wholesale and retail company and a provider of logistics and services to the pharmaceutical and healthcare sectors . celesio 's headquarters is in stuttgart , germany and it operates in 14 countries around the world . the acquisition of celesio expands our global geographic area ; the combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide . our acquisition of celesio was consummated through a series of transactions : 129.3 million of common shares of celesio were acquired from franz haniel & cie. gmbh ( “ haniel ” ) for cash consideration of 23.50 per common share or $ 4,128 million . 4,840 of the 7,000 convertible bonds issued by celesio in the nominal aggregate amount of 350 million due in october 2014 ( the “ 2014 bonds ” ) , and 2,180 of the 3,500 convertible bonds issued by celesio in the nominal amount of 350 million due in april 2018 ( the “ 2018 bonds ” ) were acquired from elliot international , l.p. , the liverpool limited partnership and elliot capital advisers , l.p. ( together , the “ elliot group ” ) for cash consideration of $ 951 million . the 2,180 acquired 2018 bonds were converted to 11.4 million common shares of celesio . 303 of the 2014 bonds and 216 of the 2018 bonds were acquired in private transactions for cash consideration of $ 63 million . 139 of the acquired 2018 bonds were converted to 0.7 million common shares of celesio . from february 7 , 2014 through march 31 , 2014 , we converted our remaining 2014 bonds and 2018 bonds into 11.9 million of celesio common shares . also during this time period , substantially all of the remaining 2014 bonds and 2018 bonds held by third parties were converted to 9 million celesio common shares valued at $ 313 million and approximately $ 30 million in cash . at march 31 , 2014 , we owned approximately 75.4 % of celesio 's outstanding and fully diluted common shares . in accordance with a business combination agreement that we entered into with celesio in january 2014 , on february 28 , 2014 and april 7 , 2014 we launched voluntary public tender offers for the common shares of celesio that remain outstanding for 23.50 per share . in april 2014 , the last of these tender offers expired and we acquired 1 million of additional common shares . we also intend to enter into a domination and profit and loss transfer agreement , with celesio as the dominated party , pursuant to sections 291 et seq . of the german stock corporation act ( aktiengesetz - aktg ) . such a domination and profit and loss transfer agreement does not require any further regulatory approval . fiscal 2013 in addition to our
| celesio debt upon our acquisition of celesio , as required , we consolidated a total of $ 2.3 billion of outstanding debt of celesio as a liability on our consolidated balance sheet . the celesio debt consists primarily of corporate bonds , convertible debt , promissory notes and amounts outstanding under their accounts receivable facility arrangements and lines of credits . debt maturities range from our fiscal years 2015 to 2024. as of march 31 , 2014 , celesio convertible debt of $ 344 million was extinguished through the issuance of celesio common stock or cash . as of march 31 , 2014 , $ 246 million and $ 188 million were outstanding under the accounts receivable factoring facility arrangements and lines of credits with committed balances of $ 308 million and $ 1,662 million . according to certain terms and conditions of celesio 's 4.00 % bonds maturing on october 18 , 2016 and their 4.50 % bonds maturing on april 26 , 2017 , effective may 7 , 2014 bondholders have the option to ask for repayment of the bonds at par value plus accrued interest . if bondholders do not exercise this option by may 19 , 2014 , the bonds will remain outstanding until their respective maturity dates . accordingly , as at march 31 , 2014 , these bonds having a book value of $ 1,244 million have been classified as a current liability . as of may 7 , 2014 , the fair value of these bonds of $ 1,272 million was more than their par value of $ 1,184 million . pss world medical debt upon our acquisition of pss world medical , we assumed the outstanding debt of pss world medical . prior to our acquisition , pss world medical called for redemption of all of its outstanding 6.375 % senior notes due 2022. due to the change in control provisions of the 3.125 % senior convertible notes due 2014 , the notes were convertible to cash at the option of the note holders . all the note holders opted to receive cash . in the fourth quarter of 2013 , we redeemed both of these notes , including accrued interest for $ 643 million using cash on hand and borrowings under our 2013 pss bridge loan .
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our asset management business segment includes our fee-based asset management operations , which include on-going base and incentive management fees . as of december 31 , 2015 , we had approximately $ 3.91 billion in aum of which 95.8 % , or $ 3.75 billion , was in cdos . almost all of our asset management revenue is earned from the management of cdos . we have not completed a new securitization since 2008. as a result , our asset management revenue has declined from its historical highs as the assets of the cdos decline as a result of maturities , repayments , auction call redemptions , and defaults . we do not expect to complete any securitizations in the future so we expect our asset management revenue to continue to decline in the future . we generate our revenue by business segment primarily through the following activities . capital markets : o ur trading activities , which include execution and brokerage services , securities lending activities , riskless trading activities , as well as gains and losses ( unrealized and realized ) and income and expense earned on securities classified as trading ; and n ew issue and advisory revenue comprised of ( a ) new issue revenue associated with originating , arranging , or placing newly created financial instruments ; and ( b ) revenue from advisory services . 42 principal investing : g ains and losses ( unrealized and realized ) and income an d expense earned on securities classified as other investments , at fair value ; and i ncome or loss from equity method affiliates . asset management : a sset management fees for our on-going asset manager services provided to various investment vehicles , which may include fees both senior and subordinate to the securities issued by the investment vehicle ; i ncentive management fees earned based on the performance of the various investment vehicles ; and income or loss from equity method affiliates . business environment our business is materially affected by economic conditions in the financial markets , political conditions , broad trends in business and finance , changes in volume and price levels of securities transactions , and changes in interest rates , all of which can affect our profitability and are unpredictable and beyond our control . these factors may affect the financial decisions made by investors and companies , including their level of participation in the financial markets and their willingness to participate in corporate transactions . severe market fluctuations or weak economic conditions could continue to reduce our trading volume and revenues , negatively affect our ability to generate new issue and advisory revenue , and adversely affect our profitability . the markets remain uneven and vulnerable to changes in investor sentiment . we believe the general business environment will continue to be challenging into the foreseeable future . a portion of our revenues is generated from net trading activity . we engage in proprietary trading for our own account , provide securities financing for our customers , as well as execute “ riskless ” trades with a customer order in hand resulting in limited market risk to us . the inventory of securities held for our own account , as well as held to facilitate customer trades , and our market making activities are sensitive to market movements . a portion of our revenues is generated from new issue and advisory engagements . the fees charged and volume of these engagements is sensitive to the overall business environment . during the first quarter of 2014 , we stopped providing investment banking and advisory services in the united states as a result of the loss of certain of jvb 's former employees . currently , jvb 's primary source of new issue revenue is our sba group 's participation in coof securitizations . the sba secondary market program allows for the purchaser of a sba loan certificate to “ strip ” a portion of the interest rate from a guaranteed loan portion , creating what is called an originator fee or interest only strip . this enhances the ability of sba pool assemblers to securitize the guaranteed portion of loans that do not have the same interest rate . our sba group 's participation in this area has grown during recent years . a portion of our revenues is generated from management fees . our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the investment vehicles . if these types of investments do not provide attractive returns to investors , the demand for such instruments will likely fall , thereby reducing our opportunity to earn new management fees or maintain existing management fees . as of december 31 , 2015 , 95.8 % of our existing aum were cdos . the creation of cdos and permanent capital vehicles has depended upon a vibrant securitization market . since 2008 , volumes within the securitization market have dropped significantly and have not recovered since that time . consequently , we have been unable to complete a new securitization since 2008. a portion of our revenues is generated from our principal investing activities . therefore , our revenues are impacted by the underlying operating results of these investments . as of december 31 , 2015 , our total other investments , at fair value ( which represents our principal investments ) was $ 14,880 . of this amount , $ 11,569 , or 77.7 % , represented investments in clos . the value of these investments is impacted by the performance of the underlying loans in these clos as well as the overall clo market . margin pressures in fixed income brokerage business performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity . story_separator_special_tag the following table summarizes the p eriods presented by asset class . replace_table_token_9_th asset management fees for trups and insurance company debt – u.s. declined primarily because in may 2014 and october 2014 , two securitizations that we managed had successful auctions and terminated . we will no longer earn fees related to these securitizations going forward . we earned a total of $ 903 in revenue from these two securitizations for the year ended december 31 , 2014. asset management fees for high grade and mezzanine abs declined primarily due to the transfer of certain management contracts to a third party and the liquidation of one cdo . as of december 31 , 2015 , we no longer manage any cdos in this asset class . we do not expect to earn material management fees in the future from this asset class . asset management fees for trups and insurance company debt – europe declined because of both ( i ) the decline of collateral balances due to principal payments and defaults and ( ii ) the impact of foreign exchange rates as these contracts make management fee payments in euros . asset management fees for broadly syndicated loans – europe consist of a single clo . fees declined because the reinvestment period has ended for this clo . following the end of such reinvestment period , principal payments received are paid out to investors in the clo . the fees we earn will decline as the collateral balances decline . additionally , this contract also makes management fee payments in euros , which negatively impacted the revenue earned . a significant portion of our managed cdos have stopped paying subordinated management fees due to diversion of cash flows called for within the cdo governing documents . see “ critical accounting policies and estimates – revenue recognition – asset management ” beginning on page 68 for discussion of our accounting policy regarding recognition of revenue related to subordinated management fees . other other asset management revenue decreased by $ 2,493 to $ 1,004 for the year ended december 31 , 2015 , as compared to $ 3,497 for the year ended december 31 , 2014 . the decrease was comprised of ( i ) a decrease of $ 125 resulting from the sale of star asia 48 manager and ( ii ) a decrease of $ 2,368 in asset management revenue earned from separ ate accounts primarily due to lower performance fees being earned during 2015. new issue and advisory revenue new issue and advisory revenue increased by $ 151 , or 3 % , to $ 5,370 for the year ended december 31 , 2015 , as compared to $ 5,219 for the year ended december 31 , 2014 . new issue and advisory revenue remained relatively flat . new issue and advisory revenue earned by ccfl increased by $ 2,072 , while new issue and advisory revenue earned by jvb decline d by $ 1,921. during the first quarter of 2014 , our u.s. broker-dealer , jvb , stopped providing investment banking and advisory services to special purpose acquisition companies ( “ spacs ” ) . while certain of the former employees of jvb 's spac investment banking and advisory group went to work for another firm , we entered into an agreement ( the “ tail agreement ” ) whereby we allowed such former employees to continue work on certain in process engagements with their new firm . as part of the tail agreement , we receive d a certain share of the revenue earned by the new firm related to these engagements . during the year ended december 31 , 2014 , we earned total new issue revenue of $ 1,889 under the tail agreement from investment banking and advisory services related to spacs . we did not earn any revenue under the tail agreement in 2015. we do not expect further revenue to be earned under this agreement . currently , jvb 's primary source of new issue revenue is our sba group 's participation in coof securitizations , defined as sba confirmation of originator fee certificates ( “ coof ” ) . the sba secondary market program allows for the purchaser of a sba loan certificate to “ strip ” a portion of the interest rate from a guaranteed loan portion , creating what is called an originator fee or interest only strip . this enhances the ability of sba pool assemblers to securitize the guaranteed portion of loans that do not have the same interest rate . our sba group 's participation in this area has grown during recent years . our new issue and advisory revenue has been , and we expect will continue to be , volatile . we earn revenue from a limited number of engagements . therefore , a small change in the number of engagements can result in large fluctuations in the revenue recognized . further , even if the number of engagements remains consistent , the average revenue per engagement can fluctuate considerably . finally , our revenue is generally earned when an underlying transaction closes ( rather than on a monthly or quarterly basis ) . therefore , the timing of underlying transactions increases the volatility of our revenue recognition . principal transactions and other income principal transactions and other income decreased by $ 7,901 to $ 78 for the year ended december 31 , 2015 , as compared to $ 7,979 for the year ended december 31 , 2014 . replace_table_token_10_th 49 principal transactions eurodekania is an investment company and we carry our investment at the nav of the fund . income recognized in each period is a result of changes in the underlying nav of the fund as well as distributions received . our investment in eurodekania is denominated in euros . we sometimes hedge this exposure ( as described in greater detail below ) . currently , eurodekania is not making new
| celesio debt upon our acquisition of celesio , as required , we consolidated a total of $ 2.3 billion of outstanding debt of celesio as a liability on our consolidated balance sheet . the celesio debt consists primarily of corporate bonds , convertible debt , promissory notes and amounts outstanding under their accounts receivable facility arrangements and lines of credits . debt maturities range from our fiscal years 2015 to 2024. as of march 31 , 2014 , celesio convertible debt of $ 344 million was extinguished through the issuance of celesio common stock or cash . as of march 31 , 2014 , $ 246 million and $ 188 million were outstanding under the accounts receivable factoring facility arrangements and lines of credits with committed balances of $ 308 million and $ 1,662 million . according to certain terms and conditions of celesio 's 4.00 % bonds maturing on october 18 , 2016 and their 4.50 % bonds maturing on april 26 , 2017 , effective may 7 , 2014 bondholders have the option to ask for repayment of the bonds at par value plus accrued interest . if bondholders do not exercise this option by may 19 , 2014 , the bonds will remain outstanding until their respective maturity dates . accordingly , as at march 31 , 2014 , these bonds having a book value of $ 1,244 million have been classified as a current liability . as of may 7 , 2014 , the fair value of these bonds of $ 1,272 million was more than their par value of $ 1,184 million . pss world medical debt upon our acquisition of pss world medical , we assumed the outstanding debt of pss world medical . prior to our acquisition , pss world medical called for redemption of all of its outstanding 6.375 % senior notes due 2022. due to the change in control provisions of the 3.125 % senior convertible notes due 2014 , the notes were convertible to cash at the option of the note holders . all the note holders opted to receive cash . in the fourth quarter of 2013 , we redeemed both of these notes , including accrued interest for $ 643 million using cash on hand and borrowings under our 2013 pss bridge loan .
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our asset management business segment includes our fee-based asset management operations , which include on-going base and incentive management fees . as of december 31 , 2015 , we had approximately $ 3.91 billion in aum of which 95.8 % , or $ 3.75 billion , was in cdos . almost all of our asset management revenue is earned from the management of cdos . we have not completed a new securitization since 2008. as a result , our asset management revenue has declined from its historical highs as the assets of the cdos decline as a result of maturities , repayments , auction call redemptions , and defaults . we do not expect to complete any securitizations in the future so we expect our asset management revenue to continue to decline in the future . we generate our revenue by business segment primarily through the following activities . capital markets : o ur trading activities , which include execution and brokerage services , securities lending activities , riskless trading activities , as well as gains and losses ( unrealized and realized ) and income and expense earned on securities classified as trading ; and n ew issue and advisory revenue comprised of ( a ) new issue revenue associated with originating , arranging , or placing newly created financial instruments ; and ( b ) revenue from advisory services . 42 principal investing : g ains and losses ( unrealized and realized ) and income an d expense earned on securities classified as other investments , at fair value ; and i ncome or loss from equity method affiliates . asset management : a sset management fees for our on-going asset manager services provided to various investment vehicles , which may include fees both senior and subordinate to the securities issued by the investment vehicle ; i ncentive management fees earned based on the performance of the various investment vehicles ; and income or loss from equity method affiliates . business environment our business is materially affected by economic conditions in the financial markets , political conditions , broad trends in business and finance , changes in volume and price levels of securities transactions , and changes in interest rates , all of which can affect our profitability and are unpredictable and beyond our control . these factors may affect the financial decisions made by investors and companies , including their level of participation in the financial markets and their willingness to participate in corporate transactions . severe market fluctuations or weak economic conditions could continue to reduce our trading volume and revenues , negatively affect our ability to generate new issue and advisory revenue , and adversely affect our profitability . the markets remain uneven and vulnerable to changes in investor sentiment . we believe the general business environment will continue to be challenging into the foreseeable future . a portion of our revenues is generated from net trading activity . we engage in proprietary trading for our own account , provide securities financing for our customers , as well as execute “ riskless ” trades with a customer order in hand resulting in limited market risk to us . the inventory of securities held for our own account , as well as held to facilitate customer trades , and our market making activities are sensitive to market movements . a portion of our revenues is generated from new issue and advisory engagements . the fees charged and volume of these engagements is sensitive to the overall business environment . during the first quarter of 2014 , we stopped providing investment banking and advisory services in the united states as a result of the loss of certain of jvb 's former employees . currently , jvb 's primary source of new issue revenue is our sba group 's participation in coof securitizations . the sba secondary market program allows for the purchaser of a sba loan certificate to “ strip ” a portion of the interest rate from a guaranteed loan portion , creating what is called an originator fee or interest only strip . this enhances the ability of sba pool assemblers to securitize the guaranteed portion of loans that do not have the same interest rate . our sba group 's participation in this area has grown during recent years . a portion of our revenues is generated from management fees . our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the investment vehicles . if these types of investments do not provide attractive returns to investors , the demand for such instruments will likely fall , thereby reducing our opportunity to earn new management fees or maintain existing management fees . as of december 31 , 2015 , 95.8 % of our existing aum were cdos . the creation of cdos and permanent capital vehicles has depended upon a vibrant securitization market . since 2008 , volumes within the securitization market have dropped significantly and have not recovered since that time . consequently , we have been unable to complete a new securitization since 2008. a portion of our revenues is generated from our principal investing activities . therefore , our revenues are impacted by the underlying operating results of these investments . as of december 31 , 2015 , our total other investments , at fair value ( which represents our principal investments ) was $ 14,880 . of this amount , $ 11,569 , or 77.7 % , represented investments in clos . the value of these investments is impacted by the performance of the underlying loans in these clos as well as the overall clo market . margin pressures in fixed income brokerage business performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity . story_separator_special_tag the following table summarizes the p eriods presented by asset class . replace_table_token_9_th asset management fees for trups and insurance company debt – u.s. declined primarily because in may 2014 and october 2014 , two securitizations that we managed had successful auctions and terminated . we will no longer earn fees related to these securitizations going forward . we earned a total of $ 903 in revenue from these two securitizations for the year ended december 31 , 2014. asset management fees for high grade and mezzanine abs declined primarily due to the transfer of certain management contracts to a third party and the liquidation of one cdo . as of december 31 , 2015 , we no longer manage any cdos in this asset class . we do not expect to earn material management fees in the future from this asset class . asset management fees for trups and insurance company debt – europe declined because of both ( i ) the decline of collateral balances due to principal payments and defaults and ( ii ) the impact of foreign exchange rates as these contracts make management fee payments in euros . asset management fees for broadly syndicated loans – europe consist of a single clo . fees declined because the reinvestment period has ended for this clo . following the end of such reinvestment period , principal payments received are paid out to investors in the clo . the fees we earn will decline as the collateral balances decline . additionally , this contract also makes management fee payments in euros , which negatively impacted the revenue earned . a significant portion of our managed cdos have stopped paying subordinated management fees due to diversion of cash flows called for within the cdo governing documents . see “ critical accounting policies and estimates – revenue recognition – asset management ” beginning on page 68 for discussion of our accounting policy regarding recognition of revenue related to subordinated management fees . other other asset management revenue decreased by $ 2,493 to $ 1,004 for the year ended december 31 , 2015 , as compared to $ 3,497 for the year ended december 31 , 2014 . the decrease was comprised of ( i ) a decrease of $ 125 resulting from the sale of star asia 48 manager and ( ii ) a decrease of $ 2,368 in asset management revenue earned from separ ate accounts primarily due to lower performance fees being earned during 2015. new issue and advisory revenue new issue and advisory revenue increased by $ 151 , or 3 % , to $ 5,370 for the year ended december 31 , 2015 , as compared to $ 5,219 for the year ended december 31 , 2014 . new issue and advisory revenue remained relatively flat . new issue and advisory revenue earned by ccfl increased by $ 2,072 , while new issue and advisory revenue earned by jvb decline d by $ 1,921. during the first quarter of 2014 , our u.s. broker-dealer , jvb , stopped providing investment banking and advisory services to special purpose acquisition companies ( “ spacs ” ) . while certain of the former employees of jvb 's spac investment banking and advisory group went to work for another firm , we entered into an agreement ( the “ tail agreement ” ) whereby we allowed such former employees to continue work on certain in process engagements with their new firm . as part of the tail agreement , we receive d a certain share of the revenue earned by the new firm related to these engagements . during the year ended december 31 , 2014 , we earned total new issue revenue of $ 1,889 under the tail agreement from investment banking and advisory services related to spacs . we did not earn any revenue under the tail agreement in 2015. we do not expect further revenue to be earned under this agreement . currently , jvb 's primary source of new issue revenue is our sba group 's participation in coof securitizations , defined as sba confirmation of originator fee certificates ( “ coof ” ) . the sba secondary market program allows for the purchaser of a sba loan certificate to “ strip ” a portion of the interest rate from a guaranteed loan portion , creating what is called an originator fee or interest only strip . this enhances the ability of sba pool assemblers to securitize the guaranteed portion of loans that do not have the same interest rate . our sba group 's participation in this area has grown during recent years . our new issue and advisory revenue has been , and we expect will continue to be , volatile . we earn revenue from a limited number of engagements . therefore , a small change in the number of engagements can result in large fluctuations in the revenue recognized . further , even if the number of engagements remains consistent , the average revenue per engagement can fluctuate considerably . finally , our revenue is generally earned when an underlying transaction closes ( rather than on a monthly or quarterly basis ) . therefore , the timing of underlying transactions increases the volatility of our revenue recognition . principal transactions and other income principal transactions and other income decreased by $ 7,901 to $ 78 for the year ended december 31 , 2015 , as compared to $ 7,979 for the year ended december 31 , 2014 . replace_table_token_10_th 49 principal transactions eurodekania is an investment company and we carry our investment at the nav of the fund . income recognized in each period is a result of changes in the underlying nav of the fund as well as distributions received . our investment in eurodekania is denominated in euros . we sometimes hedge this exposure ( as described in greater detail below ) . currently , eurodekania is not making new
| the cash provided by investing activities of $ 11,871 was comprised of ( a ) $ 12,031 in sales and returns of principal in other investments , at fair value ; partially offset by ( b ) $ 11 of purchases of other investments , at fair value and $ 149 of purchase of furniture , equipment , and leasehold improvements . the cash used in financing activities of $ 5,620 was comprised of ( a ) $ 4,000 in repurchases of our common stock in connection with the termination agreement ( see note 4 to our annual report on form 10-k ) , ( b ) $ 1,193 of dividends to stockholders of ifmi , and ( c ) $ 427 of distributions to non-controlling interests of the operating llc . 2014 cash flows as of december 31 , 2014 , our cash and cash equivalents were $ 12,253 , representing a decrease of $ 908 from december 31 , 2013. the decrease was attributable to the cash provided by operating activities of $ 4,114 , the cash provided by investing activities of $ 464 , the cash used in financing activities of $ 5,289 , and the decrease in cash caused by a change in exchange rates of $ 197. the cash provided by operating activities of $ 4,114 was comprised of ( a ) net cash outflows of $ 5,454 related to working capital fluctuations ; ( b ) net cash inflows of $ 8,446 from trading activities comprised of our investments-trading , trading securities sold , not yet purchased , securities sold under agreement to repurchase , and receivables and payables from brokers , dealers and clearing agencies , as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold , but not yet purchased ; and ( c ) net cash inflows from other earnings items of $ 1,122 ( which represents net income or loss adjusted for the following non-cash operating items : other income / ( expense ) , realized and unrealized gains and losses on other investments , income or loss from equity method affiliates , equity based compensation , depreciation , and amortization ) .
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we recognize an impairment loss when a debt investment 's value declines below cost , adjusted for accretion , amortization and previous other-than-temporary impairments , and it is determined that the decline is other-than-temporary . debt investments : we assess whether we intend to sell , or it is more likely than not that we will be required to sell , a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses . for fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell , we separate the amount of the impairment into the amount that is credit related ( credit loss component ) and the amount due to all other factors . the credit loss component is recognized in earnings and is the difference between the investment 's amortized cost basis and the present value of its expected future cash flows . the remaining difference between the investment 's fair value and the present value of future expected cash flows is recognized in other comprehensive income . equity investments : on january 1 , 2018 , we adopted asu 2016-01 , “ recognition and measurement of financial assets and financial liabilities ” . asu 2016-01 requires equity investments that are not consolidated or accounted for under the equity method of accounting to be measured at fair value with changes in fair value recognized in net income each reporting period . as a result of the new standard , equity securities with readily determinable fair values are no longer required to be evaluated for other-than-temporary-impairment . fair values of financial instruments . accounting standards codification ( “ asc ” ) 820 defines fair value , establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements . asc 820 , among other things , requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value . in addition , asc 820 precludes the use of block discounts when measuring the fair value of instruments traded in an active market , which were previously applied to large holdings of publicly traded equity securities . we determine the fair value of our financial instruments based on the fair value hierarchy established in asc 820. in accordance with asc 820 , we utilize the following fair value hierarchy : ● level 1 : quoted prices in active markets for identical assets ; ● level 2 : inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets , inputs of identical assets for less active markets , and inputs that are observable for the asset or liability , either directly or indirectly , for substantially the full term of the instrument ; and ● level 3 : inputs to the valuation methodology that are unobservable for the asset or liability . this hierarchy requires the use of observable market data when available . under asc 820 , we determine fair value based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date . it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements , in accordance with the fair value hierarchy described above . fair value measurements for assets and liabilities where there exists limited or no observable market data are calculated based upon our pricing policy , the economic and competitive environment , 35 the characteristics of the asset or liability and other factors as appropriate . these estimated fair values may not be realized upon actual sale or immediate settlement of the asset or liability . where quoted prices are available on active exchanges for identical instruments , investment securities are classified within level 1 of the valuation hierarchy . level 1 investment securities include common stock , preferred stock and the equity warrant classified as other investments . level 2 investment securities include corporate bonds , collateralized corporate bank loans , municipal bonds , u.s. treasury securities , other obligations of the u.s. government and mortgage-backed securities for which quoted prices are not available on active exchanges for identical instruments . we use a third party pricing service to determine fair values for each level 2 investment security in all asset classes . since quoted prices in active markets for identical assets are not available , these prices are determined using observable market information such as quotes from less active markets and or quoted prices of securities with similar characteristics , among other things . we have reviewed the processes used by the pricing service and have determined that they result in fair values consistent with the requirements of asc 820 for level 2 investment securities . we have not adjusted any prices received from third-party pricing sources . in cases where there is limited activity or less transparency around inputs to the valuation , investment securities are classified within level 3 of the valuation hierarchy . level 3 investments are valued based on the best available data in order to approximate fair value . this data may be internally developed and consider risk premiums that a market participant would require . investment securities classified within level 3 include other less liquid investment securities . deferred policy acquisition costs . policy acquisition costs ( mainly commission , premium taxes , underwriting and marketing expenses and ceding commissions ) that vary with and are primarily related to the successful acquisition of new and renewal insurance contracts are deferred and charged to operations over periods in which the related premiums are earned . ceding commissions from reinsurers , which include expense allowances , are deferred and recognized over the period premiums are earned for the underlying policies reinsured . story_separator_special_tag our specialty commercial segment reported a $ 54.5 million increase in losses and lae which consisted of ( a ) a $ 22.5 million increase in losses and lae in our commercial auto business unit due largely to $ 47.4 million of unfavorable prior year net loss reserve development recognized during the year ended december 31 , 2019 as compared to $ 18.1 million of unfavorable prior year net loss reserve development during the same period of 2018 , partially offset by lower current accident year loss trends and lower net earned premiums , ( b ) a $ 22.9 million increase in losses and lae in our e & s casualty business unit due primarily to $ 13.6 million of unfavorable prior year net loss reserve development during the year ended december 31 , 2019 as compared to $ 5.2 million of favorable prior year net loss reserve development during the same period of 2018 , as well as higher net earned premiums , ( c ) a $ 1.0 million decrease in losses and lae in our e & s property business unit due primarily to $ 0.3 million of net favorable prior year loss reserve development during the year ended december 31 , 2019 as compared to $ 0.8 million of unfavorable prior year net loss reserve development during the same period of 2018 , ( d ) a $ 9.0 million increase in losses and lae attributable to our professional liability business unit due primarily to increased net premiums earned , partially offset by $ 0.7 million of net favorable prior loss reserve development during the year ended december 31 , 2019 as compared to $ 1.5 million of net unfavorable prior year loss reserve development during the same period of 2018 as well as lower current accident year loss trends , and ( e ) a $ 1.1 million increase in losses and lae in our aerospace & programs business unit due primarily to higher current accident year loss trends as well as higher net premiums earned , partially offset by $ 0.1 million of net unfavorable prior year loss reserve development during the year ended december 31 , 2019 as compared to $ 1.3 million of net unfavorable prior year loss reserve development during the same period of 2018. the specialty commercial segment reported a net loss ratio of 85.0 % for the year ended december 31 , 2019 as compared to 75.2 % for the same period during 2018. the gross loss ratio before reinsurance was 75.9 % for the year ended december 31 , 2019 as compared to 73.4 % for the same period in 2018. the increase in the gross and net loss ratios was primarily due to higher unfavorable prior year net loss reserve development , partially offset by lower catastrophe losses . the specialty commercial segment reported $ 60.1 million of unfavorable prior year net loss reserve development for the year ended december 31 , 2019 as compared to unfavorable prior year net loss reserve development of $ 16.5 million for the same period of 2018. during the year ended december 31 , 2019 the specialty commercial segment reported $ 2.3 million of net catastrophe losses as compared to $ 6.0 million during the same period of 2018. the specialty commercial segment reported a net expense ratio of 21.8 % for the year ended december 31 , 2019 as compared to 22.6 % for the same period of 2018. the decrease in the expense ratio was due predominately to increased ceding commissions in our commercial auto business unit . standard commercial segment . gross premiums written for the standard commercial segment were $ 92.6 million for the year ended december 31 , 2019 , which was $ 6.5 million , or 8 % , more than the $ 86.1 million reported for the same period in 2018. the increase in gross premiums written was due to higher premium production in our commercial accounts business unit . net premiums written were $ 62.9 million for the year ended december 31 , 2019 as compared to $ 69.2 million for the same period in 2018. the decrease in net premiums written was due to increased ceded premium under a quota share reinsurance agreement entered into during the fourth quarter of 2018 on the casualty lines of business produced by the commercial accounts business unit . 40 total revenue for the standard commercial segment of $ 68.2 million for the year ended december 31 , 2019 , was $ 8.4 million , or 11 % , less than the $ 76.6 million reported for the same period in 2018. this decrease in total revenue was due to lower net premiums earned of $ 8.3 million , due primarily to the quota share reinsurance agreement entered into during the fourth quarter of 2018 , and lower commission and fees of $ 0.2 million , partially offset by higher net investment income of $ 0.1 million during the year ended december 31 , 2019 as compared to the same period during 2018. our standard commercial segment reported a pre-tax loss of $ 0.8 million for the year ended december 31 , 2019 as compared to pre-tax income of $ 13.1 million for the same period of 2018. the pre-tax loss was the result of higher losses and lae of $ 10.6 million and the lower revenue discussed above , partially offset by lower operating expenses of $ 5.1 million . reduced operating expenses were largely the result of lower production related expenses of $ 5.2 million due to increased ceding commission primarily from the reinsurance contract entered into during the fourth quarter of 2018 and lower salary and related expenses of $ 0.3 million , partially offset by higher professional service fees and other general expenses of $ 0.4 million . the standard commercial segment reported a net loss ratio of 78.2 % for the year ended december 31 , 2019 as compared
| the cash provided by investing activities of $ 11,871 was comprised of ( a ) $ 12,031 in sales and returns of principal in other investments , at fair value ; partially offset by ( b ) $ 11 of purchases of other investments , at fair value and $ 149 of purchase of furniture , equipment , and leasehold improvements . the cash used in financing activities of $ 5,620 was comprised of ( a ) $ 4,000 in repurchases of our common stock in connection with the termination agreement ( see note 4 to our annual report on form 10-k ) , ( b ) $ 1,193 of dividends to stockholders of ifmi , and ( c ) $ 427 of distributions to non-controlling interests of the operating llc . 2014 cash flows as of december 31 , 2014 , our cash and cash equivalents were $ 12,253 , representing a decrease of $ 908 from december 31 , 2013. the decrease was attributable to the cash provided by operating activities of $ 4,114 , the cash provided by investing activities of $ 464 , the cash used in financing activities of $ 5,289 , and the decrease in cash caused by a change in exchange rates of $ 197. the cash provided by operating activities of $ 4,114 was comprised of ( a ) net cash outflows of $ 5,454 related to working capital fluctuations ; ( b ) net cash inflows of $ 8,446 from trading activities comprised of our investments-trading , trading securities sold , not yet purchased , securities sold under agreement to repurchase , and receivables and payables from brokers , dealers and clearing agencies , as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold , but not yet purchased ; and ( c ) net cash inflows from other earnings items of $ 1,122 ( which represents net income or loss adjusted for the following non-cash operating items : other income / ( expense ) , realized and unrealized gains and losses on other investments , income or loss from equity method affiliates , equity based compensation , depreciation , and amortization ) .
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we recognize an impairment loss when a debt investment 's value declines below cost , adjusted for accretion , amortization and previous other-than-temporary impairments , and it is determined that the decline is other-than-temporary . debt investments : we assess whether we intend to sell , or it is more likely than not that we will be required to sell , a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses . for fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell , we separate the amount of the impairment into the amount that is credit related ( credit loss component ) and the amount due to all other factors . the credit loss component is recognized in earnings and is the difference between the investment 's amortized cost basis and the present value of its expected future cash flows . the remaining difference between the investment 's fair value and the present value of future expected cash flows is recognized in other comprehensive income . equity investments : on january 1 , 2018 , we adopted asu 2016-01 , “ recognition and measurement of financial assets and financial liabilities ” . asu 2016-01 requires equity investments that are not consolidated or accounted for under the equity method of accounting to be measured at fair value with changes in fair value recognized in net income each reporting period . as a result of the new standard , equity securities with readily determinable fair values are no longer required to be evaluated for other-than-temporary-impairment . fair values of financial instruments . accounting standards codification ( “ asc ” ) 820 defines fair value , establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements . asc 820 , among other things , requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value . in addition , asc 820 precludes the use of block discounts when measuring the fair value of instruments traded in an active market , which were previously applied to large holdings of publicly traded equity securities . we determine the fair value of our financial instruments based on the fair value hierarchy established in asc 820. in accordance with asc 820 , we utilize the following fair value hierarchy : ● level 1 : quoted prices in active markets for identical assets ; ● level 2 : inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets , inputs of identical assets for less active markets , and inputs that are observable for the asset or liability , either directly or indirectly , for substantially the full term of the instrument ; and ● level 3 : inputs to the valuation methodology that are unobservable for the asset or liability . this hierarchy requires the use of observable market data when available . under asc 820 , we determine fair value based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date . it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements , in accordance with the fair value hierarchy described above . fair value measurements for assets and liabilities where there exists limited or no observable market data are calculated based upon our pricing policy , the economic and competitive environment , 35 the characteristics of the asset or liability and other factors as appropriate . these estimated fair values may not be realized upon actual sale or immediate settlement of the asset or liability . where quoted prices are available on active exchanges for identical instruments , investment securities are classified within level 1 of the valuation hierarchy . level 1 investment securities include common stock , preferred stock and the equity warrant classified as other investments . level 2 investment securities include corporate bonds , collateralized corporate bank loans , municipal bonds , u.s. treasury securities , other obligations of the u.s. government and mortgage-backed securities for which quoted prices are not available on active exchanges for identical instruments . we use a third party pricing service to determine fair values for each level 2 investment security in all asset classes . since quoted prices in active markets for identical assets are not available , these prices are determined using observable market information such as quotes from less active markets and or quoted prices of securities with similar characteristics , among other things . we have reviewed the processes used by the pricing service and have determined that they result in fair values consistent with the requirements of asc 820 for level 2 investment securities . we have not adjusted any prices received from third-party pricing sources . in cases where there is limited activity or less transparency around inputs to the valuation , investment securities are classified within level 3 of the valuation hierarchy . level 3 investments are valued based on the best available data in order to approximate fair value . this data may be internally developed and consider risk premiums that a market participant would require . investment securities classified within level 3 include other less liquid investment securities . deferred policy acquisition costs . policy acquisition costs ( mainly commission , premium taxes , underwriting and marketing expenses and ceding commissions ) that vary with and are primarily related to the successful acquisition of new and renewal insurance contracts are deferred and charged to operations over periods in which the related premiums are earned . ceding commissions from reinsurers , which include expense allowances , are deferred and recognized over the period premiums are earned for the underlying policies reinsured . story_separator_special_tag our specialty commercial segment reported a $ 54.5 million increase in losses and lae which consisted of ( a ) a $ 22.5 million increase in losses and lae in our commercial auto business unit due largely to $ 47.4 million of unfavorable prior year net loss reserve development recognized during the year ended december 31 , 2019 as compared to $ 18.1 million of unfavorable prior year net loss reserve development during the same period of 2018 , partially offset by lower current accident year loss trends and lower net earned premiums , ( b ) a $ 22.9 million increase in losses and lae in our e & s casualty business unit due primarily to $ 13.6 million of unfavorable prior year net loss reserve development during the year ended december 31 , 2019 as compared to $ 5.2 million of favorable prior year net loss reserve development during the same period of 2018 , as well as higher net earned premiums , ( c ) a $ 1.0 million decrease in losses and lae in our e & s property business unit due primarily to $ 0.3 million of net favorable prior year loss reserve development during the year ended december 31 , 2019 as compared to $ 0.8 million of unfavorable prior year net loss reserve development during the same period of 2018 , ( d ) a $ 9.0 million increase in losses and lae attributable to our professional liability business unit due primarily to increased net premiums earned , partially offset by $ 0.7 million of net favorable prior loss reserve development during the year ended december 31 , 2019 as compared to $ 1.5 million of net unfavorable prior year loss reserve development during the same period of 2018 as well as lower current accident year loss trends , and ( e ) a $ 1.1 million increase in losses and lae in our aerospace & programs business unit due primarily to higher current accident year loss trends as well as higher net premiums earned , partially offset by $ 0.1 million of net unfavorable prior year loss reserve development during the year ended december 31 , 2019 as compared to $ 1.3 million of net unfavorable prior year loss reserve development during the same period of 2018. the specialty commercial segment reported a net loss ratio of 85.0 % for the year ended december 31 , 2019 as compared to 75.2 % for the same period during 2018. the gross loss ratio before reinsurance was 75.9 % for the year ended december 31 , 2019 as compared to 73.4 % for the same period in 2018. the increase in the gross and net loss ratios was primarily due to higher unfavorable prior year net loss reserve development , partially offset by lower catastrophe losses . the specialty commercial segment reported $ 60.1 million of unfavorable prior year net loss reserve development for the year ended december 31 , 2019 as compared to unfavorable prior year net loss reserve development of $ 16.5 million for the same period of 2018. during the year ended december 31 , 2019 the specialty commercial segment reported $ 2.3 million of net catastrophe losses as compared to $ 6.0 million during the same period of 2018. the specialty commercial segment reported a net expense ratio of 21.8 % for the year ended december 31 , 2019 as compared to 22.6 % for the same period of 2018. the decrease in the expense ratio was due predominately to increased ceding commissions in our commercial auto business unit . standard commercial segment . gross premiums written for the standard commercial segment were $ 92.6 million for the year ended december 31 , 2019 , which was $ 6.5 million , or 8 % , more than the $ 86.1 million reported for the same period in 2018. the increase in gross premiums written was due to higher premium production in our commercial accounts business unit . net premiums written were $ 62.9 million for the year ended december 31 , 2019 as compared to $ 69.2 million for the same period in 2018. the decrease in net premiums written was due to increased ceded premium under a quota share reinsurance agreement entered into during the fourth quarter of 2018 on the casualty lines of business produced by the commercial accounts business unit . 40 total revenue for the standard commercial segment of $ 68.2 million for the year ended december 31 , 2019 , was $ 8.4 million , or 11 % , less than the $ 76.6 million reported for the same period in 2018. this decrease in total revenue was due to lower net premiums earned of $ 8.3 million , due primarily to the quota share reinsurance agreement entered into during the fourth quarter of 2018 , and lower commission and fees of $ 0.2 million , partially offset by higher net investment income of $ 0.1 million during the year ended december 31 , 2019 as compared to the same period during 2018. our standard commercial segment reported a pre-tax loss of $ 0.8 million for the year ended december 31 , 2019 as compared to pre-tax income of $ 13.1 million for the same period of 2018. the pre-tax loss was the result of higher losses and lae of $ 10.6 million and the lower revenue discussed above , partially offset by lower operating expenses of $ 5.1 million . reduced operating expenses were largely the result of lower production related expenses of $ 5.2 million due to increased ceding commission primarily from the reinsurance contract entered into during the fourth quarter of 2018 and lower salary and related expenses of $ 0.3 million , partially offset by higher professional service fees and other general expenses of $ 0.4 million . the standard commercial segment reported a net loss ratio of 78.2 % for the year ended december 31 , 2019 as compared
| liquidity and capital resources sources and uses of funds our sources of funds are from insurance-related operations , financing activities and investing activities . major sources of funds from operations include premiums collected ( net of policy cancellations and premiums ceded ) , commissions and processing and service fees . as a holding company , hallmark is dependent on dividend payments and management fees from its subsidiaries to meet operating expenses and debt obligations . as of december 31 , 2019 , we had $ 19.0 million in unrestricted cash and cash equivalents , including $ 12.5 million held in premium and claim trust accounts , as well as $ 1.0 million in debt securities , at the holding company and our non-insurance subsidiaries . as of that date , our insurance subsidiaries held $ 34.3 million of unrestricted cash and cash equivalents as well as $ 573.3 million in debt securities with an average modified duration of 1.5 years . accordingly , we do not anticipate selling long-term debt instruments to meet any liquidity needs . ahic and tbic , domiciled in texas , are limited in the payment of dividends to their stockholders in any 12-month period , without the prior written consent of the texas department of insurance , to the greater of statutory net income for the prior calendar year or 10 % of statutory policyholders ' surplus as of the prior year end . hic and hnic , both domiciled in arizona , are limited in the payment of dividends to the lesser of 10 % of prior year policyholders ' surplus or prior year 's net income , without prior written approval from the arizona department of insurance . hsic , domiciled in oklahoma , is limited in the payment of dividends to the greater of 10 % of prior year policyholders ' surplus or prior year 's statutory net income , not including realized capital gains , without prior written approval from the oklahoma insurance department . for all our insurance companies , dividends may only be paid from unassigned surplus funds .
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26 the greenbrier companies 2013 annual report we operate two manufacturing facilities in sahagun , mexico , one of which we own and one which is leased . in september 2013 , we were notified by the landlord of our leased facility that the landlord does not intend to renew the lease following the expiration of the lease term in november 2014. while we continue to discuss the potential extension of the lease , we are also planning for alternatives to replace the manufacturing capacity of such facility , including potentially through expanding production capacity at our owned facility in sahagun , mexico or at other manufacturing sites . results of operations the accounting policies of the three segments in which we operate are the same as those described in the summary of significant accounting policies . segment performance is evaluated based on margin . the company 's integrated business model results in selling and administrative costs being intertwined among the segments . currently , greenbrier 's management does not allocate these costs for either external or internal reporting purposes . overview ( in thousands ) 2013 2012 2011 revenue : manufacturing $ 1,215,734 $ 1,253,964 $ 721,102 wheels , repair & parts 469,222 481,865 452,865 leasing & services 71,462 71,887 69,323 1,756,418 1,807,716 1,243,290 margin : manufacturing 132,845 131,580 59,975 wheels , repair & parts 37,721 48,324 47,416 leasing & services 35,807 34,516 32,140 segment margin total 206,373 214,420 139,531 less unallocated items : selling and administrative 103,175 104,596 80,326 net gain on disposition of equipment ( 18,072 ) ( 8,964 ) ( 8,369 ) goodwill impairment 76,900 restructuring charges 2,719 interest and foreign exchange 22,158 24,809 36,992 loss on extinguishment of debt 15,657 earnings before income tax and earnings ( loss ) from unconsolidated affiliates 19,493 93,979 14,925 income tax expense ( 25,060 ) ( 32,393 ) ( 3,564 ) earnings ( loss ) before earnings ( loss ) from unconsolidated affiliates ( 5,567 ) 61,586 11,361 earnings ( loss ) from unconsolidated affiliates 186 ( 416 ) ( 2,974 ) net earnings ( loss ) ( 5,381 ) 61,170 8,387 net earnings attributable to noncontrolling interest ( 5,667 ) ( 2,462 ) ( 1,921 ) net earnings ( loss ) attributable to greenbrier $ ( 11,048 ) $ 58,708 $ 6,466 diluted earnings ( loss ) per common share $ ( 0.41 ) $ 1.91 $ 0.24 the decrease in revenue for the year ended august 31 , 2013 was primarily the result of a lower volume of deliveries in the manufacturing segment of our business . the increase in revenue for the year ended august 31 , 2012 was primarily the result of higher levels of activity associated with the economic recovery in the freight car market including higher railcar deliveries as a result of increased demand . the decrease in net earnings for the year ended august 31 , 2013 was primarily attributable to a non-cash goodwill impairment charge of $ 71.8 million , net of tax and restructuring charges of $ 1.8 million , net of tax . these were partially offset by an increase in gain on disposition of equipment . the increase in net earnings for the greenbrier companies 2013 annual report 27 the year ended august 31 , 2012 was primarily attributable to an increase in manufacturing margin in 2012 and loss on extinguishment of debt recognized in 2011. these factors were partially offset by higher selling and administrative costs associated with operating at higher production levels in 2012. manufacturing segment manufacturing revenue was $ 1.216 billion , $ 1.254 billion and $ 721.1 million for the years ended august 31 , 2013 , 2012 and 2011. railcar deliveries , which are the primary source of manufacturing revenue , were 11,600 units in 2013 compared to 15,000 units in 2012 and 9,400 units in 2011. manufacturing revenue decreased $ 38.2 million in 2013 compared to 2012 primarily due to a lower volume of deliveries as compared to the prior year . these lower deliveries were a result of a change in product mix to more labor intensive railcar types and lower than expected demand for certain of our products . these factors were partially offset by a higher per unit average selling price as a result of a change in product mix and an increase in marine revenue from the prior year . manufacturing revenue increased $ 532.9 million in 2012 compared to 2011 primarily due to higher railcar deliveries as a result of increased demand and a higher per unit average selling price principally due to a change in product mix . manufacturing margin as a percentage of revenue was 10.9 % in 2013 , 10.5 % in 2012 and 8.3 % in 2011. the increase in 2013 compared to 2012 was primarily the result of a favorable change in product mix and an increase in marine revenue . these factors were partially offset by inefficiencies with ramping up tank car production . the increase in 2012 compared to 2011 was primarily the result of efficiencies from operating at higher production rates and a more favorable pricing environment . in addition , 2011 was impacted by inefficiencies as we ramped up production at idle facilities . wheels , repair & parts segment wheels , repair & parts revenue was $ 469.2 million , $ 481.9 million and $ 452.9 million for the years ended august 31 , 2013 , 2012 and 2011. the $ 12.7 million decrease in revenue in 2013 compared to 2012 was primarily the result of lower demand for wheel set replacements and a decrease in scrap metal pricing and volume . these were partially offset by an increase in demand for repair work . the $ 29.0 million increase in revenue in 2012 compared to 2011 was primarily the result of higher sales volumes of repair and parts due to higher demand . story_separator_special_tag the estimated maintenance liability is based on maintenance histories for each type and age of railcar . these estimates involve judgment as to the future costs of repairs and the types and timing of repairs required over the lease term . as we can not predict with certainty the prices , timing and volume of maintenance needed in the future on railcars under long-term leases , this estimate is uncertain and could be materially different from maintenance requirements . the liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements . these adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements . warranty accruals - warranty costs to cover a defined warranty period are estimated and charged to operations . the estimated warranty cost is based on historical warranty claims for each particular product type . for new product types without a warranty history , preliminary estimates are based on historical information for similar product types . these estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products . if warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations , warranty expense may exceed the accrual for that particular product . conversely , there is the possibility that claims may be lower than estimates . the warranty accrual is periodically reviewed and updated based on warranty trends . however , as we can not predict future claims , the potential exists for the difference in any one reporting period to be material . environmental costs - at times we may be involved in various proceedings related to environmental matters . we estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information . if further developments or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves , the accrual for environmental remediation could be materially understated or overstated . adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made . due to the uncertain nature of estimating potential environmental matters , there can be no assurance that we will not become involved in future litigation or other proceedings or , if we were found to be responsible or liable in any litigation or proceeding , that such costs would not be material to us . revenue recognition - revenue is recognized when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the price is fixed or determinable and collectability is reasonably assured . railcars are generally manufactured , repaired or refurbished and wheels and parts produced under firm orders from third parties . revenue is recognized when these products or services are completed , accepted by an unaffiliated customer and contractual contingencies removed . certain leases are operated under car hire arrangements whereby revenue is earned based on utilization , car hire rates and terms specified in the lease agreement . car hire revenue is reported from a third party source two months in arrears ; however , such revenue the greenbrier companies 2013 annual report 35 is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported . these estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar . adjustments to actual have historically not been significant . revenues from construction of marine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract . under the percentage of completion method , judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition . we sell railcars with leases attached to financial investors . in addition we will often perform management or maintenance services at market rates for these railcars . pursuant to the guidance in asc 840-20-40 , we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those provisions . we apply a 10 % threshold to determine whether the level of retained risk exceeds 10 % of the individual fair value of the railcars delivered . for any contracts with multiple elements ( i.e . railcars , maintenance , management services , etc ) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement . if objective and reliable evidence of fair value of any element is not available , we will use the element 's estimated selling price for purposes of allocating the total arrangement consideration among the elements . impairment of long-lived assets - when changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable , the assets are evaluated for impairment . if the forecast undiscounted future cash flows are less than the carrying amount of the assets , an impairment charge to reduce the carrying value of the assets to fair value is recognized in the current period . these estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change . if the forecast undiscounted future cash flows exceeded the carrying amount of the assets it would indicate that the assets were
| liquidity and capital resources sources and uses of funds our sources of funds are from insurance-related operations , financing activities and investing activities . major sources of funds from operations include premiums collected ( net of policy cancellations and premiums ceded ) , commissions and processing and service fees . as a holding company , hallmark is dependent on dividend payments and management fees from its subsidiaries to meet operating expenses and debt obligations . as of december 31 , 2019 , we had $ 19.0 million in unrestricted cash and cash equivalents , including $ 12.5 million held in premium and claim trust accounts , as well as $ 1.0 million in debt securities , at the holding company and our non-insurance subsidiaries . as of that date , our insurance subsidiaries held $ 34.3 million of unrestricted cash and cash equivalents as well as $ 573.3 million in debt securities with an average modified duration of 1.5 years . accordingly , we do not anticipate selling long-term debt instruments to meet any liquidity needs . ahic and tbic , domiciled in texas , are limited in the payment of dividends to their stockholders in any 12-month period , without the prior written consent of the texas department of insurance , to the greater of statutory net income for the prior calendar year or 10 % of statutory policyholders ' surplus as of the prior year end . hic and hnic , both domiciled in arizona , are limited in the payment of dividends to the lesser of 10 % of prior year policyholders ' surplus or prior year 's net income , without prior written approval from the arizona department of insurance . hsic , domiciled in oklahoma , is limited in the payment of dividends to the greater of 10 % of prior year policyholders ' surplus or prior year 's statutory net income , not including realized capital gains , without prior written approval from the oklahoma insurance department . for all our insurance companies , dividends may only be paid from unassigned surplus funds .
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26 the greenbrier companies 2013 annual report we operate two manufacturing facilities in sahagun , mexico , one of which we own and one which is leased . in september 2013 , we were notified by the landlord of our leased facility that the landlord does not intend to renew the lease following the expiration of the lease term in november 2014. while we continue to discuss the potential extension of the lease , we are also planning for alternatives to replace the manufacturing capacity of such facility , including potentially through expanding production capacity at our owned facility in sahagun , mexico or at other manufacturing sites . results of operations the accounting policies of the three segments in which we operate are the same as those described in the summary of significant accounting policies . segment performance is evaluated based on margin . the company 's integrated business model results in selling and administrative costs being intertwined among the segments . currently , greenbrier 's management does not allocate these costs for either external or internal reporting purposes . overview ( in thousands ) 2013 2012 2011 revenue : manufacturing $ 1,215,734 $ 1,253,964 $ 721,102 wheels , repair & parts 469,222 481,865 452,865 leasing & services 71,462 71,887 69,323 1,756,418 1,807,716 1,243,290 margin : manufacturing 132,845 131,580 59,975 wheels , repair & parts 37,721 48,324 47,416 leasing & services 35,807 34,516 32,140 segment margin total 206,373 214,420 139,531 less unallocated items : selling and administrative 103,175 104,596 80,326 net gain on disposition of equipment ( 18,072 ) ( 8,964 ) ( 8,369 ) goodwill impairment 76,900 restructuring charges 2,719 interest and foreign exchange 22,158 24,809 36,992 loss on extinguishment of debt 15,657 earnings before income tax and earnings ( loss ) from unconsolidated affiliates 19,493 93,979 14,925 income tax expense ( 25,060 ) ( 32,393 ) ( 3,564 ) earnings ( loss ) before earnings ( loss ) from unconsolidated affiliates ( 5,567 ) 61,586 11,361 earnings ( loss ) from unconsolidated affiliates 186 ( 416 ) ( 2,974 ) net earnings ( loss ) ( 5,381 ) 61,170 8,387 net earnings attributable to noncontrolling interest ( 5,667 ) ( 2,462 ) ( 1,921 ) net earnings ( loss ) attributable to greenbrier $ ( 11,048 ) $ 58,708 $ 6,466 diluted earnings ( loss ) per common share $ ( 0.41 ) $ 1.91 $ 0.24 the decrease in revenue for the year ended august 31 , 2013 was primarily the result of a lower volume of deliveries in the manufacturing segment of our business . the increase in revenue for the year ended august 31 , 2012 was primarily the result of higher levels of activity associated with the economic recovery in the freight car market including higher railcar deliveries as a result of increased demand . the decrease in net earnings for the year ended august 31 , 2013 was primarily attributable to a non-cash goodwill impairment charge of $ 71.8 million , net of tax and restructuring charges of $ 1.8 million , net of tax . these were partially offset by an increase in gain on disposition of equipment . the increase in net earnings for the greenbrier companies 2013 annual report 27 the year ended august 31 , 2012 was primarily attributable to an increase in manufacturing margin in 2012 and loss on extinguishment of debt recognized in 2011. these factors were partially offset by higher selling and administrative costs associated with operating at higher production levels in 2012. manufacturing segment manufacturing revenue was $ 1.216 billion , $ 1.254 billion and $ 721.1 million for the years ended august 31 , 2013 , 2012 and 2011. railcar deliveries , which are the primary source of manufacturing revenue , were 11,600 units in 2013 compared to 15,000 units in 2012 and 9,400 units in 2011. manufacturing revenue decreased $ 38.2 million in 2013 compared to 2012 primarily due to a lower volume of deliveries as compared to the prior year . these lower deliveries were a result of a change in product mix to more labor intensive railcar types and lower than expected demand for certain of our products . these factors were partially offset by a higher per unit average selling price as a result of a change in product mix and an increase in marine revenue from the prior year . manufacturing revenue increased $ 532.9 million in 2012 compared to 2011 primarily due to higher railcar deliveries as a result of increased demand and a higher per unit average selling price principally due to a change in product mix . manufacturing margin as a percentage of revenue was 10.9 % in 2013 , 10.5 % in 2012 and 8.3 % in 2011. the increase in 2013 compared to 2012 was primarily the result of a favorable change in product mix and an increase in marine revenue . these factors were partially offset by inefficiencies with ramping up tank car production . the increase in 2012 compared to 2011 was primarily the result of efficiencies from operating at higher production rates and a more favorable pricing environment . in addition , 2011 was impacted by inefficiencies as we ramped up production at idle facilities . wheels , repair & parts segment wheels , repair & parts revenue was $ 469.2 million , $ 481.9 million and $ 452.9 million for the years ended august 31 , 2013 , 2012 and 2011. the $ 12.7 million decrease in revenue in 2013 compared to 2012 was primarily the result of lower demand for wheel set replacements and a decrease in scrap metal pricing and volume . these were partially offset by an increase in demand for repair work . the $ 29.0 million increase in revenue in 2012 compared to 2011 was primarily the result of higher sales volumes of repair and parts due to higher demand . story_separator_special_tag the estimated maintenance liability is based on maintenance histories for each type and age of railcar . these estimates involve judgment as to the future costs of repairs and the types and timing of repairs required over the lease term . as we can not predict with certainty the prices , timing and volume of maintenance needed in the future on railcars under long-term leases , this estimate is uncertain and could be materially different from maintenance requirements . the liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements . these adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements . warranty accruals - warranty costs to cover a defined warranty period are estimated and charged to operations . the estimated warranty cost is based on historical warranty claims for each particular product type . for new product types without a warranty history , preliminary estimates are based on historical information for similar product types . these estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products . if warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations , warranty expense may exceed the accrual for that particular product . conversely , there is the possibility that claims may be lower than estimates . the warranty accrual is periodically reviewed and updated based on warranty trends . however , as we can not predict future claims , the potential exists for the difference in any one reporting period to be material . environmental costs - at times we may be involved in various proceedings related to environmental matters . we estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information . if further developments or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves , the accrual for environmental remediation could be materially understated or overstated . adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made . due to the uncertain nature of estimating potential environmental matters , there can be no assurance that we will not become involved in future litigation or other proceedings or , if we were found to be responsible or liable in any litigation or proceeding , that such costs would not be material to us . revenue recognition - revenue is recognized when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the price is fixed or determinable and collectability is reasonably assured . railcars are generally manufactured , repaired or refurbished and wheels and parts produced under firm orders from third parties . revenue is recognized when these products or services are completed , accepted by an unaffiliated customer and contractual contingencies removed . certain leases are operated under car hire arrangements whereby revenue is earned based on utilization , car hire rates and terms specified in the lease agreement . car hire revenue is reported from a third party source two months in arrears ; however , such revenue the greenbrier companies 2013 annual report 35 is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported . these estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar . adjustments to actual have historically not been significant . revenues from construction of marine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract . under the percentage of completion method , judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition . we sell railcars with leases attached to financial investors . in addition we will often perform management or maintenance services at market rates for these railcars . pursuant to the guidance in asc 840-20-40 , we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those provisions . we apply a 10 % threshold to determine whether the level of retained risk exceeds 10 % of the individual fair value of the railcars delivered . for any contracts with multiple elements ( i.e . railcars , maintenance , management services , etc ) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement . if objective and reliable evidence of fair value of any element is not available , we will use the element 's estimated selling price for purposes of allocating the total arrangement consideration among the elements . impairment of long-lived assets - when changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable , the assets are evaluated for impairment . if the forecast undiscounted future cash flows are less than the carrying amount of the assets , an impairment charge to reduce the carrying value of the assets to fair value is recognized in the current period . these estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change . if the forecast undiscounted future cash flows exceeded the carrying amount of the assets it would indicate that the assets were
| liquidity and capital resources years ended august 31 , ( in thousands ) 2013 2012 2011 net cash provided by ( used in ) operating activities $ 104,592 $ 116,056 $ ( 34,252 ) net cash provided by ( used in ) investing activities 6,159 ( 88,947 ) ( 69,264 ) net cash provided by ( used in ) financing activities ( 65,732 ) ( 28,794 ) 57,991 effect of exchange rate changes ( 1,155 ) 5,034 ( 3,117 ) net increase ( decrease ) in cash and cash equivalents $ 43,864 $ 3,349 $ ( 48,642 ) we have been financed through cash generated from operations , borrowings and issuance of stock . at august 31 , 2013 cash and cash equivalents was $ 97.4 million , an increase of $ 43.8 million from $ 53.6 million at the prior year end . cash provided by operating activities was $ 104.6 million and $ 116.1 million for the years ended august 31 , 2013 and 2012 compared to cash used in operating activities of $ 34.3 million for the year ended august 31 , 2011. the decrease in 2013 was primarily due to a change in the timing of working capital needs and timing of sales of leased railcars for syndication . the increase in 2012 was primarily due to increased profitability and a change in the timing of working capital needs as a result of working capital management initiatives and build up of working capital in 2011 to prepare for operating at higher production levels in 2012. these factors were partially offset by an increase in leased railcars for syndication expected to be sold in the following year . cash provided by ( used in ) investing activities primarily related to capital expenditures less proceeds from the sale of assets .
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for measurement purposes , a 6.0 % , 7.0 % , 4.5 % and 8.5 % annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019 for pre-65 medical , pre-65 drug , post-65 medical and post-65 drug , respectively . the health care cost trend rates are assumed to decline steadily to an ultimate rate of 4.5 % by 2025 for pre-65 medical and by 2026 for pre-65 and post-65 drug . post-65 medical trend is assumed to be 4.5 % for all years into the future . assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan . the estimated rate of compensation increase used in our retirement plans is 4.5 % and is based on recent trends for all non-union employees and the amounts we are contractually obligated for union employees . the following table reflects the sensitivities that a change in certain actuarial assumptions would have had on the december 31 , 2018 reported pension liability and our 2018 reported pension expense ( in thousands ) : replace_table_token_10_th the following chart reflects the sensitivities that a change in certain actuarial assumptions would have had on the december 31 , 2018 other post-retirement benefit obligation and our 2018 reported other post-retirement benefit expense ( in thousands ) : replace_table_token_11_th 27 tax accruals we use the asset and liability method of accounting for income taxes . under this method , we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities . the application of income tax law and regulations is complex and we make judgments regarding income tax exposures . changes in these judgments , due to changes in law , regulation , interpretation or audit adjustments can materially affect amounts we recognize in our financial statements . on december 22 , 2017 , the tcja was enacted . substantially all of the provisions of the tcja are effective for taxable years beginning after december 31 , 2017. the tcja includes significant changes to the irc , including amendments which significantly change the taxation of business entities and includes specific provisions related to regulated public utilities . see part ii , item 8 , financial statements and supplementary data , note k of notes to financial statements for further discussion . when appropriate , we record a valuation allowance against deferred tax assets to reflect that these tax assets may not be realized . in assessing the likelihood of the realization of deferred tax assets , management considers the estimated amount and character of future taxable income . significant changes in these judgments and estimates could have a material impact on the results of operations and financial position of the company . there were no valuation allowances for deferred tax assets as of december 31 , 2018. we recognize tax benefits that are more likely than not to be sustained upon examination by tax authorities . the amount recognized is measured as the largest amount of benefit that is greater than 50 % likely to be realized upon settlement . the unrecognized tax benefits that do not meet the recognition and measurement standards were $ 3.2 million as of december 31 , 2018. overview the following is an overview of our results of operations for the years ended december 31 , 2018 , 2017 and 2016 . net income and basic earnings per share for the years ended december 31 , 2018 , 2017 and 2016 are shown below : replace_table_token_12_th 28 the following table and accompanying explanations show the primary factors affecting the after-tax change in income between the calendar years ended december 31 , 2018 and 2017 , 2017 and 2016 , and 2016 and 2015 ( in thousands ) : replace_table_token_13_th footnotes reflect pre-tax amounts ( a ) investment and interest income , ndt decreased in 2018 , primarily due to net realized and unrealized losses on securities held in the ndt . beginning on january 1 , 2018 , the company adopted asu 2016-01 , financial instruments , and began recording unrealized gains and losses on equity securities held in the ndt directly in earnings . refer to `` impact of new accounting standards and use of non-gaap financial measures `` for further details . ( b ) investment and interest income , ndt increased in 2017 and decreased in 2016 , primarily due to changes in realized gains on securities sold from the ndt . sales of such securities are primarily the result of the company 's efforts to re-balance and further diversify the ndt investments . ( c ) depreciation and amortization increased primarily due to increases in plant . ( d ) depreciation and amortization increased primarily due to increases in plant , including mps units 3 and 4 , which were placed in service in 2016. these increases were partially offset by the sale of the company 's interest in four corners in july 2016 . ( e ) depreciation and amortization decreased primarily due to ( i ) a reduction of approximately $ 10.9 million resulting from changes in depreciation rates approved in the puct final order in docket no . 44941 ( `` 2016 puct final order `` ) and the nmprc final order and ( ii ) the sale of the company 's interest in four corners in 2016. these decreases were partially offset by an increase in plant , primarily due to mps units 1 and 2 and the eastside operations center ( `` eoc `` ) each beingplaced in service in march 2015 , and mps units 3 and 4 being placed in service in may 2016 and september 2016 , respectively . story_separator_special_tag cooling degree days increased 8.8 % in the twelve months ended december 31 , 2018 , when compared to the twelve months ended december 31 , 2017 , and were 10.9 % above the 10-year average . heating degree days increased 27.3 % in the twelve months ended december 31 , 2018 , when compared to the twelve months ended december 31 , 2017 , and were 5.8 % below the 10-year average . for the twelve months ended december 31 , 2017 , retail non-fuel base revenues increased primarily due to the recognition of $ 8.8 million approved in the 2017 puct final order . excluding the $ 8.8 million 2017 puct final order impact , for the twelve months ended december 31 , 2017 , retail non-fuel base revenues increased $ 4.5 million , or 0.7 % , compared to the twelve months ended december 31 , 2016. this increase was primarily due to increased revenues from residential customers of $ 2.5 million driven by a 1.6 % increase in the average number of residential customers served and increased revenues from small commercial and industrial customers of $ 2.1 million driven by a 2.4 % increase in the average number of small commercial and industrial customers served . the company experienced an overall 1.7 % increase in the average number of customers served , partially offset by milder weather when compared to the twelve months ended december 31 , 2016. heating degree days decreased 17.8 % in the twelve months ended december 31 , 2017 , when compared to the twelve months ended december 31 , 2016. during our peak summer cooling season , cooling degree days in 2017 were comparable to the same period in 2016. fuel revenues . fuel revenues consist of ( i ) revenues collected from customers under fuel recovery mechanisms approved by the state commissions and the ferc , ( ii ) deferred fuel revenues which , are comprised of the difference between fuel costs and fuel revenues collected from customers , and ( iii ) prior to july 1 , 2016 , fuel costs recovered in base rates in new mexico . in new mexico , effective july 1 , 2016 , with the implementation of the nmprc final order , fuel and purchased power costs are no longer recovered through base rates , as they were historically , but are recovered through the fppcac . fuel and purchased power costs are reconciled to actual costs on a monthly basis and recovered or refunded to customers the second succeeding month . additionally , effective january 1 , 2018 , pursuant to the final order in nmprc case no . 17-00090-ut , the rps costs for new mexico are recovered through a separate rps cost rider and not through the fppcac . the rps cost rider is updated in an annual nmprc filing , including a true-up of the prior calendar year 's rps costs and rps cost rider revenue . in texas , fuel costs are recovered through a fixed fuel factor . we can seek to revise our texas fixed fuel factor based upon an approved formula at least four months after our last revision , except in the month of december . in addition , if we materially over-recover fuel costs , we must seek to refund the over-recovery , and if we materially under-recover fuel costs , we may seek a surcharge to recover those costs . fuel over-and under-recoveries are defined as material when they exceed 4 % of the previous twelve months ' fuel costs . in march 2018 and march 2017 , $ 1.1 million and $ 1.4 million , respectively , were credited to customers through the applicable fuel adjustment clauses as the result of a reimbursement from the doe related to spent nuclear fuel storage . we over-recovered fuel costs by $ 4.8 million in the twelve months ended december 31 , 2018. we over-recovered fuel costs by $ 17.1 million and under-recovered fuel costs by $ 14.9 million in the twelve months ended december 31 , 2017 and 2016 , respectively . at december 31 , 2018 , we had a net fuel over-recovery balance of $ 11.0 million , including over-recoveries of $ 8.9 million in texas , $ 2.0 million in new mexico and $ 0.1 million in ferc jurisdictions . on october 13 , 2017 , we filed a request to decrease our texas fixed fuel factor by approximately 19 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . the decrease in our texas fixed fuel factor became effective beginning with the november 2017 billing month . on april 13 , 2018 , we filed a request with the puct to decrease the texas fixed fuel factor by approximately 29 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on april 25 , 2018 , our proposed fuel factors were approved on an interim basis effective for the first billing cycle of the may 2018 billing month . the revised factor was approved and the docket closed on may 22 , 2018. on october 15 , 2018 , we filed a request with the puct to decrease our texas fixed fuel factor by approximately 6.99 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on october 25 , 2018 , our fixed fuel factor was approved on an interim basis effective for the first billing cycle of the november 2018 billing month . the revised factor was approved by the puct and the docket closed on november 19 , 2018. the texas fixed fuel factor will continue thereafter until changed by the puct . 33 off-system sales . off-system sales are sales into wholesale markets outside our service territory . off-system
| liquidity and capital resources years ended august 31 , ( in thousands ) 2013 2012 2011 net cash provided by ( used in ) operating activities $ 104,592 $ 116,056 $ ( 34,252 ) net cash provided by ( used in ) investing activities 6,159 ( 88,947 ) ( 69,264 ) net cash provided by ( used in ) financing activities ( 65,732 ) ( 28,794 ) 57,991 effect of exchange rate changes ( 1,155 ) 5,034 ( 3,117 ) net increase ( decrease ) in cash and cash equivalents $ 43,864 $ 3,349 $ ( 48,642 ) we have been financed through cash generated from operations , borrowings and issuance of stock . at august 31 , 2013 cash and cash equivalents was $ 97.4 million , an increase of $ 43.8 million from $ 53.6 million at the prior year end . cash provided by operating activities was $ 104.6 million and $ 116.1 million for the years ended august 31 , 2013 and 2012 compared to cash used in operating activities of $ 34.3 million for the year ended august 31 , 2011. the decrease in 2013 was primarily due to a change in the timing of working capital needs and timing of sales of leased railcars for syndication . the increase in 2012 was primarily due to increased profitability and a change in the timing of working capital needs as a result of working capital management initiatives and build up of working capital in 2011 to prepare for operating at higher production levels in 2012. these factors were partially offset by an increase in leased railcars for syndication expected to be sold in the following year . cash provided by ( used in ) investing activities primarily related to capital expenditures less proceeds from the sale of assets .
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for measurement purposes , a 6.0 % , 7.0 % , 4.5 % and 8.5 % annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019 for pre-65 medical , pre-65 drug , post-65 medical and post-65 drug , respectively . the health care cost trend rates are assumed to decline steadily to an ultimate rate of 4.5 % by 2025 for pre-65 medical and by 2026 for pre-65 and post-65 drug . post-65 medical trend is assumed to be 4.5 % for all years into the future . assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan . the estimated rate of compensation increase used in our retirement plans is 4.5 % and is based on recent trends for all non-union employees and the amounts we are contractually obligated for union employees . the following table reflects the sensitivities that a change in certain actuarial assumptions would have had on the december 31 , 2018 reported pension liability and our 2018 reported pension expense ( in thousands ) : replace_table_token_10_th the following chart reflects the sensitivities that a change in certain actuarial assumptions would have had on the december 31 , 2018 other post-retirement benefit obligation and our 2018 reported other post-retirement benefit expense ( in thousands ) : replace_table_token_11_th 27 tax accruals we use the asset and liability method of accounting for income taxes . under this method , we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities . the application of income tax law and regulations is complex and we make judgments regarding income tax exposures . changes in these judgments , due to changes in law , regulation , interpretation or audit adjustments can materially affect amounts we recognize in our financial statements . on december 22 , 2017 , the tcja was enacted . substantially all of the provisions of the tcja are effective for taxable years beginning after december 31 , 2017. the tcja includes significant changes to the irc , including amendments which significantly change the taxation of business entities and includes specific provisions related to regulated public utilities . see part ii , item 8 , financial statements and supplementary data , note k of notes to financial statements for further discussion . when appropriate , we record a valuation allowance against deferred tax assets to reflect that these tax assets may not be realized . in assessing the likelihood of the realization of deferred tax assets , management considers the estimated amount and character of future taxable income . significant changes in these judgments and estimates could have a material impact on the results of operations and financial position of the company . there were no valuation allowances for deferred tax assets as of december 31 , 2018. we recognize tax benefits that are more likely than not to be sustained upon examination by tax authorities . the amount recognized is measured as the largest amount of benefit that is greater than 50 % likely to be realized upon settlement . the unrecognized tax benefits that do not meet the recognition and measurement standards were $ 3.2 million as of december 31 , 2018. overview the following is an overview of our results of operations for the years ended december 31 , 2018 , 2017 and 2016 . net income and basic earnings per share for the years ended december 31 , 2018 , 2017 and 2016 are shown below : replace_table_token_12_th 28 the following table and accompanying explanations show the primary factors affecting the after-tax change in income between the calendar years ended december 31 , 2018 and 2017 , 2017 and 2016 , and 2016 and 2015 ( in thousands ) : replace_table_token_13_th footnotes reflect pre-tax amounts ( a ) investment and interest income , ndt decreased in 2018 , primarily due to net realized and unrealized losses on securities held in the ndt . beginning on january 1 , 2018 , the company adopted asu 2016-01 , financial instruments , and began recording unrealized gains and losses on equity securities held in the ndt directly in earnings . refer to `` impact of new accounting standards and use of non-gaap financial measures `` for further details . ( b ) investment and interest income , ndt increased in 2017 and decreased in 2016 , primarily due to changes in realized gains on securities sold from the ndt . sales of such securities are primarily the result of the company 's efforts to re-balance and further diversify the ndt investments . ( c ) depreciation and amortization increased primarily due to increases in plant . ( d ) depreciation and amortization increased primarily due to increases in plant , including mps units 3 and 4 , which were placed in service in 2016. these increases were partially offset by the sale of the company 's interest in four corners in july 2016 . ( e ) depreciation and amortization decreased primarily due to ( i ) a reduction of approximately $ 10.9 million resulting from changes in depreciation rates approved in the puct final order in docket no . 44941 ( `` 2016 puct final order `` ) and the nmprc final order and ( ii ) the sale of the company 's interest in four corners in 2016. these decreases were partially offset by an increase in plant , primarily due to mps units 1 and 2 and the eastside operations center ( `` eoc `` ) each beingplaced in service in march 2015 , and mps units 3 and 4 being placed in service in may 2016 and september 2016 , respectively . story_separator_special_tag cooling degree days increased 8.8 % in the twelve months ended december 31 , 2018 , when compared to the twelve months ended december 31 , 2017 , and were 10.9 % above the 10-year average . heating degree days increased 27.3 % in the twelve months ended december 31 , 2018 , when compared to the twelve months ended december 31 , 2017 , and were 5.8 % below the 10-year average . for the twelve months ended december 31 , 2017 , retail non-fuel base revenues increased primarily due to the recognition of $ 8.8 million approved in the 2017 puct final order . excluding the $ 8.8 million 2017 puct final order impact , for the twelve months ended december 31 , 2017 , retail non-fuel base revenues increased $ 4.5 million , or 0.7 % , compared to the twelve months ended december 31 , 2016. this increase was primarily due to increased revenues from residential customers of $ 2.5 million driven by a 1.6 % increase in the average number of residential customers served and increased revenues from small commercial and industrial customers of $ 2.1 million driven by a 2.4 % increase in the average number of small commercial and industrial customers served . the company experienced an overall 1.7 % increase in the average number of customers served , partially offset by milder weather when compared to the twelve months ended december 31 , 2016. heating degree days decreased 17.8 % in the twelve months ended december 31 , 2017 , when compared to the twelve months ended december 31 , 2016. during our peak summer cooling season , cooling degree days in 2017 were comparable to the same period in 2016. fuel revenues . fuel revenues consist of ( i ) revenues collected from customers under fuel recovery mechanisms approved by the state commissions and the ferc , ( ii ) deferred fuel revenues which , are comprised of the difference between fuel costs and fuel revenues collected from customers , and ( iii ) prior to july 1 , 2016 , fuel costs recovered in base rates in new mexico . in new mexico , effective july 1 , 2016 , with the implementation of the nmprc final order , fuel and purchased power costs are no longer recovered through base rates , as they were historically , but are recovered through the fppcac . fuel and purchased power costs are reconciled to actual costs on a monthly basis and recovered or refunded to customers the second succeeding month . additionally , effective january 1 , 2018 , pursuant to the final order in nmprc case no . 17-00090-ut , the rps costs for new mexico are recovered through a separate rps cost rider and not through the fppcac . the rps cost rider is updated in an annual nmprc filing , including a true-up of the prior calendar year 's rps costs and rps cost rider revenue . in texas , fuel costs are recovered through a fixed fuel factor . we can seek to revise our texas fixed fuel factor based upon an approved formula at least four months after our last revision , except in the month of december . in addition , if we materially over-recover fuel costs , we must seek to refund the over-recovery , and if we materially under-recover fuel costs , we may seek a surcharge to recover those costs . fuel over-and under-recoveries are defined as material when they exceed 4 % of the previous twelve months ' fuel costs . in march 2018 and march 2017 , $ 1.1 million and $ 1.4 million , respectively , were credited to customers through the applicable fuel adjustment clauses as the result of a reimbursement from the doe related to spent nuclear fuel storage . we over-recovered fuel costs by $ 4.8 million in the twelve months ended december 31 , 2018. we over-recovered fuel costs by $ 17.1 million and under-recovered fuel costs by $ 14.9 million in the twelve months ended december 31 , 2017 and 2016 , respectively . at december 31 , 2018 , we had a net fuel over-recovery balance of $ 11.0 million , including over-recoveries of $ 8.9 million in texas , $ 2.0 million in new mexico and $ 0.1 million in ferc jurisdictions . on october 13 , 2017 , we filed a request to decrease our texas fixed fuel factor by approximately 19 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . the decrease in our texas fixed fuel factor became effective beginning with the november 2017 billing month . on april 13 , 2018 , we filed a request with the puct to decrease the texas fixed fuel factor by approximately 29 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on april 25 , 2018 , our proposed fuel factors were approved on an interim basis effective for the first billing cycle of the may 2018 billing month . the revised factor was approved and the docket closed on may 22 , 2018. on october 15 , 2018 , we filed a request with the puct to decrease our texas fixed fuel factor by approximately 6.99 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on october 25 , 2018 , our fixed fuel factor was approved on an interim basis effective for the first billing cycle of the november 2018 billing month . the revised factor was approved by the puct and the docket closed on november 19 , 2018. the texas fixed fuel factor will continue thereafter until changed by the puct . 33 off-system sales . off-system sales are sales into wholesale markets outside our service territory . off-system
| capital resources . cash provided by operations , $ 285.4 million for the twelve months ended december 31 , 2018 , and $ 288.6 million for the twelve months ended december 31 , 2017 , is a significant source for funding capital requirements . a component of cash flows from operations is the change in net over-collection and under-collection of fuel revenues . cash from operations has been impacted by the timing of the recovery of fuel costs through fuel recovery mechanisms in texas and new mexico , and our sales for resale full requirement customer . we recover actual fuel costs from customers through fuel adjustment mechanisms in texas and new mexico , and from our sales for resale full requirement customer . we record deferred fuel revenues for the under-recovery or over-recovery of fuel costs until they can be recovered from or refunded to customers . in texas , fuel costs are recovered through a fixed fuel factor . we can seek to revise our fixed fuel factor at least four months after our last revision except in the month of december based upon our approved formula which allows us to adjust fuel rates to reflect changes in costs of natural gas . we are required to request to refund fuel costs in any month when the over-recovery balance exceeds a threshold material amount and we expect fuel costs to continue to be materially over-recovered . we are permitted to seek to surcharge fuel under-recoveries in any month the balance exceeds a threshold material amount that we expect fuel cost recovery to continue to be materially under-recovered . fuel over and under-recoveries are considered material when they exceed 4 % of the previous twelve months ' fuel costs . on october 15 , 2018 , we filed a request with the puct to decrease our texas fixed fuel factor by approximately 6.99 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on october 25 , 2018 , our fixed fuel factor was approved on an interim basis effective for the first billing cycle of the november 2018 billing month .
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impact of covid-19 the covid-19 pandemic has resulted , and is likely to continue to result , in significant economic disruption and has adversely affected and will likely continue to adversely affect our business . our operations have been designated “ essential critical infrastructure work ” in the energy sector by the u.s. department of homeland security , meaning that we have been able to continue operating to the fullest extent possible . while continuing our business operations , we are focused on protecting the health and wellbeing of our employees , customers and the communities in which we operate . except as described herein , the covid-19 pandemic has not resulted in any adverse effects to our operations , including financial reporting systems , internal control over financial reporting and disclosure controls and procedures . additionally , our technicians and o & m services continued to operate effectively , and we believe our supply chain has not been disrupted . all of our natural gas fueling stations have remained fully operational during the covid-19 pandemic and continue to provide access to customers many that are supplying essential services . further , we have not experienced any challenges implementing business continuity plans and have not incurred , and do not expect to incur , material expenditures related to the same . we have adopted and applied protocols and procedures in accordance with federal , state and local government policies and mandates and centers for disease control ( cdc ) guidelines for our offices . specifically , we have implemented enhanced cleaning and disinfecting protocols and procedures like temperature and covid-19 screening questionnaires for the health and safety of our employees , customers and the communities in which we operate . we have provided personal protective equipment ( including masks and gloves ) and hand sanitizer , we have modified office seating , we expect all our employees to maintain appropriate physical distancing , and we continue to restrict employee travel in accordance with the various state health orders . we began to see the negative effects of covid-19 on volumes delivered in mid-march 2020 and continued to see declines in volumes delivered through december 31 , 2020 , as compared to the respective periods in 2019. we saw our volumes bottom in the second quarter of 2020 and have since seen improvement in volumes as volumes delivered for the fourth quarter of 2020 increased 7 % over the second quarter of 2020. while volumes delivered in december 2020 were 2 % lower compared to december 2019 , this decline was lower than the decline of 4 % when comparing september 2020 to september 2019. the most significant negative effects of covid-19 in relation to our volumes continue to be seen in the airports ( fleet services ) and public transit customer markets , which were down by between 15 % and 32 % during the three months ended december 31 , 2020 compared to the comparable 2019 period due to federal , state and local government mandates to restrict normal daily activities , as well as travel bans , quarantines and “ shelter-in-place ” orders , with growth in the refuse market in the three months ended december 31 , 2020 from the three months ended december 31 , 2019 , where demand continues to be strong . although many of these restrictions have been lifted or scaled back in recent months , the continued prevalence of covid-19 in certain areas has resulted in the re-imposition of certain restrictions and may lead to other restrictions being re-implemented in response to efforts to reduce the spread of covid-19 . these measures , which may remain in place for a significant amount of time , may further adversely affect airports , public transit and government fleet customer markets . our volume of gges delivered for the year ended december 31 , 2020 declined 5 % compared to the prior year . 34 although we are experiencing gradual improvements since the onset of the covid-19 pandemic , there is no guarantee this will continue due to uncertainties regarding the effects of the covid-19 pandemic . we are projecting growth in volumes for 2021 compared to 2020 ; however , it is possible that the prolonged effect of the covid-19 pandemic could negatively affect our future volumes . declines in volume have resulted and could continue to result in lower gross margin dollars year-over-year and likely a lower gross margin per gge due to lower output on fixed operating costs and the effect of less revenue from environmental credits . lower volumes have affected and may continue to affect our aftc revenue as a portion of the decline in volume is from aftc-eligible volumes . we continue to experience lower operating expenses , which has helped mitigate the lower gross profit margins from lower volumes , and we have benefitted from other gains on station asset disposals . given the dynamic nature of these circumstances , significant uncertainty exists concerning the duration of business disruption and the full extent of the effect of covid-19 on our business , results of operations and financial condition . additionally , the effects of covid-19 , low oil prices and the adoption of government policies and programs , or increased popular sentiment , in favor of other vehicle technologies or fuels may delay adoption of natural gas vehicles , particularly heavy-duty natural gas trucks , by new or existing customers . for more information , see “ risk factors ” in part ii , item 1a of this report . story_separator_special_tag for example , california lawmakers and regulators have implemented various measures designed to increase the use of electric , hydrogen and other zero-emission vehicles , including establishing firm goals for the number of these vehicles operating on state roads by specified dates and enacting various laws and other programs in support of these goals . among other things , we believe many california lawmakers and regulators desire to limit and ultimately discontinue the production and use of internal combustion engines because such engines have “ tailpipe ” emissions . ● we believe the lack of substantial growth in the heavy-duty trucking market has been driven in part by the experience of operators with , or perceptions of , unsatisfactory performance by prior models of heavy-duty truck 39 engines , actual or perceived insufficiencies in the financial incentives to convert , and improvements in diesel engine technology . if these conditions continue , then the growth levels in this market will continue to be low . we believe the newest models of heavy-duty truck engines have substantially addressed concerns with prior models . further , we have launched our zero now truck financing program and the chevron adopt-a-port program to combat operator concerns , but these programs may not ultimately be successful . to the extent these or other factors have contributed to curtailed demand or slowing growth in the market for our vehicle fuels , we believe they have also contributed to decreases in station construction activity in certain periods , as the success of this activity is dependent on the success of the market for our vehicle fuels generally . moreover , we believe these factors have materially contributed to the volatility and declines in our stock price and market capitalization in recent years , which has and could in the future lead to decreased cash flows and indications of asset or goodwill impairment . if these adverse macroeconomic conditions and other uncertainties in our industry persist , our financial results and stock price may continue to be adversely affected . in spite of these market conditions , we believe our key customer markets , including heavy-duty trucking , airports , refuse , and public transit , are well-suited for the adoption of our vehicle fuels because they consume relatively high volumes of fuel , refuel at centralized locations or along well-defined routes and or are facing increasingly stringent emissions or other environmental requirements . we also expect the lower greenhouse gas emissions associated with our rng vehicle fuel will result in increased demand for this fuel , resulting in our continued delivery of increasing volumes of rng to our vehicle fleet customers . additionally , we anticipate that , over time , cities and communities in the united states and canada will follow large cities in europe in banning diesel vehicles . if these projections materialize , we believe there will be growth in the consumption of our vehicle fuels in our key customer and geographic markets , and our goal is to capitalize on this growth if and when it materializes . in that event , we expect our operating costs and capital expenditures would increase in connection with any growth of our business in the future . our performance overview . our gross revenue mostly consists of volume-related revenue , station construction sales , and aftc revenue . our revenue can vary between periods due to a variety of factors , including , among others , the amount and timing of vehicle fuel sales , natural gas commodity prices , station construction sales , sales of environmental credits , and recognition of government credits , grants and incentives , such as aftc . in addition , our volume-related revenue has been and may continue to be subject to increased fluctuations as a result of our entry into certain commodity swap arrangements in october 2018 , because the changes in fair value of these and certain other derivative instruments , including existing and anticipated fueling contracts under our zero now truck financing program , are included in volume-related revenue . our cost of sales can also vary between periods due to a variety of factors , including fluctuations in natural gas commodity prices , station construction and labor costs , as well as the other factors that impact our revenue levels described above . in addition , our performance in certain periods has been affected by transactions or events that have resulted in significant cash or non-cash gains or losses . such gains or losses may not recur regularly , in the same amounts or at all in future periods and , with respect to non-cash gains and losses , do not impact our liquidity . these significant fluctuations in our operating results may render period-to-period comparisons less meaningful , especially given the current uncertainties related to the ongoing covid-19 pandemic , and investors in our securities should not rely on the results of one period as an indicator of performance in any other period . additionally , these fluctuations in our operating results could cause our performance in any period to fall below the financial guidance we may have provided to the public or the estimates and projections of the investment community , which could negatively affect the price of our common stock . see “ results of operations ” below for more information about our performance in 2019 and 2020. volume . the amount of rng and conventional natural gas , in the form of cng and lng , that we delivered decreased by 4.6 % from 2019 to 2020 due to the effect of covid-19 . 40 while total volume declined due to the effect of covid-19 , the amount of rng we sell for vehicle fuel , which is delivered in the form of cng or lng , has experienced rapid growth in recent years , and increased by 7 % from 2019 to 2020. we believe the increased demand for rng is
| capital resources . cash provided by operations , $ 285.4 million for the twelve months ended december 31 , 2018 , and $ 288.6 million for the twelve months ended december 31 , 2017 , is a significant source for funding capital requirements . a component of cash flows from operations is the change in net over-collection and under-collection of fuel revenues . cash from operations has been impacted by the timing of the recovery of fuel costs through fuel recovery mechanisms in texas and new mexico , and our sales for resale full requirement customer . we recover actual fuel costs from customers through fuel adjustment mechanisms in texas and new mexico , and from our sales for resale full requirement customer . we record deferred fuel revenues for the under-recovery or over-recovery of fuel costs until they can be recovered from or refunded to customers . in texas , fuel costs are recovered through a fixed fuel factor . we can seek to revise our fixed fuel factor at least four months after our last revision except in the month of december based upon our approved formula which allows us to adjust fuel rates to reflect changes in costs of natural gas . we are required to request to refund fuel costs in any month when the over-recovery balance exceeds a threshold material amount and we expect fuel costs to continue to be materially over-recovered . we are permitted to seek to surcharge fuel under-recoveries in any month the balance exceeds a threshold material amount that we expect fuel cost recovery to continue to be materially under-recovered . fuel over and under-recoveries are considered material when they exceed 4 % of the previous twelve months ' fuel costs . on october 15 , 2018 , we filed a request with the puct to decrease our texas fixed fuel factor by approximately 6.99 % to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power . on october 25 , 2018 , our fixed fuel factor was approved on an interim basis effective for the first billing cycle of the november 2018 billing month .
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impact of covid-19 the covid-19 pandemic has resulted , and is likely to continue to result , in significant economic disruption and has adversely affected and will likely continue to adversely affect our business . our operations have been designated “ essential critical infrastructure work ” in the energy sector by the u.s. department of homeland security , meaning that we have been able to continue operating to the fullest extent possible . while continuing our business operations , we are focused on protecting the health and wellbeing of our employees , customers and the communities in which we operate . except as described herein , the covid-19 pandemic has not resulted in any adverse effects to our operations , including financial reporting systems , internal control over financial reporting and disclosure controls and procedures . additionally , our technicians and o & m services continued to operate effectively , and we believe our supply chain has not been disrupted . all of our natural gas fueling stations have remained fully operational during the covid-19 pandemic and continue to provide access to customers many that are supplying essential services . further , we have not experienced any challenges implementing business continuity plans and have not incurred , and do not expect to incur , material expenditures related to the same . we have adopted and applied protocols and procedures in accordance with federal , state and local government policies and mandates and centers for disease control ( cdc ) guidelines for our offices . specifically , we have implemented enhanced cleaning and disinfecting protocols and procedures like temperature and covid-19 screening questionnaires for the health and safety of our employees , customers and the communities in which we operate . we have provided personal protective equipment ( including masks and gloves ) and hand sanitizer , we have modified office seating , we expect all our employees to maintain appropriate physical distancing , and we continue to restrict employee travel in accordance with the various state health orders . we began to see the negative effects of covid-19 on volumes delivered in mid-march 2020 and continued to see declines in volumes delivered through december 31 , 2020 , as compared to the respective periods in 2019. we saw our volumes bottom in the second quarter of 2020 and have since seen improvement in volumes as volumes delivered for the fourth quarter of 2020 increased 7 % over the second quarter of 2020. while volumes delivered in december 2020 were 2 % lower compared to december 2019 , this decline was lower than the decline of 4 % when comparing september 2020 to september 2019. the most significant negative effects of covid-19 in relation to our volumes continue to be seen in the airports ( fleet services ) and public transit customer markets , which were down by between 15 % and 32 % during the three months ended december 31 , 2020 compared to the comparable 2019 period due to federal , state and local government mandates to restrict normal daily activities , as well as travel bans , quarantines and “ shelter-in-place ” orders , with growth in the refuse market in the three months ended december 31 , 2020 from the three months ended december 31 , 2019 , where demand continues to be strong . although many of these restrictions have been lifted or scaled back in recent months , the continued prevalence of covid-19 in certain areas has resulted in the re-imposition of certain restrictions and may lead to other restrictions being re-implemented in response to efforts to reduce the spread of covid-19 . these measures , which may remain in place for a significant amount of time , may further adversely affect airports , public transit and government fleet customer markets . our volume of gges delivered for the year ended december 31 , 2020 declined 5 % compared to the prior year . 34 although we are experiencing gradual improvements since the onset of the covid-19 pandemic , there is no guarantee this will continue due to uncertainties regarding the effects of the covid-19 pandemic . we are projecting growth in volumes for 2021 compared to 2020 ; however , it is possible that the prolonged effect of the covid-19 pandemic could negatively affect our future volumes . declines in volume have resulted and could continue to result in lower gross margin dollars year-over-year and likely a lower gross margin per gge due to lower output on fixed operating costs and the effect of less revenue from environmental credits . lower volumes have affected and may continue to affect our aftc revenue as a portion of the decline in volume is from aftc-eligible volumes . we continue to experience lower operating expenses , which has helped mitigate the lower gross profit margins from lower volumes , and we have benefitted from other gains on station asset disposals . given the dynamic nature of these circumstances , significant uncertainty exists concerning the duration of business disruption and the full extent of the effect of covid-19 on our business , results of operations and financial condition . additionally , the effects of covid-19 , low oil prices and the adoption of government policies and programs , or increased popular sentiment , in favor of other vehicle technologies or fuels may delay adoption of natural gas vehicles , particularly heavy-duty natural gas trucks , by new or existing customers . for more information , see “ risk factors ” in part ii , item 1a of this report . story_separator_special_tag for example , california lawmakers and regulators have implemented various measures designed to increase the use of electric , hydrogen and other zero-emission vehicles , including establishing firm goals for the number of these vehicles operating on state roads by specified dates and enacting various laws and other programs in support of these goals . among other things , we believe many california lawmakers and regulators desire to limit and ultimately discontinue the production and use of internal combustion engines because such engines have “ tailpipe ” emissions . ● we believe the lack of substantial growth in the heavy-duty trucking market has been driven in part by the experience of operators with , or perceptions of , unsatisfactory performance by prior models of heavy-duty truck 39 engines , actual or perceived insufficiencies in the financial incentives to convert , and improvements in diesel engine technology . if these conditions continue , then the growth levels in this market will continue to be low . we believe the newest models of heavy-duty truck engines have substantially addressed concerns with prior models . further , we have launched our zero now truck financing program and the chevron adopt-a-port program to combat operator concerns , but these programs may not ultimately be successful . to the extent these or other factors have contributed to curtailed demand or slowing growth in the market for our vehicle fuels , we believe they have also contributed to decreases in station construction activity in certain periods , as the success of this activity is dependent on the success of the market for our vehicle fuels generally . moreover , we believe these factors have materially contributed to the volatility and declines in our stock price and market capitalization in recent years , which has and could in the future lead to decreased cash flows and indications of asset or goodwill impairment . if these adverse macroeconomic conditions and other uncertainties in our industry persist , our financial results and stock price may continue to be adversely affected . in spite of these market conditions , we believe our key customer markets , including heavy-duty trucking , airports , refuse , and public transit , are well-suited for the adoption of our vehicle fuels because they consume relatively high volumes of fuel , refuel at centralized locations or along well-defined routes and or are facing increasingly stringent emissions or other environmental requirements . we also expect the lower greenhouse gas emissions associated with our rng vehicle fuel will result in increased demand for this fuel , resulting in our continued delivery of increasing volumes of rng to our vehicle fleet customers . additionally , we anticipate that , over time , cities and communities in the united states and canada will follow large cities in europe in banning diesel vehicles . if these projections materialize , we believe there will be growth in the consumption of our vehicle fuels in our key customer and geographic markets , and our goal is to capitalize on this growth if and when it materializes . in that event , we expect our operating costs and capital expenditures would increase in connection with any growth of our business in the future . our performance overview . our gross revenue mostly consists of volume-related revenue , station construction sales , and aftc revenue . our revenue can vary between periods due to a variety of factors , including , among others , the amount and timing of vehicle fuel sales , natural gas commodity prices , station construction sales , sales of environmental credits , and recognition of government credits , grants and incentives , such as aftc . in addition , our volume-related revenue has been and may continue to be subject to increased fluctuations as a result of our entry into certain commodity swap arrangements in october 2018 , because the changes in fair value of these and certain other derivative instruments , including existing and anticipated fueling contracts under our zero now truck financing program , are included in volume-related revenue . our cost of sales can also vary between periods due to a variety of factors , including fluctuations in natural gas commodity prices , station construction and labor costs , as well as the other factors that impact our revenue levels described above . in addition , our performance in certain periods has been affected by transactions or events that have resulted in significant cash or non-cash gains or losses . such gains or losses may not recur regularly , in the same amounts or at all in future periods and , with respect to non-cash gains and losses , do not impact our liquidity . these significant fluctuations in our operating results may render period-to-period comparisons less meaningful , especially given the current uncertainties related to the ongoing covid-19 pandemic , and investors in our securities should not rely on the results of one period as an indicator of performance in any other period . additionally , these fluctuations in our operating results could cause our performance in any period to fall below the financial guidance we may have provided to the public or the estimates and projections of the investment community , which could negatively affect the price of our common stock . see “ results of operations ” below for more information about our performance in 2019 and 2020. volume . the amount of rng and conventional natural gas , in the form of cng and lng , that we delivered decreased by 4.6 % from 2019 to 2020 due to the effect of covid-19 . 40 while total volume declined due to the effect of covid-19 , the amount of rng we sell for vehicle fuel , which is delivered in the form of cng or lng , has experienced rapid growth in recent years , and increased by 7 % from 2019 to 2020. we believe the increased demand for rng is
| cash flows operating activities . cash provided by operating activities was $ 61.0 million in 2020 , compared to $ 12.3 million in 2019. the increase in cash provided by operating activities was primarily attributable to aftc revenues , partially offset by other changes in working capital resulting from the timing of receipts and payments of cash in 2020 , and $ 7.8 million used to terminate a contract between ng advantage and bp . investing activities . cash provided by investing activities was $ 24.2 million in 2020 , compared to cash used in investing activities of $ 1.5 million in 2019. the change was primarily attributable to an increase in net maturities of short-term investments in 2020 compared to 2019 and lower capital expenditures , partially offset by lower proceeds from property and equipment disposals and lower net earn-out proceeds received in connection with the bp transaction . financing activities . cash used in financing activities was $ 18.7 million in 2020 , compared to cash provided by financing activities of $ 7.7 million in 2019. cash used in financing activities in 2020 was primarily attributable to an increase in repayments of debt instruments and finance lease obligations due to repayment of the 7.5 % notes and repurchases of common stock , partially offset by proceeds received from debt instruments . cash provided by financing activities in 2019 was primarily attributable to proceeds from debt instruments , partially offset by repayments of debt instruments and finance lease obligations .
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conversely , when volume declines , we typically produce fewer revenue dollars , which can reduce our gross profit dollars . we can reduce certain variable expenses when volumes decline , but we can not easily reduce our fixed costs . pricing for our products can have a more significant impact on our results of operations than customer demand levels . as pricing increases , so do our revenue dollars . our pricing usually increases when the cost of our materials increase . if prices increase and we maintain the same gross profit percentage , we generate higher levels of gross profit and pre-tax income dollars for the same operational efforts . conversely , if pricing declines , we will typically generate lower levels of gross profit and pre-tax income dollars . because changes in pricing do not require us to adjust our expense structure other than for profit-based compensation , the impact on our results of operations from changes in pricing is typically much greater than the effect of volume changes . in addition , when volume or pricing increases , our working capital requirements typically increase , which may require us to increase our outstanding debt . this usually increases our interest expense . when our customer demand falls , we typically generate stronger levels of cash flow from operations as our working capital needs decrease . recent developments in february 2013 , we entered into a definitive merger agreement to acquire all the outstanding shares of metals usa holdings corp. ( `` metals usa `` ) for $ 20.65 per share in cash for a total equity purchase price of approximately $ 786 million and assumption of approximately $ 452 million of debt , for a total enterprise value of approximately $ 1.2 billion . the transaction is expected to close in the second quarter of 2013. metals usa 's total assets as of december 31 , 2012 and sales for the year then ended were approximately $ 1.0 billion ( unaudited ) and $ 2.0 billion ( unaudited ) , respectively . the transaction has been unanimously approved by the respective boards of directors of reliance and metals usa . the transaction is subject to approval by metals usa stockholders , along with the receipt of regulatory clearances and the satisfaction of other customary closing conditions , and includes a 30-day `` go-shop `` period . we anticipate funding the transaction with borrowings on our revolving credit facility , together with funds obtained from accessing the bank credit and debt capital markets . 2012 acquisitions effective october 1 , 2012 , through our wholly owned subsidiary feralloy corporation ( `` feralloy `` ) , we acquired all the outstanding capital stock of gh metal solutions , inc. ( formerly known as the gas house , inc. ) ( `` gh `` ) , a value added processor and fabricator of carbon steel products , that will allow feralloy to better serve the increasing demands of its diverse customer base . gh , located in fort payne , alabama , was founded in 1958 and has grown its processing equipment to include flat-bed lasers , tube lasers , torches , shears , automatic band saws , cnc press brakes , coil-fed and hand-fed stampers , robotic and manual welders , and a painting line . gh operates as a wholly owned subsidiary of feralloy and had net sales of $ 12.6 million for the three months ended december 31 , 2012. effective october 1 , 2012 , we acquired all the outstanding limited liability company interests of sunbelt steel texas , llc ( `` sunbelt `` ) , a value added distributor of special alloy steel bar and heavy-wall 33 tubing products to the oil and gas industry . sunbelt was founded in 1986 and is headquartered in houston , texas with an additional location in lafayette , louisiana . sunbelt increases our growing exposure to the energy market in high end , niche products serving customers across multiple oil and gas well drilling types , including vertical , horizontal , directional , and deepwater drilling applications . sunbelt had net sales of $ 12.5 million for the three months ended december 31 , 2012. on july 6 , 2012 , we acquired substantially all of the assets of airport metals ( australia ) pty ltd. , a subsidiary of samuel son & co. , limited , through our newly-formed subsidiary bralco metals ( australia ) pty ltd. ( `` airport metals `` ) . airport metals , based in melbourne , operates as a stocking distributor of aircraft materials and supplies . the addition of airport metals is our first entry into australia and enhances our ability to service important aerospace customers in that area . net sales of airport metals during the period from july 6 , 2012 through december 31 , 2012 were $ 1.4 million . effective april , 27 , 2012 , through our wholly owned subsidiary precision strip , inc. ( `` psi `` ) , we acquired the assets of the worthington steel vonore , tennessee plant , a processing facility owned by worthington industries , inc. the vonore plant operates as a psi location which processes and delivers carbon steel , aluminum and stainless steel products on a `` toll `` basis , processing the metal for a fee without taking ownership of the metal . the addition of the vonore location to psi 's existing footprint of facilities allows psi to better service its customer base in an important geographic area of the country . the vonore location 's net sales during the period from april 27 , 2012 through december 31 , 2012 were $ 1.6 million . story_separator_special_tag net income replace_table_token_24_th the significant increase in our net income was primarily the result of a more favorable demand and pricing environment for our products , which has allowed us to generate increased gross profit dollars with relatively lower increases in our operating expenses . net income margin improved primarily due to higher sales levels and a relatively consistent cost structure as discussed in `` expenses `` above . story_separator_special_tag respectively , divided by interest expense ) . our leverage ratio as of december 31 , 2012 calculated in accordance with the terms of the revolving credit facility was 25.8 % compared to the financial covenant maximum amount of 60 % ( leverage ratio is calculated as total debt , inclusive of capital lease obligations and outstanding letters of credit , divided by reliance shareholders ' equity plus total debt ) . the minimum net worth requirement as of december 31 , 2012 was $ 1.19 billion compared to reliance shareholders ' equity balance of $ 3.56 billion as of december 31 , 2012. additionally , all of our 100 % -owned domestic subsidiaries , which constitute the substantial majority of our subsidiaries , guarantee the borrowings under the revolving credit facility , the indenture and the private placement notes . the subsidiary guarantors , together with reliance , are required collectively to account for at least 80 % of our consolidated ebitda and 80 % of consolidated tangible assets . reliance and the subsidiary guarantors accounted for approximately 90 % of our total consolidated ebitda for the last twelve months and approximately 89 % of total consolidated tangible assets as of december 31 , 2012. we were in compliance with all debt covenants as of december 31 , 2012. off-balance sheet arrangements we do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships , such as entities often referred to as structured finance or variable interest entities , 43 which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . as of december 31 , 2012 and 2011 , we were contingently liable under standby letters of credit in the aggregate amounts of $ 31.6 million and $ 35.5 million , respectively . the letters of credit related to insurance policies , construction projects , and outstanding bonds . contractual obligations and other commitments the following table summarizes our contractual obligations as of december 31 , 2012. certain of these contractual obligations are reflected on our balance sheet , while others are disclosed as future obligations under u.s. generally accepted accounting principles . replace_table_token_25_th ( 1 ) interest is estimated using applicable rates as of december 31 , 2012 for our outstanding fixed and variable rate debt based on their respective scheduled maturities . also , the entire outstanding balance on the revolving credit facility of $ 525 million is assumed to remain unchanged until its maturity date in july 2016 . ( 2 ) the majority of our inventory purchases are completed within 30 to 120 days and therefore are not included in this table except for certain purchases where we have significant lead times or corresponding long-term sales commitments , typically for aerospace-related materials . ( 3 ) includes the estimated benefit payments for the next ten years for various long-term retirement plans . for qualified defined benefit plans we have only included the estimated employer contribution amounts for 2013 as funding projections beyond 2013 are not practical to estimate . we have excluded deferred income taxes of $ 466.3 million , long-term tax contingencies of $ 15.9 million and other long-term liabilities of $ 11.2 million from the amounts presented , as the amounts that will be settled in cash are not known and the timing of any payments is uncertain . contractual obligations for purchases of goods or services are defined as agreements that are enforceable and legally binding on our company and that specify all significant terms , including fixed or minimum quantities to be purchased ; fixed , minimum or variable price provisions ; and the approximate timing of the transaction . our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time periods . in addition , some of our purchase orders represent authorizations to purchase rather than binding agreements . we do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months . therefore , agreements for the purchase of goods and services are not included in the table above except for certain purchases where we have significant lead times or corresponding long-term sales commitments , typically for aerospace-related materials . the expected timing of payments of the obligations above is estimated based on current information . timing of payments and actual amounts paid may be different , depending on the time of receipt of goods 44 or services , pricing in effect at that time for inventory purchase commitments , or due to changes to agreed-upon amounts for some obligations . inflation our operations have not been , and we do not expect them to be , materially affected by general inflation . historically , we have been successful in adjusting prices to our customers to reflect changes in metal prices . seasonality some of our customers are in seasonal businesses , especially customers in the construction industry and related businesses . our geographic , product and customer diversity reduces the impact of seasonal trends on our operating results . however , revenues in the months of july , november and december traditionally have been lower than in other months because of a reduced number of working days for shipments of our products , resulting from vacation and holiday closures at some of our customers . we can not assure you that period-to-period fluctuations will not occur in the future . results of any one
| cash flows operating activities . cash provided by operating activities was $ 61.0 million in 2020 , compared to $ 12.3 million in 2019. the increase in cash provided by operating activities was primarily attributable to aftc revenues , partially offset by other changes in working capital resulting from the timing of receipts and payments of cash in 2020 , and $ 7.8 million used to terminate a contract between ng advantage and bp . investing activities . cash provided by investing activities was $ 24.2 million in 2020 , compared to cash used in investing activities of $ 1.5 million in 2019. the change was primarily attributable to an increase in net maturities of short-term investments in 2020 compared to 2019 and lower capital expenditures , partially offset by lower proceeds from property and equipment disposals and lower net earn-out proceeds received in connection with the bp transaction . financing activities . cash used in financing activities was $ 18.7 million in 2020 , compared to cash provided by financing activities of $ 7.7 million in 2019. cash used in financing activities in 2020 was primarily attributable to an increase in repayments of debt instruments and finance lease obligations due to repayment of the 7.5 % notes and repurchases of common stock , partially offset by proceeds received from debt instruments . cash provided by financing activities in 2019 was primarily attributable to proceeds from debt instruments , partially offset by repayments of debt instruments and finance lease obligations .
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conversely , when volume declines , we typically produce fewer revenue dollars , which can reduce our gross profit dollars . we can reduce certain variable expenses when volumes decline , but we can not easily reduce our fixed costs . pricing for our products can have a more significant impact on our results of operations than customer demand levels . as pricing increases , so do our revenue dollars . our pricing usually increases when the cost of our materials increase . if prices increase and we maintain the same gross profit percentage , we generate higher levels of gross profit and pre-tax income dollars for the same operational efforts . conversely , if pricing declines , we will typically generate lower levels of gross profit and pre-tax income dollars . because changes in pricing do not require us to adjust our expense structure other than for profit-based compensation , the impact on our results of operations from changes in pricing is typically much greater than the effect of volume changes . in addition , when volume or pricing increases , our working capital requirements typically increase , which may require us to increase our outstanding debt . this usually increases our interest expense . when our customer demand falls , we typically generate stronger levels of cash flow from operations as our working capital needs decrease . recent developments in february 2013 , we entered into a definitive merger agreement to acquire all the outstanding shares of metals usa holdings corp. ( `` metals usa `` ) for $ 20.65 per share in cash for a total equity purchase price of approximately $ 786 million and assumption of approximately $ 452 million of debt , for a total enterprise value of approximately $ 1.2 billion . the transaction is expected to close in the second quarter of 2013. metals usa 's total assets as of december 31 , 2012 and sales for the year then ended were approximately $ 1.0 billion ( unaudited ) and $ 2.0 billion ( unaudited ) , respectively . the transaction has been unanimously approved by the respective boards of directors of reliance and metals usa . the transaction is subject to approval by metals usa stockholders , along with the receipt of regulatory clearances and the satisfaction of other customary closing conditions , and includes a 30-day `` go-shop `` period . we anticipate funding the transaction with borrowings on our revolving credit facility , together with funds obtained from accessing the bank credit and debt capital markets . 2012 acquisitions effective october 1 , 2012 , through our wholly owned subsidiary feralloy corporation ( `` feralloy `` ) , we acquired all the outstanding capital stock of gh metal solutions , inc. ( formerly known as the gas house , inc. ) ( `` gh `` ) , a value added processor and fabricator of carbon steel products , that will allow feralloy to better serve the increasing demands of its diverse customer base . gh , located in fort payne , alabama , was founded in 1958 and has grown its processing equipment to include flat-bed lasers , tube lasers , torches , shears , automatic band saws , cnc press brakes , coil-fed and hand-fed stampers , robotic and manual welders , and a painting line . gh operates as a wholly owned subsidiary of feralloy and had net sales of $ 12.6 million for the three months ended december 31 , 2012. effective october 1 , 2012 , we acquired all the outstanding limited liability company interests of sunbelt steel texas , llc ( `` sunbelt `` ) , a value added distributor of special alloy steel bar and heavy-wall 33 tubing products to the oil and gas industry . sunbelt was founded in 1986 and is headquartered in houston , texas with an additional location in lafayette , louisiana . sunbelt increases our growing exposure to the energy market in high end , niche products serving customers across multiple oil and gas well drilling types , including vertical , horizontal , directional , and deepwater drilling applications . sunbelt had net sales of $ 12.5 million for the three months ended december 31 , 2012. on july 6 , 2012 , we acquired substantially all of the assets of airport metals ( australia ) pty ltd. , a subsidiary of samuel son & co. , limited , through our newly-formed subsidiary bralco metals ( australia ) pty ltd. ( `` airport metals `` ) . airport metals , based in melbourne , operates as a stocking distributor of aircraft materials and supplies . the addition of airport metals is our first entry into australia and enhances our ability to service important aerospace customers in that area . net sales of airport metals during the period from july 6 , 2012 through december 31 , 2012 were $ 1.4 million . effective april , 27 , 2012 , through our wholly owned subsidiary precision strip , inc. ( `` psi `` ) , we acquired the assets of the worthington steel vonore , tennessee plant , a processing facility owned by worthington industries , inc. the vonore plant operates as a psi location which processes and delivers carbon steel , aluminum and stainless steel products on a `` toll `` basis , processing the metal for a fee without taking ownership of the metal . the addition of the vonore location to psi 's existing footprint of facilities allows psi to better service its customer base in an important geographic area of the country . the vonore location 's net sales during the period from april 27 , 2012 through december 31 , 2012 were $ 1.6 million . story_separator_special_tag net income replace_table_token_24_th the significant increase in our net income was primarily the result of a more favorable demand and pricing environment for our products , which has allowed us to generate increased gross profit dollars with relatively lower increases in our operating expenses . net income margin improved primarily due to higher sales levels and a relatively consistent cost structure as discussed in `` expenses `` above . story_separator_special_tag respectively , divided by interest expense ) . our leverage ratio as of december 31 , 2012 calculated in accordance with the terms of the revolving credit facility was 25.8 % compared to the financial covenant maximum amount of 60 % ( leverage ratio is calculated as total debt , inclusive of capital lease obligations and outstanding letters of credit , divided by reliance shareholders ' equity plus total debt ) . the minimum net worth requirement as of december 31 , 2012 was $ 1.19 billion compared to reliance shareholders ' equity balance of $ 3.56 billion as of december 31 , 2012. additionally , all of our 100 % -owned domestic subsidiaries , which constitute the substantial majority of our subsidiaries , guarantee the borrowings under the revolving credit facility , the indenture and the private placement notes . the subsidiary guarantors , together with reliance , are required collectively to account for at least 80 % of our consolidated ebitda and 80 % of consolidated tangible assets . reliance and the subsidiary guarantors accounted for approximately 90 % of our total consolidated ebitda for the last twelve months and approximately 89 % of total consolidated tangible assets as of december 31 , 2012. we were in compliance with all debt covenants as of december 31 , 2012. off-balance sheet arrangements we do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships , such as entities often referred to as structured finance or variable interest entities , 43 which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . as of december 31 , 2012 and 2011 , we were contingently liable under standby letters of credit in the aggregate amounts of $ 31.6 million and $ 35.5 million , respectively . the letters of credit related to insurance policies , construction projects , and outstanding bonds . contractual obligations and other commitments the following table summarizes our contractual obligations as of december 31 , 2012. certain of these contractual obligations are reflected on our balance sheet , while others are disclosed as future obligations under u.s. generally accepted accounting principles . replace_table_token_25_th ( 1 ) interest is estimated using applicable rates as of december 31 , 2012 for our outstanding fixed and variable rate debt based on their respective scheduled maturities . also , the entire outstanding balance on the revolving credit facility of $ 525 million is assumed to remain unchanged until its maturity date in july 2016 . ( 2 ) the majority of our inventory purchases are completed within 30 to 120 days and therefore are not included in this table except for certain purchases where we have significant lead times or corresponding long-term sales commitments , typically for aerospace-related materials . ( 3 ) includes the estimated benefit payments for the next ten years for various long-term retirement plans . for qualified defined benefit plans we have only included the estimated employer contribution amounts for 2013 as funding projections beyond 2013 are not practical to estimate . we have excluded deferred income taxes of $ 466.3 million , long-term tax contingencies of $ 15.9 million and other long-term liabilities of $ 11.2 million from the amounts presented , as the amounts that will be settled in cash are not known and the timing of any payments is uncertain . contractual obligations for purchases of goods or services are defined as agreements that are enforceable and legally binding on our company and that specify all significant terms , including fixed or minimum quantities to be purchased ; fixed , minimum or variable price provisions ; and the approximate timing of the transaction . our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time periods . in addition , some of our purchase orders represent authorizations to purchase rather than binding agreements . we do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months . therefore , agreements for the purchase of goods and services are not included in the table above except for certain purchases where we have significant lead times or corresponding long-term sales commitments , typically for aerospace-related materials . the expected timing of payments of the obligations above is estimated based on current information . timing of payments and actual amounts paid may be different , depending on the time of receipt of goods 44 or services , pricing in effect at that time for inventory purchase commitments , or due to changes to agreed-upon amounts for some obligations . inflation our operations have not been , and we do not expect them to be , materially affected by general inflation . historically , we have been successful in adjusting prices to our customers to reflect changes in metal prices . seasonality some of our customers are in seasonal businesses , especially customers in the construction industry and related businesses . our geographic , product and customer diversity reduces the impact of seasonal trends on our operating results . however , revenues in the months of july , november and december traditionally have been lower than in other months because of a reduced number of working days for shipments of our products , resulting from vacation and holiday closures at some of our customers . we can not assure you that period-to-period fluctuations will not occur in the future . results of any one
| liquidity and capital resources operating activities net cash provided by operating activities was $ 601.9 million in 2012 compared to $ 234.8 million in 2011. the increase was mainly due to higher profitability levels and a larger working capital ( primarily accounts receivable and inventories ) investment requirement in 2011 as compared to 2012. when volume or pricing increases , our working capital requirements typically increase . when demand and pricing falls , we typically generate higher levels of cash flow from operating activities as our working capital needs decrease . throughout 2011 , both volume and pricing for our products were increasing , requiring a larger investment in working capital . in 2012 , particularly in the fourth quarter , demand for our products was 41 declining , and by aligning our working capital needs with current business levels we generated a significant amount of cash flow from operating activities . to manage our working capital , we focus on our days sales outstanding and on our inventory turnover rate , as receivables and inventory are the two most significant elements of our working capital . at december 31 , 2012 , our days sales outstanding rate was approximately 42.1 days compared to 41.6 days at december 31 , 2011. our inventory turn rate ( based on dollars ) during 2012 was about 4.0 times ( or 3.0 months on hand ) , compared to our 2011 rate of 4.4 times ( or 2.7 months on hand ) . lower demand levels in the latter part of 2012 negatively impacted our inventory turns . investing activities capital expenditures were $ 214.0 million in 2012 compared to $ 156.4 million in 2011. the majority of our 2012 capital expenditures related to growth initiatives to expand or relocate existing facilities , to purchase properties that were previously leased , to add or upgrade equipment , and to meet ongoing maintenance requirements . we also spent $ 166.9 million on acquisitions in 2012 , net of cash acquired , compared to $ 313.3 million in 2011. financing activities our 2012 capital expenditures and the 2012 acquisitions were largely funded by our cash from operations and the borrowings on our revolving credit facility .
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in addition to being evaluated for safety , 23 of the 29 patients were evaluable for preliminary signals of efficacy prior to or at the eight-week conclusion of their first cycle of treatment using the response evaluation criteria in solid tumors ( “ recist ” ) , the current standard for evaluating changes in the size of tumors . eight of the 23 patients ( 35 % ) had stable disease ( “ sd ” ) and 15 of 24 ( 65 % ) had progressive disease ( “ pd ” ) . it should be noted that of the 15 patients with pd , six came from cohorts 1 and 2 and are considered to have received less than potentially therapeutic doses of sbp-101 . we also noted that 28 of the 29 patients had follow-up blood tests measuring the tumor marker ca 19-9 associated with pancreatic ductal adenocarcinoma . eleven of these patients ( 39 % ) had reductions in the ca 19-9 levels , as measured at least once after the baseline assessment . seven of the remaining 17 patients who showed no reduction in ca 19-9 came from cohorts one and two . by cohort , stable disease occurred in two patients in cohort 3 , two patients in cohort 4 and four patients in cohort 5. the best response outcomes and best median survival were observed in the group of patients who received total cumulative doses of approximately 6 mg/kg ( cohort 3 ) . two of four patients ( 50 % ) showed sd at week eight . median survival in this group was 5.9 months , with two patients surviving 8 and 10 months , respectively . by total cumulative dose received , 5 of 12 patients ( 42 % ) who received total cumulative doses between 2.5 mg/kg and 8.0 mg/kg had reductions in the ca19-9 levels , as measured at least once after the baseline assessment . nine of these patients ( 67 % ) exceeded 3 months of overall survival ( “ os ” ) , three patients ( 25 % ) exceeded 9 months of os and two patients ( 17 % ) exceeded 1 year of os and were still alive at the end of the study . 40 this study was conducted at clinical sites in both australia and the united states including the mayo clinic scottsdale and honorhealth in scottsdale , az , the austin health olivia newton-john cancer wellness & research centre in melbourne , australia and the ashford cancer centre in adelaide , australia . with the approval of the dsmb , we cancelled the phase 1b portion of the first-in-human monotherapy study in order to evaluate sbp-101 as front line , combination chemotherapy in pancreatic cancer patients . we began enrolling patients in our next clinical trial in june of 2018. this second clinical trial is a phase 1a/1b study of the safety , efficacy and pharmacokinetics of sbp-101 administered in combination with two standard-of-care chemotherapy agents , gemcitabine and nab-paclitaxel . we are currently conducting the trial at four study sites ( three in australia and one in the united states ) . in the phase 1a portion of this trial , we expect to enroll three cohorts of three to six patients with increased dosage levels of sbp-101 administered in the second and third cohorts . demonstration of adequate safety in phase 1a is expected to lead to the phase 1b exploration of efficacy , in which we plan to enroll ten patients using the recommended dosage level determined in phase 1a . should we obtain adequate funding , we hope to increase the number of patients enrolled in the phase 1b portion of the trial to 36 , thus providing a stronger basis for the next steps in the clinical evaluation of sbp - 101. we expect to complete phase 1a in the fourth quarter of 2019. early results from the phase 1b expansion could become available as soon as the second half of 2020. we estimate that completion of our phase 1a/1b clinical trial in pda will require additional funding of approximately $ 6 to $ 12 million . additional clinical trials will be required for fda or other similar approvals if the results of the front-line clinical trial of our sbp-101 product candidate justify continued development . the cost and timing of additional clinical trials is highly dependent on the nature and size of the trials ; however , it is estimated that the next steps in the approval process could cost between $ 25 and $ 30 million . financial overview we have incurred losses of $ 35.1 million since our inception in 2011. for the year ended december 31 , 2018 , we incurred a net loss of $ 5.9 million , which includes a non-cash charge of $ 1.8 million related to the amortization of the debt discount on $ 3.1 million of convertible notes which converted to common stock and common stock and warrants during the year . we also incurred negative cash flows from operating activities of $ 2.4 million for this period . we expect to incur substantial losses , which will continue to generate negative net cash flows from operating activities , as we continue to pursue research and development activities and commercialize our sbp-101 product candidate . our increase in cash compared to december 31 , 2017 was primarily due to $ 3.6 aggregate proceeds from equity and debt offerings completed during 2018 , offset in part by cash used in operations . story_separator_special_tag pursuant to these closings we issued notes with a principal balance equal to the gross proceeds of $ 817,000 and issued 481,422 warrants to purchase common stock 46 cash flows net cash used in operating activities net cash used in operating activities was $ 2.4 million during 2018 , compared to $ 3.4 million during 2017. the net cash used in each of these periods primarily reflects the net loss for these periods and is partially offset by the effects of changes in operating assets and liabilities . in the year ended december 31 , 2018 , the net loss is also offset by a non-cash charge of $ 1.8 million related to the amortization of the discount on the 2017 convertible notes payable . in the year ended december 31 , 2017 , the net loss is also offset by a non-cash charge of $ 3.7 million related to the induced conversions of $ 2.9 million of convertible promissory notes , including accrued but unpaid interest , and $ 250,000 aggregate principal amount of demand notes and a non-cash charge of $ 1.4 million related to the amortization of the discount on the 2017 convertible notes payable . story_separator_special_tag font-size : 10pt ; margin-top : 0pt ; margin-bottom : 0pt ; `` > we require additional funds to continue our operations and execute our business plan , including completing our current phase 1 clinical trial , planning for required future trials and pursuing regulatory approvals in the united states , the european union and other international markets . we historically have financed our operations principally from the sale of convertible debt and equity securities . while we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means , there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions , or at all . we believe that our existing cash , combined with the proceeds from the sale of the 2018 notes , will be sufficient to fund our operating expenses through the second quarter of 2019. if we are unable to obtain additional financing when needed , we would need to scale back our operations taking actions which may include , among other things , reducing use of outside professional service providers , reducing staff or staff compensation , significantly modify or delay the development of our sbp-101 product candidate , license to third parties the rights to commercialize our sbp-101 product candidate for pancreatic cancer , pancreatitis or other applications that we would otherwise seek to pursue , or cease operations . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the interests of our current stockholders would be diluted , and the terms may include liquidation or other preferences that adversely affect the rights of our current stockholders . if we issue preferred stock , it could affect the rights of our stockholders or reduce the value of our common stock . in particular , specific rights granted to future holders of preferred stock may include voting rights , preferences as to dividends and liquidation , conversion and redemption rights , sinking fund provisions , and restrictions on our ability to merge with or sell our assets to a third party . debt financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . any of these events could adversely affect our ability to achieve our regulatory approvals and commercialization goals and harm our business . our future success is dependent upon our ability to obtain additional financing , the success of our current phase 1a/1b clinical trial and required future trials , our ability to obtain marketing approval for our sbp-101 product candidate in the united states , the european union and other international markets . if we are unable to obtain additional financing when needed , if our phase 1 clinical trial is not successful , if we do not receive regulatory approval required future trials or if once these studies are concluded , we do not receive marketing approval for our sbp-101 product candidate , we would not be able to continue as a going concern and would be forced to cease operations . the financial statements included in this report have been prepared assuming that we will continue as a going concern and do not include any adjustments relating to the recoverability or classification of assets or the amounts of liabilities that might result from the outcome of these uncertainties . 49 license agreement on december 22 , 2011 , we entered into an exclusive license agreement with the university of florida research foundation ( “ ufrf ” ) , which was acquired in exchange for $ 15,000 in cash and the issuance of 10 % of our common stock . upon executing the license agreement , 80,000 shares of common stock were issued to ufrf which was determined to have a fair value of $ 20,000 based upon an estimated fair value of our common stock of $ 0.25 per share . the license agreement also contained an anti-dilution provision which required the company to issue additional shares to ufrf sufficient for ufrf to maintain its 10 % ownership interest in the company until we secured an addition $ 2.0 million external investment . this investment was received during 2012. the license agreement requires the company to pay royalties to ufrf ranging from 2.5 % to 5 % of net sales of licensed products developed from the licensed technology . minimum annual royalties are required after the initial occurrence of a commercial sale of a marketed product . royalties are payable for the longer of ( i ) the last to expire of the claims
| liquidity and capital resources operating activities net cash provided by operating activities was $ 601.9 million in 2012 compared to $ 234.8 million in 2011. the increase was mainly due to higher profitability levels and a larger working capital ( primarily accounts receivable and inventories ) investment requirement in 2011 as compared to 2012. when volume or pricing increases , our working capital requirements typically increase . when demand and pricing falls , we typically generate higher levels of cash flow from operating activities as our working capital needs decrease . throughout 2011 , both volume and pricing for our products were increasing , requiring a larger investment in working capital . in 2012 , particularly in the fourth quarter , demand for our products was 41 declining , and by aligning our working capital needs with current business levels we generated a significant amount of cash flow from operating activities . to manage our working capital , we focus on our days sales outstanding and on our inventory turnover rate , as receivables and inventory are the two most significant elements of our working capital . at december 31 , 2012 , our days sales outstanding rate was approximately 42.1 days compared to 41.6 days at december 31 , 2011. our inventory turn rate ( based on dollars ) during 2012 was about 4.0 times ( or 3.0 months on hand ) , compared to our 2011 rate of 4.4 times ( or 2.7 months on hand ) . lower demand levels in the latter part of 2012 negatively impacted our inventory turns . investing activities capital expenditures were $ 214.0 million in 2012 compared to $ 156.4 million in 2011. the majority of our 2012 capital expenditures related to growth initiatives to expand or relocate existing facilities , to purchase properties that were previously leased , to add or upgrade equipment , and to meet ongoing maintenance requirements . we also spent $ 166.9 million on acquisitions in 2012 , net of cash acquired , compared to $ 313.3 million in 2011. financing activities our 2012 capital expenditures and the 2012 acquisitions were largely funded by our cash from operations and the borrowings on our revolving credit facility .
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in addition to being evaluated for safety , 23 of the 29 patients were evaluable for preliminary signals of efficacy prior to or at the eight-week conclusion of their first cycle of treatment using the response evaluation criteria in solid tumors ( “ recist ” ) , the current standard for evaluating changes in the size of tumors . eight of the 23 patients ( 35 % ) had stable disease ( “ sd ” ) and 15 of 24 ( 65 % ) had progressive disease ( “ pd ” ) . it should be noted that of the 15 patients with pd , six came from cohorts 1 and 2 and are considered to have received less than potentially therapeutic doses of sbp-101 . we also noted that 28 of the 29 patients had follow-up blood tests measuring the tumor marker ca 19-9 associated with pancreatic ductal adenocarcinoma . eleven of these patients ( 39 % ) had reductions in the ca 19-9 levels , as measured at least once after the baseline assessment . seven of the remaining 17 patients who showed no reduction in ca 19-9 came from cohorts one and two . by cohort , stable disease occurred in two patients in cohort 3 , two patients in cohort 4 and four patients in cohort 5. the best response outcomes and best median survival were observed in the group of patients who received total cumulative doses of approximately 6 mg/kg ( cohort 3 ) . two of four patients ( 50 % ) showed sd at week eight . median survival in this group was 5.9 months , with two patients surviving 8 and 10 months , respectively . by total cumulative dose received , 5 of 12 patients ( 42 % ) who received total cumulative doses between 2.5 mg/kg and 8.0 mg/kg had reductions in the ca19-9 levels , as measured at least once after the baseline assessment . nine of these patients ( 67 % ) exceeded 3 months of overall survival ( “ os ” ) , three patients ( 25 % ) exceeded 9 months of os and two patients ( 17 % ) exceeded 1 year of os and were still alive at the end of the study . 40 this study was conducted at clinical sites in both australia and the united states including the mayo clinic scottsdale and honorhealth in scottsdale , az , the austin health olivia newton-john cancer wellness & research centre in melbourne , australia and the ashford cancer centre in adelaide , australia . with the approval of the dsmb , we cancelled the phase 1b portion of the first-in-human monotherapy study in order to evaluate sbp-101 as front line , combination chemotherapy in pancreatic cancer patients . we began enrolling patients in our next clinical trial in june of 2018. this second clinical trial is a phase 1a/1b study of the safety , efficacy and pharmacokinetics of sbp-101 administered in combination with two standard-of-care chemotherapy agents , gemcitabine and nab-paclitaxel . we are currently conducting the trial at four study sites ( three in australia and one in the united states ) . in the phase 1a portion of this trial , we expect to enroll three cohorts of three to six patients with increased dosage levels of sbp-101 administered in the second and third cohorts . demonstration of adequate safety in phase 1a is expected to lead to the phase 1b exploration of efficacy , in which we plan to enroll ten patients using the recommended dosage level determined in phase 1a . should we obtain adequate funding , we hope to increase the number of patients enrolled in the phase 1b portion of the trial to 36 , thus providing a stronger basis for the next steps in the clinical evaluation of sbp - 101. we expect to complete phase 1a in the fourth quarter of 2019. early results from the phase 1b expansion could become available as soon as the second half of 2020. we estimate that completion of our phase 1a/1b clinical trial in pda will require additional funding of approximately $ 6 to $ 12 million . additional clinical trials will be required for fda or other similar approvals if the results of the front-line clinical trial of our sbp-101 product candidate justify continued development . the cost and timing of additional clinical trials is highly dependent on the nature and size of the trials ; however , it is estimated that the next steps in the approval process could cost between $ 25 and $ 30 million . financial overview we have incurred losses of $ 35.1 million since our inception in 2011. for the year ended december 31 , 2018 , we incurred a net loss of $ 5.9 million , which includes a non-cash charge of $ 1.8 million related to the amortization of the debt discount on $ 3.1 million of convertible notes which converted to common stock and common stock and warrants during the year . we also incurred negative cash flows from operating activities of $ 2.4 million for this period . we expect to incur substantial losses , which will continue to generate negative net cash flows from operating activities , as we continue to pursue research and development activities and commercialize our sbp-101 product candidate . our increase in cash compared to december 31 , 2017 was primarily due to $ 3.6 aggregate proceeds from equity and debt offerings completed during 2018 , offset in part by cash used in operations . story_separator_special_tag pursuant to these closings we issued notes with a principal balance equal to the gross proceeds of $ 817,000 and issued 481,422 warrants to purchase common stock 46 cash flows net cash used in operating activities net cash used in operating activities was $ 2.4 million during 2018 , compared to $ 3.4 million during 2017. the net cash used in each of these periods primarily reflects the net loss for these periods and is partially offset by the effects of changes in operating assets and liabilities . in the year ended december 31 , 2018 , the net loss is also offset by a non-cash charge of $ 1.8 million related to the amortization of the discount on the 2017 convertible notes payable . in the year ended december 31 , 2017 , the net loss is also offset by a non-cash charge of $ 3.7 million related to the induced conversions of $ 2.9 million of convertible promissory notes , including accrued but unpaid interest , and $ 250,000 aggregate principal amount of demand notes and a non-cash charge of $ 1.4 million related to the amortization of the discount on the 2017 convertible notes payable . story_separator_special_tag font-size : 10pt ; margin-top : 0pt ; margin-bottom : 0pt ; `` > we require additional funds to continue our operations and execute our business plan , including completing our current phase 1 clinical trial , planning for required future trials and pursuing regulatory approvals in the united states , the european union and other international markets . we historically have financed our operations principally from the sale of convertible debt and equity securities . while we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means , there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions , or at all . we believe that our existing cash , combined with the proceeds from the sale of the 2018 notes , will be sufficient to fund our operating expenses through the second quarter of 2019. if we are unable to obtain additional financing when needed , we would need to scale back our operations taking actions which may include , among other things , reducing use of outside professional service providers , reducing staff or staff compensation , significantly modify or delay the development of our sbp-101 product candidate , license to third parties the rights to commercialize our sbp-101 product candidate for pancreatic cancer , pancreatitis or other applications that we would otherwise seek to pursue , or cease operations . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the interests of our current stockholders would be diluted , and the terms may include liquidation or other preferences that adversely affect the rights of our current stockholders . if we issue preferred stock , it could affect the rights of our stockholders or reduce the value of our common stock . in particular , specific rights granted to future holders of preferred stock may include voting rights , preferences as to dividends and liquidation , conversion and redemption rights , sinking fund provisions , and restrictions on our ability to merge with or sell our assets to a third party . debt financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . any of these events could adversely affect our ability to achieve our regulatory approvals and commercialization goals and harm our business . our future success is dependent upon our ability to obtain additional financing , the success of our current phase 1a/1b clinical trial and required future trials , our ability to obtain marketing approval for our sbp-101 product candidate in the united states , the european union and other international markets . if we are unable to obtain additional financing when needed , if our phase 1 clinical trial is not successful , if we do not receive regulatory approval required future trials or if once these studies are concluded , we do not receive marketing approval for our sbp-101 product candidate , we would not be able to continue as a going concern and would be forced to cease operations . the financial statements included in this report have been prepared assuming that we will continue as a going concern and do not include any adjustments relating to the recoverability or classification of assets or the amounts of liabilities that might result from the outcome of these uncertainties . 49 license agreement on december 22 , 2011 , we entered into an exclusive license agreement with the university of florida research foundation ( “ ufrf ” ) , which was acquired in exchange for $ 15,000 in cash and the issuance of 10 % of our common stock . upon executing the license agreement , 80,000 shares of common stock were issued to ufrf which was determined to have a fair value of $ 20,000 based upon an estimated fair value of our common stock of $ 0.25 per share . the license agreement also contained an anti-dilution provision which required the company to issue additional shares to ufrf sufficient for ufrf to maintain its 10 % ownership interest in the company until we secured an addition $ 2.0 million external investment . this investment was received during 2012. the license agreement requires the company to pay royalties to ufrf ranging from 2.5 % to 5 % of net sales of licensed products developed from the licensed technology . minimum annual royalties are required after the initial occurrence of a commercial sale of a marketed product . royalties are payable for the longer of ( i ) the last to expire of the claims
| net cash provided by financing activities net cash provided by financing activities was $ 3.6 million for the years ended december 31 , 2018 which was comprised primarily of net proceeds from the sale of common stock and warrants ( $ 2.3 million ) and the sale of the 2018 notes and warrants ( $ 1.3 million ) . during the year ended december 31 , 2017 , net cash provided by financing activities was $ 3.1 million which resulted from net proceeds received in the sale of convertible promissory notes . capital requirements as we continue to pursue our operations and execute our business plan , including the completion of our current phase 1a/1b clinical trial for our initial product candidate , sbp-101 , in pancreatic cancer , planning for required future trials and pursuing regulatory approvals in the united states , the european union and other international markets , we expect to continue to incur substantial and increasing losses , which will continue to generate negative net cash flows from operating activities . our future capital uses and requirements depend on numerous current and future factors . these factors include , but are not limited to , the following : ● the progress of clinical trials required to support our applications for regulatory approvals , including our phase 1a /1b clinical trial , a human clinical trial in australia and the united states ; ● our ability to demonstrate the safety and effectiveness of our sbp-101 product candidate ; ● our ability to obtain regulatory approval of our sbp-101 product candidate in the united states , the european union or other international markets ; ● the cost and delays in product development that may result from changes in regulatory oversight applicable to our sbp-101 product candidate ; ● the market acceptance and level of future sales of our sbp-101 product candidate ; ● the rate of progress in establishing reimbursement arrangements with third-party payors ; ● the effect of competing technological and market developments ; and ● the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims .
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number of clinical sites included in the trials ; the length of time required to enroll suitable patient subjects ; and the efficacy and safety profile of the drug candidate . we test potential drug candidates in numerous preclinical studies for safety , toxicology and immunogenicity . we may then conduct multiple clinical trials for each drug candidate . as we obtain results from trials , we may elect to discontinue or delay clinical trials for certain drug candidates in order to focus our resources on more promising drug candidates . an element of our business strategy is to pursue the research and development of a broad portfolio of drug candidates . this is intended to allow us to diversify the risks associated with our research and development expenditures . to the extent we are unable to maintain a broad range of drug candidates , our dependence on the success of one or a few drug candidates increases . regulatory approval is required before we can market our drug candidates as therapeutic products . in order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval , the regulatory agency must conclude that our clinical data are safe and effective . historically , the results from preclinical testing and early clinical trials ( through phase 2 ) have often not been predictive of results obtained in later clinical trials . a number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals . 63 furthermore , our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our drug candidates . in the event that third parties take over the clinical trial process for one of our drug candidates , the estimated completion date would largely be under control of that third party rather than us . we can not forecast with any degree of certainty which proprietary products , if any , will be subject to future collaborative arrangements , in whole or in part , and how such arrangements would affect our development plan or capital requirements . our programs may also benefit from subsidies , grants , contracts or government or agency-sponsored studies that could reduce our development costs . as a result of the uncertainties discussed above , among others , it is difficult to accurately estimate the duration and completion costs of our research and development projects or when , if ever , and to what extent we will receive cash inflows from the commercialization and sale of a product . our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements , when appropriate , could significantly increase our capital requirements and could adversely impact our liquidity . these uncertainties could force us to seek additional , external sources of financing from time to time in order to continue with our business strategy . our inability to raise additional capital , or to do so on terms reasonably acceptable to us , would jeopardize the future success of our business . during the past five years through december 31 , 2017 , we incurred an aggregate of $ 470.9 million in research and development expenses . the following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the years ended december 31 , 2017 , 2016 and 2015. the amounts disclosed in the following table reflect direct research and development costs , license fees associated with the underlying technology and an allocation of indirect research and development costs to each program . replace_table_token_10_th clinical development programs glembatumumab vedotin glembatumumab vedotin is an antibody-drug conjugate , or adc , that consists of a fully human monoclonal antibody , cr011 , linked to a potent cell-killing drug , monomethyl auristatin e , or mmae . the cr011 antibody specifically targets glycoprotein nmb , referred to as gpnmb , that is over-expressed in a variety of cancers including breast cancer , melanoma , non-small cell lung cancer , uveal melanoma and osteosarcoma , among others . the adc technology , comprised of mmae and a stable linker system for attaching it to cr011 , was licensed from seattle genetics , inc. and is the same 64 as that used in the marketed product adcetris® . the adc is designed to be stable in the bloodstream . following intravenous administration , glembatumumab vedotin targets and binds to gpnmb , and upon internalization into the targeted cell , glembatumumab vedotin is designed to release mmae from cr011 to produce a cell-killing effect . glembatumumab vedotin is being studied across multiple indications in company-sponsored trials and in collaborative studies with external parties . the u.s. food and drug administration , or fda , has granted fast track designation to glembatumumab vedotin for the treatment of advanced , refractory/resistant gpnmb-expressing breast cancer . a companion diagnostic is in development for certain indications , and we expect that , if necessary , such a companion diagnostic must be approved by the fda or certain other foreign regulatory agencies before glembatumumab vedotin may be commercialized in those indications . treatment of metastatic breast cancer : glembatumumab vedotin has been evaluated for the treatment of metastatic breast cancer ( mbc ) in multiple studies including a single-arm phase 1/2 study ( journal of clinical oncology , september 2014 ) ; a randomized , controlled phase 2b study compared to investigator 's choice chemotherapy in patients with gpnmb-positive mbc called emerge ( journal of clinical oncology , april 2015 ) ; and the ongoing randomized , controlled phase 2b study in patients with triple negative , gpnmb overexpressing breast cancer , called metric . we expect to report topline primary endpoint data from the metric study during the second quarter of 2018. story_separator_special_tag data ( n=36 ) from the phase 1 dose-escalation portion of the study were presented in an oral presentation at the american society of clinical oncology annual meeting in june 2017. the majority of patients had pd-l1 negative tumor at baseline and presented with stage iv , heavily pre-treated disease . 80 % of patients enrolled presented with refractory or recurrent colorectal ( n=21 ) or ovarian cancer ( n=8 ) , a population expected to have minimal response to checkpoint blockade . the primary objective of the phase 1 portion of the study was to evaluate the safety and tolerability of the combination . the combination was well tolerated at all varlilumab dose levels tested without any evidence of increased autoimmunity or inappropriate immune activation . marked changes in the tumor microenvironment including increased infiltrating cd8+ t cells and increased pd-l1 expression , which have been shown to correlate with a greater magnitude of treatment effect from checkpoint inhibitors in other clinical studies , were observed . additional evidence of immune activity , such as increase in inflammatory chemokines and decrease in t regulatory cells , was also noted . notable disease control was also observed ( stable disease or better for at least 3 months ) , considering the stage iv patient population contained mostly ( 80 % ) colorectal and ovarian cases : 0.1 mg/kg varlilumab + 240 mg opdivo : 1/5 ( 20 % ) , 1 mg/kg varlilumab + 240 mg opdivo : 5/15 ( 33 % ) and 10 mg/kg varlilumab + 240 mg opdivo : 6/15 ( 40 % ) . 69 three partial responses ( pr ) were observed . a patient with pd-l1 negative , mmr proficient ( msi-low ) colorectal cancer , typically unlikely to respond to checkpoint blockade monotherapy , achieved a confirmed pr ( 95 % decrease in target lesions ) and following completion of combination treatment , continues to receive treatment with opdivo monotherapy at 31+ months . a patient with low pd-l1 ( 5 % expression ) squamous cell head and neck cancer achieved a confirmed pr ( 59 % shrinkage ) and experienced pfs of 6.7 months . a patient with pd-l1 negative ovarian cancer experienced a single timepoint pr ( 49 % shrinkage ) but discontinued treatment to a dose-limiting toxicity ( immune hepatitis , an event known to be associated with checkpoint inhibition therapy ) . a subgroup analysis was conducted in patients with ovarian cancer based on an observed increase of pd-l1 and tumor-infiltrating lymphocytes in this patient population . in patients with paired baseline and on-treatment biopsies ( n=13 ) , only 15 % were pd-l1 positive ( ³ 1 % tumor cells ) at baseline compared to 77 % during treatment ( p=0.015 ) . patients with increased tumor pd-l1 expression and tumor cd8 t cells correlated with better clinical outcome with treatment ( stable disease or better ) . the phase 2 portion of the study opened to enrollment in april 2016 and completed enrollment in january 2018 with cohorts in colorectal cancer ( n=21 ) , ovarian cancer ( n=58 ) , head and neck squamous cell carcinoma ( n=24 ) , renal cell carcinoma ( n=14 ) and glioblastoma ( n=22 ) . the primary objective of the phase 2 cohorts is orr , except glioblastoma , where the primary objective is the rate of 12-month os . secondary objectives include pharmacokinetic assessments , determining the immunogenicity of varlilumab when given in combination with opdivo , evaluating alternate dosing schedules of varlilumab and further assessing the anti-tumor activity of combination treatment . we plan to work with bms to present data from the study at future medical meetings in 2018. third-party sponsored studies : we have also entered into a crada with the nci under which nci is sponsoring a phase 2 study of varlilumab in combination with nivolumab in relapsed or refractory aggressive b-cell lymphomas . patients receive either nivolumab alone or the combination . the primary outcome measure is orr . secondary outcome measures include dor , safety , pfs and os . the study opened to enrollment in january 2018 and is expected to enroll 106 patients . cdx-3379 cdx-3379 is a human monoclonal antibody with half-life extension designed to block the activity of erbb3 ( her3 ) . we believe erbb3 may be an important receptor regulating cancer cell growth and survival as well as resistance to targeted therapies and is expressed in many cancers , including head and neck , thyroid , breast , lung and gastric cancers , as well as melanoma . we believe the proposed mechanism of action for cdx-3379 sets it apart from other drugs in development in this class due to its ability to block both ligand-independent and ligand-dependent erbb3 signaling by binding to a unique epitope . it has a favorable pharmacologic profile , including a longer half-life and slower clearance relative to other drug candidates in this class . we believe cdx-3379 also has potential to enhance anti-tumor activity and or overcome resistance in combination with other targeted and cytotoxic therapies to directly kill tumor cells . tumor cell death and the ensuing release of new tumor antigens has the potential to serve as a focus for combination therapy with immuno-oncology approaches , even in refractory patients . cdx-3379 has been evaluated in three phase 1 studies for the treatment of multiple solid tumors that express erbb3 and is currently being evaluated is a phase 2 study in combination with cetuximab in cetuximab-resistant , advanced head and neck squamous cell carcinoma . the most recent data for cdx-3379 were reported from a phase 1a/1b study conducted in solid tumors . the study included a single-agent , dose-escalation portion and combination expansion cohorts . the single-agent , dose-escalation portion of the study did not identify an mtd , and there were no dose limiting toxicities . the most common adverse events included rash and diarrhea and
| net cash provided by financing activities net cash provided by financing activities was $ 3.6 million for the years ended december 31 , 2018 which was comprised primarily of net proceeds from the sale of common stock and warrants ( $ 2.3 million ) and the sale of the 2018 notes and warrants ( $ 1.3 million ) . during the year ended december 31 , 2017 , net cash provided by financing activities was $ 3.1 million which resulted from net proceeds received in the sale of convertible promissory notes . capital requirements as we continue to pursue our operations and execute our business plan , including the completion of our current phase 1a/1b clinical trial for our initial product candidate , sbp-101 , in pancreatic cancer , planning for required future trials and pursuing regulatory approvals in the united states , the european union and other international markets , we expect to continue to incur substantial and increasing losses , which will continue to generate negative net cash flows from operating activities . our future capital uses and requirements depend on numerous current and future factors . these factors include , but are not limited to , the following : ● the progress of clinical trials required to support our applications for regulatory approvals , including our phase 1a /1b clinical trial , a human clinical trial in australia and the united states ; ● our ability to demonstrate the safety and effectiveness of our sbp-101 product candidate ; ● our ability to obtain regulatory approval of our sbp-101 product candidate in the united states , the european union or other international markets ; ● the cost and delays in product development that may result from changes in regulatory oversight applicable to our sbp-101 product candidate ; ● the market acceptance and level of future sales of our sbp-101 product candidate ; ● the rate of progress in establishing reimbursement arrangements with third-party payors ; ● the effect of competing technological and market developments ; and ● the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims .
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number of clinical sites included in the trials ; the length of time required to enroll suitable patient subjects ; and the efficacy and safety profile of the drug candidate . we test potential drug candidates in numerous preclinical studies for safety , toxicology and immunogenicity . we may then conduct multiple clinical trials for each drug candidate . as we obtain results from trials , we may elect to discontinue or delay clinical trials for certain drug candidates in order to focus our resources on more promising drug candidates . an element of our business strategy is to pursue the research and development of a broad portfolio of drug candidates . this is intended to allow us to diversify the risks associated with our research and development expenditures . to the extent we are unable to maintain a broad range of drug candidates , our dependence on the success of one or a few drug candidates increases . regulatory approval is required before we can market our drug candidates as therapeutic products . in order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval , the regulatory agency must conclude that our clinical data are safe and effective . historically , the results from preclinical testing and early clinical trials ( through phase 2 ) have often not been predictive of results obtained in later clinical trials . a number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals . 63 furthermore , our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our drug candidates . in the event that third parties take over the clinical trial process for one of our drug candidates , the estimated completion date would largely be under control of that third party rather than us . we can not forecast with any degree of certainty which proprietary products , if any , will be subject to future collaborative arrangements , in whole or in part , and how such arrangements would affect our development plan or capital requirements . our programs may also benefit from subsidies , grants , contracts or government or agency-sponsored studies that could reduce our development costs . as a result of the uncertainties discussed above , among others , it is difficult to accurately estimate the duration and completion costs of our research and development projects or when , if ever , and to what extent we will receive cash inflows from the commercialization and sale of a product . our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements , when appropriate , could significantly increase our capital requirements and could adversely impact our liquidity . these uncertainties could force us to seek additional , external sources of financing from time to time in order to continue with our business strategy . our inability to raise additional capital , or to do so on terms reasonably acceptable to us , would jeopardize the future success of our business . during the past five years through december 31 , 2017 , we incurred an aggregate of $ 470.9 million in research and development expenses . the following table indicates the amount incurred for each of our significant research programs and for other identified research and development activities during the years ended december 31 , 2017 , 2016 and 2015. the amounts disclosed in the following table reflect direct research and development costs , license fees associated with the underlying technology and an allocation of indirect research and development costs to each program . replace_table_token_10_th clinical development programs glembatumumab vedotin glembatumumab vedotin is an antibody-drug conjugate , or adc , that consists of a fully human monoclonal antibody , cr011 , linked to a potent cell-killing drug , monomethyl auristatin e , or mmae . the cr011 antibody specifically targets glycoprotein nmb , referred to as gpnmb , that is over-expressed in a variety of cancers including breast cancer , melanoma , non-small cell lung cancer , uveal melanoma and osteosarcoma , among others . the adc technology , comprised of mmae and a stable linker system for attaching it to cr011 , was licensed from seattle genetics , inc. and is the same 64 as that used in the marketed product adcetris® . the adc is designed to be stable in the bloodstream . following intravenous administration , glembatumumab vedotin targets and binds to gpnmb , and upon internalization into the targeted cell , glembatumumab vedotin is designed to release mmae from cr011 to produce a cell-killing effect . glembatumumab vedotin is being studied across multiple indications in company-sponsored trials and in collaborative studies with external parties . the u.s. food and drug administration , or fda , has granted fast track designation to glembatumumab vedotin for the treatment of advanced , refractory/resistant gpnmb-expressing breast cancer . a companion diagnostic is in development for certain indications , and we expect that , if necessary , such a companion diagnostic must be approved by the fda or certain other foreign regulatory agencies before glembatumumab vedotin may be commercialized in those indications . treatment of metastatic breast cancer : glembatumumab vedotin has been evaluated for the treatment of metastatic breast cancer ( mbc ) in multiple studies including a single-arm phase 1/2 study ( journal of clinical oncology , september 2014 ) ; a randomized , controlled phase 2b study compared to investigator 's choice chemotherapy in patients with gpnmb-positive mbc called emerge ( journal of clinical oncology , april 2015 ) ; and the ongoing randomized , controlled phase 2b study in patients with triple negative , gpnmb overexpressing breast cancer , called metric . we expect to report topline primary endpoint data from the metric study during the second quarter of 2018. story_separator_special_tag data ( n=36 ) from the phase 1 dose-escalation portion of the study were presented in an oral presentation at the american society of clinical oncology annual meeting in june 2017. the majority of patients had pd-l1 negative tumor at baseline and presented with stage iv , heavily pre-treated disease . 80 % of patients enrolled presented with refractory or recurrent colorectal ( n=21 ) or ovarian cancer ( n=8 ) , a population expected to have minimal response to checkpoint blockade . the primary objective of the phase 1 portion of the study was to evaluate the safety and tolerability of the combination . the combination was well tolerated at all varlilumab dose levels tested without any evidence of increased autoimmunity or inappropriate immune activation . marked changes in the tumor microenvironment including increased infiltrating cd8+ t cells and increased pd-l1 expression , which have been shown to correlate with a greater magnitude of treatment effect from checkpoint inhibitors in other clinical studies , were observed . additional evidence of immune activity , such as increase in inflammatory chemokines and decrease in t regulatory cells , was also noted . notable disease control was also observed ( stable disease or better for at least 3 months ) , considering the stage iv patient population contained mostly ( 80 % ) colorectal and ovarian cases : 0.1 mg/kg varlilumab + 240 mg opdivo : 1/5 ( 20 % ) , 1 mg/kg varlilumab + 240 mg opdivo : 5/15 ( 33 % ) and 10 mg/kg varlilumab + 240 mg opdivo : 6/15 ( 40 % ) . 69 three partial responses ( pr ) were observed . a patient with pd-l1 negative , mmr proficient ( msi-low ) colorectal cancer , typically unlikely to respond to checkpoint blockade monotherapy , achieved a confirmed pr ( 95 % decrease in target lesions ) and following completion of combination treatment , continues to receive treatment with opdivo monotherapy at 31+ months . a patient with low pd-l1 ( 5 % expression ) squamous cell head and neck cancer achieved a confirmed pr ( 59 % shrinkage ) and experienced pfs of 6.7 months . a patient with pd-l1 negative ovarian cancer experienced a single timepoint pr ( 49 % shrinkage ) but discontinued treatment to a dose-limiting toxicity ( immune hepatitis , an event known to be associated with checkpoint inhibition therapy ) . a subgroup analysis was conducted in patients with ovarian cancer based on an observed increase of pd-l1 and tumor-infiltrating lymphocytes in this patient population . in patients with paired baseline and on-treatment biopsies ( n=13 ) , only 15 % were pd-l1 positive ( ³ 1 % tumor cells ) at baseline compared to 77 % during treatment ( p=0.015 ) . patients with increased tumor pd-l1 expression and tumor cd8 t cells correlated with better clinical outcome with treatment ( stable disease or better ) . the phase 2 portion of the study opened to enrollment in april 2016 and completed enrollment in january 2018 with cohorts in colorectal cancer ( n=21 ) , ovarian cancer ( n=58 ) , head and neck squamous cell carcinoma ( n=24 ) , renal cell carcinoma ( n=14 ) and glioblastoma ( n=22 ) . the primary objective of the phase 2 cohorts is orr , except glioblastoma , where the primary objective is the rate of 12-month os . secondary objectives include pharmacokinetic assessments , determining the immunogenicity of varlilumab when given in combination with opdivo , evaluating alternate dosing schedules of varlilumab and further assessing the anti-tumor activity of combination treatment . we plan to work with bms to present data from the study at future medical meetings in 2018. third-party sponsored studies : we have also entered into a crada with the nci under which nci is sponsoring a phase 2 study of varlilumab in combination with nivolumab in relapsed or refractory aggressive b-cell lymphomas . patients receive either nivolumab alone or the combination . the primary outcome measure is orr . secondary outcome measures include dor , safety , pfs and os . the study opened to enrollment in january 2018 and is expected to enroll 106 patients . cdx-3379 cdx-3379 is a human monoclonal antibody with half-life extension designed to block the activity of erbb3 ( her3 ) . we believe erbb3 may be an important receptor regulating cancer cell growth and survival as well as resistance to targeted therapies and is expressed in many cancers , including head and neck , thyroid , breast , lung and gastric cancers , as well as melanoma . we believe the proposed mechanism of action for cdx-3379 sets it apart from other drugs in development in this class due to its ability to block both ligand-independent and ligand-dependent erbb3 signaling by binding to a unique epitope . it has a favorable pharmacologic profile , including a longer half-life and slower clearance relative to other drug candidates in this class . we believe cdx-3379 also has potential to enhance anti-tumor activity and or overcome resistance in combination with other targeted and cytotoxic therapies to directly kill tumor cells . tumor cell death and the ensuing release of new tumor antigens has the potential to serve as a focus for combination therapy with immuno-oncology approaches , even in refractory patients . cdx-3379 has been evaluated in three phase 1 studies for the treatment of multiple solid tumors that express erbb3 and is currently being evaluated is a phase 2 study in combination with cetuximab in cetuximab-resistant , advanced head and neck squamous cell carcinoma . the most recent data for cdx-3379 were reported from a phase 1a/1b study conducted in solid tumors . the study included a single-agent , dose-escalation portion and combination expansion cohorts . the single-agent , dose-escalation portion of the study did not identify an mtd , and there were no dose limiting toxicities . the most common adverse events included rash and diarrhea and
| liquidity and capital resources our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with commercial banks and financial institutions . we maintain cash balances with financial institutions in excess of insured limits . we do not anticipate any losses with respect to such cash balances . we invest our excess cash balances in marketable securities , including municipal bond securities , u.s. government agency securities and high-grade corporate bonds that meet high credit quality standards , as specified in our investment policy . our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity . the use of our cash flows for operations has primarily consisted of salaries and wages for our employees ; facility and facility-related costs for our offices , laboratories and manufacturing facility ; fees paid in connection with preclinical studies , clinical studies , contract manufacturing , laboratory supplies and services ; and consulting , legal and other professional fees . to date , the primary sources of cash flows from operations have been payments received from our collaborative partners and from government entities . the timing of any new collaboration agreements , government contracts or grants and any payments under these agreements , contracts or grants can not be easily predicted and may vary significantly from quarter to quarter . at december 31 , 2017 , our principal sources of liquidity consisted of cash , cash equivalents and marketable securities of $ 139.4 million . we have had recurring losses and incurred a loss of $ 93.0 million for the year ended december 31 , 2017. net cash used in operations for the year ended december 31 , 2017 was $ 99.9 million .
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gaylord opryland reopened november 15 , 2010. while the grand ole opry continued its schedule at alternative venues , including our ryman auditorium , the grand ole opry house reopened september 28 , 2010. certain of our nashville-based attractions were closed for a period of time , but reopened in june and july , and the majority of the affected corporate offices reopened during november 2010. gross total remediation and rebuilding costs came in at the low end of the projected $ 215- $ 225 million range , including approximately $ 23- $ 28 million in pre-flood planned enhancement projects at gaylord opryland . in addition , preopening costs came in under the projected $ 57- $ 62 million range . these costs included the initial eight-week carrying period for all labor at the hotel as well as the labor for security , engineering , horticulture , reservations , sales , accounting and management during the restoration , as well as the labor associated with re-launching the assets and the restocking of operating supplies prior to re-opening . in addition , we incurred a non-cash write-off of $ 45.0 million associated with the impairment of certain assets as a result of sustained flood damage , as further described in note 2 to our consolidated financial statements included herein . while several flood-related projects remain to be completed in 2011 , we anticipate that net of tax refunds of $ 36.5 million , insurance proceeds of $ 50.0 million , and the cost of projects slated for the property prior to the flood , the net cash impact of the flood will be approximately $ 150 million . we believe that 24 we have ample liquidity for the remaining projects through the use of a combination of cash on-hand , available borrowings and cash flow generated by our other hotel assets . other recent events repurchase of senior notes . during 2010 , we repurchased $ 28.5 million in aggregate principal amount of our outstanding 6.75 % senior notes for $ 27.0 million . after adjusting for deferred financing costs and other costs , we recorded a pre-tax gain of $ 1.3 million as a result of the repurchases , which is recorded as a net gain on extinguishment of debt in the accompanying financial information . we used available cash and borrowings under our revolving credit facility to finance the purchases and intend to consider additional repurchases of our 6.75 % senior notes from time to time depending on market conditions . labor union activity . as of december 31 , 2010 , approximately 1,504 employees at gaylord national were represented by labor unions , and are working pursuant to the terms of the collective bargaining agreements which have been negotiated with the four unions representing these employees . as a result , we experienced an increase in labor and benefit costs in 2010. development update we invested heavily in our operations during 2008 , primarily in connection with continued improvements of gaylord opryland , and the construction of the gaylord national beginning in 2005 and continuing through 2008. our investments in 2009 consisted primarily of ongoing maintenance capital expenditures for our existing properties . our investments in 2010 consisted primarily of capital expenditures associated with the flood damage and reopening of gaylord opryland and the grand ole opry house , as described above in nashville flood , as well as ongoing maintenance capital expenditures for our existing properties . our investments in 2011 are also expected to consist primarily of ongoing maintenance capital expenditures for our existing properties , and potentially , development projects that have not yet been determined . as more fully described in note 16 to our consolidated financial statements included herein , we have entered into a land purchase agreement with respect to a potential hotel development in mesa , arizona . we are also considering expansions at gaylord texan and gaylord palms , as well as other potential hotel sites throughout the country . in addition , we are reevaluating our prior considerations regarding a possible expansion of gaylord opryland . we have made no commitments to construct expansions of our current facilities or to build new facilities . we are closely monitoring the condition of the economy and the availability of attractive financing . we are unable to predict at this time when we might make such commitments or commence construction of these proposed expansion projects . our current operations our ongoing operations are organized into three principal business segments : hospitality , consisting of gaylord opryland , gaylord palms , gaylord texan , radisson hotel at opryland and , commencing in april 2008 , gaylord national , as well as our ownership interests in two joint ventures . opry and attractions , consisting of our grand ole opry assets , wsm-am and our nashville attractions . corporate and other , consisting of our corporate expenses . for the years ended december 31 , our total revenues were divided among these business segments as follows : replace_table_token_4_th we generate a significant portion of our revenues from our hospitality segment . we believe that we are the only hospitality company whose stated primary focus is on the large group meetings and conventions sector of the lodging market . our strategy is to continue 25 this focus by concentrating on our all-in-one-place self-contained service offerings and by emphasizing customer rotation among our convention properties , while also offering additional entertainment opportunities to guests and target customers . in addition to our group meetings strategy , we are also focused on improving leisure demand in our hotels through special events ( country christmas , summer-themed events , etc . ) , social media strategies , and unique content and entertainment partnerships . key performance indicators the operating results of our hospitality segment are highly dependent on the volume of customers at our hotels and the quality of the customer mix at our hotels . story_separator_special_tag hospitality operating costs , which consist of direct costs associated with the daily operations of our hotels ( primarily room , food and beverage and convention costs ) , decreased during 2010 , as compared to 2009 , primarily due to a $ 74.7 million decrease at gaylord opryland as a result of being closed due to the nashville flood , partially offset by an increase in operating costs at gaylord national , gaylord texan and gaylord palms , as described below . hospitality operating costs decreased during 2009 , as compared to 2008 , due to decreases in operating costs for our same-store hospitality properties for 2009 , partially offset by the fact that the gaylord national was not operational for all of 2008 ( the gaylord national opened in april 2008 ) , as described below . total hospitality segment selling , general and administrative expenses , consisting of administrative and overhead costs , decreased in 2010 , as compared to 2009 , primarily as a result of a decrease of $ 18.2 million at gaylord opryland as a result of being closed due to the nashville flood , partially offset by slight increases at gaylord texan , gaylord palms and gaylord national , as described below . total hospitality segment selling , general and administrative decreased in 2009 , as compared to 2008 , at each of our same-store hospitality segment properties , primarily due to our cost containment initiative , partially offset by the fact that the gaylord national was not operational for all of 2008 ( the gaylord national opened in april 2008 ) , as described below . hospitality depreciation and amortization expense decreased during 2010 , as compared to 2009 , primarily as a result of a decrease at gaylord palms due to the initial furniture , fixtures and equipment placed in service at the hotel 's opening in 2002 becoming fully depreciated during 2010 , as well as a decrease at gaylord opryland as a result of the nashville flood . hospitality depreciation and 30 amortization expense increased during 2009 , as compared to 2008 , due to the opening of the gaylord national and the related fixed assets placed into service . property-level results . the following presents the property-level financial results for the years ended december 31 , 2010 , 2009 and 2008 ( gaylord national opened in april 2008 ) : gaylord opryland results . the results of gaylord opryland for the years ended december 31 , 2010 , 2009 and 2008 are as follows ( in thousands , except percentages and performance metrics ) : replace_table_token_9_th ( 1 ) gaylord opryland results and performance do not include the effect of casualty loss and preopening costs and are for the periods of time that the hotel was open . see the discussion of casualty loss and preopening costs set forth below . excludes 5,171 room nights that were taken out of service during the year ended december 31 , 2008 as a result of a multi-year rooms renovation program at gaylord opryland . the rooms renovation program was completed in february 2008. total revenue decreased at gaylord opryland during 2010 , as compared to 2009 , as a result of the hotel closing on may 3 , 2010 as a result of the nashville flood . gaylord opryland reopened on november 15 , 2010. for the period that the hotel was open , while occupancy was relatively stable for 2010 , as compared to 2009 , a decrease in adr during 2010 , primarily as a result of continued pressure on room rates , resulted in a decreased revpar during 2010. total revpar remained fairly stable due to an increase in outside-the-room spending . revenue and total revpar were also negatively impacted by a decrease in collections of attrition and cancellation fees during 2010. the decrease in gaylord opryland revenue , revpar and total revpar during 2009 , as compared to 2008 , was due to a combination of lower occupancy and a lower adr , as the hotel experienced lower levels of group business during the period than in the prior year . this decrease in group business also led to decreases in banquet , catering and other outside-the-room spending at the hotel , which reduced the hotel 's total revpar for the period . these decreases were partially offset by increased collection of attrition and cancellation fees during 2009. operating costs at gaylord opryland during 2010 , as compared to 2009 , decreased due to the hotel closing as a result of the nashville flood . operating costs at gaylord opryland during 2009 , as compared to 2008 , decreased due to decreased variable operating costs associated with the lower levels of occupancy and outside-the-room spending at the hotel , as well as aggressive management of costs . selling , general and administrative expenses at gaylord opryland decreased during 2010 , as compared to 2009 , primarily due to the hotel closing as a result of the nashville flood , as well as overall expense reductions associated with our cost containment initiative . selling , general and administrative expenses at gaylord opryland decreased during 2009 , as compared to 2008 , primarily due to the results of our cost containment initiative and a decrease in bad debt expense associated with the write-down of a receivable from a large convention customer in the prior year . 31 gaylord palms results . the results of gaylord palms for the years ended december 31 , 2010 , 2009 and 2008 are as follows ( in thousands , except percentages and performance metrics ) : replace_table_token_10_th gaylord palms total revenue remained stable in 2010 , as compared to 2009. the hotel experienced an increase in occupancy during 2010 , primarily as a result of increased group business . however , adr decreased , primarily due to a recent increase in room supply in the orlando , florida market that has seen
| liquidity and capital resources our cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist primarily of investments in money market mutual funds with commercial banks and financial institutions . we maintain cash balances with financial institutions in excess of insured limits . we do not anticipate any losses with respect to such cash balances . we invest our excess cash balances in marketable securities , including municipal bond securities , u.s. government agency securities and high-grade corporate bonds that meet high credit quality standards , as specified in our investment policy . our investment policy seeks to manage these assets to achieve our goals of preserving principal and maintaining adequate liquidity . the use of our cash flows for operations has primarily consisted of salaries and wages for our employees ; facility and facility-related costs for our offices , laboratories and manufacturing facility ; fees paid in connection with preclinical studies , clinical studies , contract manufacturing , laboratory supplies and services ; and consulting , legal and other professional fees . to date , the primary sources of cash flows from operations have been payments received from our collaborative partners and from government entities . the timing of any new collaboration agreements , government contracts or grants and any payments under these agreements , contracts or grants can not be easily predicted and may vary significantly from quarter to quarter . at december 31 , 2017 , our principal sources of liquidity consisted of cash , cash equivalents and marketable securities of $ 139.4 million . we have had recurring losses and incurred a loss of $ 93.0 million for the year ended december 31 , 2017. net cash used in operations for the year ended december 31 , 2017 was $ 99.9 million .
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gaylord opryland reopened november 15 , 2010. while the grand ole opry continued its schedule at alternative venues , including our ryman auditorium , the grand ole opry house reopened september 28 , 2010. certain of our nashville-based attractions were closed for a period of time , but reopened in june and july , and the majority of the affected corporate offices reopened during november 2010. gross total remediation and rebuilding costs came in at the low end of the projected $ 215- $ 225 million range , including approximately $ 23- $ 28 million in pre-flood planned enhancement projects at gaylord opryland . in addition , preopening costs came in under the projected $ 57- $ 62 million range . these costs included the initial eight-week carrying period for all labor at the hotel as well as the labor for security , engineering , horticulture , reservations , sales , accounting and management during the restoration , as well as the labor associated with re-launching the assets and the restocking of operating supplies prior to re-opening . in addition , we incurred a non-cash write-off of $ 45.0 million associated with the impairment of certain assets as a result of sustained flood damage , as further described in note 2 to our consolidated financial statements included herein . while several flood-related projects remain to be completed in 2011 , we anticipate that net of tax refunds of $ 36.5 million , insurance proceeds of $ 50.0 million , and the cost of projects slated for the property prior to the flood , the net cash impact of the flood will be approximately $ 150 million . we believe that 24 we have ample liquidity for the remaining projects through the use of a combination of cash on-hand , available borrowings and cash flow generated by our other hotel assets . other recent events repurchase of senior notes . during 2010 , we repurchased $ 28.5 million in aggregate principal amount of our outstanding 6.75 % senior notes for $ 27.0 million . after adjusting for deferred financing costs and other costs , we recorded a pre-tax gain of $ 1.3 million as a result of the repurchases , which is recorded as a net gain on extinguishment of debt in the accompanying financial information . we used available cash and borrowings under our revolving credit facility to finance the purchases and intend to consider additional repurchases of our 6.75 % senior notes from time to time depending on market conditions . labor union activity . as of december 31 , 2010 , approximately 1,504 employees at gaylord national were represented by labor unions , and are working pursuant to the terms of the collective bargaining agreements which have been negotiated with the four unions representing these employees . as a result , we experienced an increase in labor and benefit costs in 2010. development update we invested heavily in our operations during 2008 , primarily in connection with continued improvements of gaylord opryland , and the construction of the gaylord national beginning in 2005 and continuing through 2008. our investments in 2009 consisted primarily of ongoing maintenance capital expenditures for our existing properties . our investments in 2010 consisted primarily of capital expenditures associated with the flood damage and reopening of gaylord opryland and the grand ole opry house , as described above in nashville flood , as well as ongoing maintenance capital expenditures for our existing properties . our investments in 2011 are also expected to consist primarily of ongoing maintenance capital expenditures for our existing properties , and potentially , development projects that have not yet been determined . as more fully described in note 16 to our consolidated financial statements included herein , we have entered into a land purchase agreement with respect to a potential hotel development in mesa , arizona . we are also considering expansions at gaylord texan and gaylord palms , as well as other potential hotel sites throughout the country . in addition , we are reevaluating our prior considerations regarding a possible expansion of gaylord opryland . we have made no commitments to construct expansions of our current facilities or to build new facilities . we are closely monitoring the condition of the economy and the availability of attractive financing . we are unable to predict at this time when we might make such commitments or commence construction of these proposed expansion projects . our current operations our ongoing operations are organized into three principal business segments : hospitality , consisting of gaylord opryland , gaylord palms , gaylord texan , radisson hotel at opryland and , commencing in april 2008 , gaylord national , as well as our ownership interests in two joint ventures . opry and attractions , consisting of our grand ole opry assets , wsm-am and our nashville attractions . corporate and other , consisting of our corporate expenses . for the years ended december 31 , our total revenues were divided among these business segments as follows : replace_table_token_4_th we generate a significant portion of our revenues from our hospitality segment . we believe that we are the only hospitality company whose stated primary focus is on the large group meetings and conventions sector of the lodging market . our strategy is to continue 25 this focus by concentrating on our all-in-one-place self-contained service offerings and by emphasizing customer rotation among our convention properties , while also offering additional entertainment opportunities to guests and target customers . in addition to our group meetings strategy , we are also focused on improving leisure demand in our hotels through special events ( country christmas , summer-themed events , etc . ) , social media strategies , and unique content and entertainment partnerships . key performance indicators the operating results of our hospitality segment are highly dependent on the volume of customers at our hotels and the quality of the customer mix at our hotels . story_separator_special_tag hospitality operating costs , which consist of direct costs associated with the daily operations of our hotels ( primarily room , food and beverage and convention costs ) , decreased during 2010 , as compared to 2009 , primarily due to a $ 74.7 million decrease at gaylord opryland as a result of being closed due to the nashville flood , partially offset by an increase in operating costs at gaylord national , gaylord texan and gaylord palms , as described below . hospitality operating costs decreased during 2009 , as compared to 2008 , due to decreases in operating costs for our same-store hospitality properties for 2009 , partially offset by the fact that the gaylord national was not operational for all of 2008 ( the gaylord national opened in april 2008 ) , as described below . total hospitality segment selling , general and administrative expenses , consisting of administrative and overhead costs , decreased in 2010 , as compared to 2009 , primarily as a result of a decrease of $ 18.2 million at gaylord opryland as a result of being closed due to the nashville flood , partially offset by slight increases at gaylord texan , gaylord palms and gaylord national , as described below . total hospitality segment selling , general and administrative decreased in 2009 , as compared to 2008 , at each of our same-store hospitality segment properties , primarily due to our cost containment initiative , partially offset by the fact that the gaylord national was not operational for all of 2008 ( the gaylord national opened in april 2008 ) , as described below . hospitality depreciation and amortization expense decreased during 2010 , as compared to 2009 , primarily as a result of a decrease at gaylord palms due to the initial furniture , fixtures and equipment placed in service at the hotel 's opening in 2002 becoming fully depreciated during 2010 , as well as a decrease at gaylord opryland as a result of the nashville flood . hospitality depreciation and 30 amortization expense increased during 2009 , as compared to 2008 , due to the opening of the gaylord national and the related fixed assets placed into service . property-level results . the following presents the property-level financial results for the years ended december 31 , 2010 , 2009 and 2008 ( gaylord national opened in april 2008 ) : gaylord opryland results . the results of gaylord opryland for the years ended december 31 , 2010 , 2009 and 2008 are as follows ( in thousands , except percentages and performance metrics ) : replace_table_token_9_th ( 1 ) gaylord opryland results and performance do not include the effect of casualty loss and preopening costs and are for the periods of time that the hotel was open . see the discussion of casualty loss and preopening costs set forth below . excludes 5,171 room nights that were taken out of service during the year ended december 31 , 2008 as a result of a multi-year rooms renovation program at gaylord opryland . the rooms renovation program was completed in february 2008. total revenue decreased at gaylord opryland during 2010 , as compared to 2009 , as a result of the hotel closing on may 3 , 2010 as a result of the nashville flood . gaylord opryland reopened on november 15 , 2010. for the period that the hotel was open , while occupancy was relatively stable for 2010 , as compared to 2009 , a decrease in adr during 2010 , primarily as a result of continued pressure on room rates , resulted in a decreased revpar during 2010. total revpar remained fairly stable due to an increase in outside-the-room spending . revenue and total revpar were also negatively impacted by a decrease in collections of attrition and cancellation fees during 2010. the decrease in gaylord opryland revenue , revpar and total revpar during 2009 , as compared to 2008 , was due to a combination of lower occupancy and a lower adr , as the hotel experienced lower levels of group business during the period than in the prior year . this decrease in group business also led to decreases in banquet , catering and other outside-the-room spending at the hotel , which reduced the hotel 's total revpar for the period . these decreases were partially offset by increased collection of attrition and cancellation fees during 2009. operating costs at gaylord opryland during 2010 , as compared to 2009 , decreased due to the hotel closing as a result of the nashville flood . operating costs at gaylord opryland during 2009 , as compared to 2008 , decreased due to decreased variable operating costs associated with the lower levels of occupancy and outside-the-room spending at the hotel , as well as aggressive management of costs . selling , general and administrative expenses at gaylord opryland decreased during 2010 , as compared to 2009 , primarily due to the hotel closing as a result of the nashville flood , as well as overall expense reductions associated with our cost containment initiative . selling , general and administrative expenses at gaylord opryland decreased during 2009 , as compared to 2008 , primarily due to the results of our cost containment initiative and a decrease in bad debt expense associated with the write-down of a receivable from a large convention customer in the prior year . 31 gaylord palms results . the results of gaylord palms for the years ended december 31 , 2010 , 2009 and 2008 are as follows ( in thousands , except percentages and performance metrics ) : replace_table_token_10_th gaylord palms total revenue remained stable in 2010 , as compared to 2009. the hotel experienced an increase in occupancy during 2010 , primarily as a result of increased group business . however , adr decreased , primarily due to a recent increase in room supply in the orlando , florida market that has seen
| cash flows from financing activities . our cash flows from financing activities reflect primarily the issuance of debt and the repayment of long-term debt . during 2010 , our net cash flows used in financing activities continuing operations were $ 3.3 million , primarily reflecting the payment of $ 27.0 million to repurchase portions of our senior notes , partially offset by $ 26.1 million in proceeds from the exercise of stock option and purchase plans . during 2009 , our net cash flows provided by financing activities continuing operations were $ 89.4 million , primarily reflecting $ 358.1 million in proceeds from the issuance of our 3.75 % convertible notes , net of equity-related issuance costs , $ 169.0 million in proceeds from the issuance of common stock and warrants , net of issuance costs , and $ 5.0 million received from the termination of the interest rate swap agreements associated with our senior notes , partially offset by the payment of $ 329.6 million to repurchase portions of our senior notes , the payment of $ 76.7 million to purchase a convertible note hedge associated with the 3.75 % convertible notes , $ 22.5 million in net repayments under our $ 1.0 billion credit facility , the payment of $ 8.1 million in deferred financing costs associated with the 3.75 % convertible notes and the payment of $ 4.6 million to purchase shares of our common stock to fund a supplemental employee retirement plan . during 2008 , our net cash flows provided by financing activities continuing operations were $ 268.6 million , primarily reflecting $ 324.5 million in net borrowings under our $ 1.0 billion credit facility , partially offset by the payment of $ 25.6 million to repurchase portions of our senior notes , the payment of $ 20.0 million to repurchase shares of our common stock and the payment of $ 10.8 million in deferred financing costs to refinance our $ 1.0 billion credit facility .
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the operations of linc are included in the facility solutions segment as of the acquisition date . 20 summary of key financial performance indicators during the second half of 2011 and continuing throughout 2012 , the u.s. economy was generally weak and the company faced increasing competitive pricing pressures which led to a reduction in scope of work and certain contract losses from the company 's clients . this competitive environment impacted overall margins in fiscal 2012. further , a significant portion of the revenues in the facility solutions segment is generated from contracts with the u.s. government . the company is continually assessing the potential impact that the size , composition , and timing of congressional approval of the annual federal budget will have on its government clients . in addition , the company monitors and assesses the potential impact of u.s. government policy and strategy changes on its business . while the volume of bid activity and request for proposals for future awards remains active , the company 's government business has experienced and may continue to experience delays in new contract awards and in the start dates of currently awarded contracts or early termination of existing contracts . in addition , during the year ended october 31 , 2012 , there were unfavorable developments in certain general liability and workers ' compensation claims for certain policy years prior to fiscal 2012. certain general liability claims related to earlier policy years experienced losses significantly higher than were previously estimated . workers ' compensation expense was unfavorable in california and other states where the company maintains a significant presence . specifically in california , workers ' compensation claims were favorable for older years , but adverse for more current years due primarily to california 's post-reform workers ' compensation environment . in addition , some of the unfavorable workers ' compensation development may be the result of the company 's continuing attempt to achieve earlier settlement of claims . offsetting the unfavorable workers ' compensation developments in california and other states was the impact of a favorable reform in illinois , and more specifically relating to reduced medical costs associated with the reform . the company has also implemented a series of initiatives to improve the management of general liability claims . further , the recognition within the company 's annual actuarial assessment of the loss experience for policy years in which linc was a member of a group captive , also resulted in a favorable insurance adjustment . after analyzing the historical loss development patterns , comparing the loss development against benchmarks , adjusting for known operational claims handling changes , and applying actuarial projection methods to determine the estimate of ultimate losses , the company increased its expected reserves for prior-year claims , which resulted in an increase in the related insurance expense of $ 7.3 million during fiscal year ended october 31 , 2012 and was recorded as part of corporate expenses . these factors , along with higher payroll and payroll related expenses , and the accrual of certain legal settlement costs , have negatively impacted the company 's operating results in 2012. financial overview revenues increased by $ 53.4 million , or 1.3 % , in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to revenues associated with the timing of the linc acquisition , which occurred on december 1 , 2010 , new business within the security and janitorial segments , and additional revenues in the facility solutions segment from new abm building and energy solutions ( abes ) contracts . the increase in revenues was partially offset by the continuing impact of reduction in scope of work and contract losses starting in fiscal 2011 and the termination of certain u.s. government contracts in iraq earlier in the fiscal year . operating profit decreased by $ 21.0 million , or 17.9 % in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the decrease was primarily related to an increase in self-insurance expense related to prior year claims primarily as a result of unfavorable developments in certain general liability and workers ' compensation claims during the year ended october 31 , 2012 and higher payroll and payroll related expenses , primarily from higher state unemployment insurance rates and the impact of one additional working day in the year ended october 31 , 2012. the decrease in operating profit was also related to higher legal settlement costs and the continuing impact of increasing competitive pricing pressures and contract losses starting in fiscal 2011 , including the termination of certain u.s. government contracts in iraq earlier in the fiscal year . in addition to revenues and operating profit , the company 's management views operating cash flows as a good indicator of financial performance , as strong operating cash flows provide opportunities for growth both organically and through acquisitions . operating cash flows primarily depend on : revenue levels ; the quality and timing of collections of accounts receivable , including receivables from government contracts which generally have longer collection periods ; the timing of payments to suppliers and other vendors ; the timing and amount of income tax payments ; and the timing and amount of payments on insured claims . the company 's net cash provided by continuing operating activities was $ 148.9 million , $ 156.8 million and $ 140.7 million in the years ended october 31 , 2012 , 2011 and 2010 , respectively . the company 's largest operating segment is the janitorial segment , which generated approximately 55.7 % of the company 's revenues and approximately 67.3 % of the company 's operating profit , excluding expenses allocated to corporate , in the year ended october 31 , 2012 . story_separator_special_tag the average outstanding balances under the company 's line of credit were $ 369.1 million and $ 156.7 million in the year ended october 31 , 2011 and october 31 , 2010 , respectively . provision for income taxes the effective tax rate on income from continuing operations for the years ended october 31 , 2011 and 2010 was 35.0 % and 38.6 % , respectively . the tax provision for the year ended october 31 , 2011 includes a tax benefit of $ 4.7 million related to a re-measurement of certain unrecognized tax benefits , partially offset by other discrete tax costs of $ 1.9 million , primarily related to the true-up of prior year tax balances including a reduction in anticipated employment based tax credits . 28 segment information segment revenues and operating profits for the years ended october 31 , 2011 and 2010 were as follows : replace_table_token_11_th janitorial replace_table_token_12_th janitorial revenues increased by $ 74.1 million , or 3.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with diversco , which was acquired on june 30 , 2010 , and additional revenues from new business . the period-over-period increase in revenues attributable to diversco in 2011 was $ 49.8 million . operating profit increased by $ 0.6 million , or 0.4 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 0.2 % , to 5.9 % in the year ended october 31 , 2011 from 6.1 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to the increase in revenue , partially offset by higher payroll and payroll related expenses as a result of one additional working day in the year ended october 31 , 2011 and the impact of higher state unemployment insurance rates that went into effect on january 1 , 2011 , as well as increases in fuel costs . 29 facility solutions replace_table_token_13_th facility solutions revenues increased by $ 516.8 million , or 135.1 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with the acquisition of linc , which was acquired on december 1 , 2010. the revenues attributable to linc in 2011 were $ 512.9 million . operating profit increased by $ 10.5 million , or 45.6 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 2.3 % , to 3.7 % in the year ended october 31 , 2011 from 6.0 % in the year ended october 31 , 2010. the increase in operating profit is primarily related to the operating profit associated with linc , which was $ 11.1 million ( excluding transaction costs and the interest expense associated with the borrowings under the company 's line of credit used to finance the acquisition , which were recorded within corporate expenses ) in the year ended october 31 , 2011. parking replace_table_token_14_th parking revenues increased by $ 146.3 million , or 31.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was related to revenues associated with the acquisition of l & r , which was acquired on october 1 , 2010 , partially offset by lost business as a result of the weaker u.s. economy . the period-over-period increase in revenues attributable to l & r in 2011 was $ 154.5 million . operating profit increased by $ 1.5 million , or 6.7 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 0.9 % , to 3.9 % in the year ended october 31 , 2011 from 4.8 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to the increase in revenues , partially offset by an increase in payroll related expenses associated with higher state unemployment insurance rates that went into effect on january 1 , 2011 and an increase in legal costs related to a contract settlement . security replace_table_token_15_th security revenues increased by $ 14.1 million , or 4.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with the acquisition of diversco , which was acquired on june 30 , 2010 , and additional revenues from new business . the period-over-period increase in revenues attributable to diversco in the year ended october 31 , 2011 was $ 7.4 million . operating profit increased by $ 0.5 million , or 6.4 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins increased by 0.1 % , to 2.3 % in the year ended october 31 , 2011 from 2.2 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to a reduction in general and administrative expenses , predominantly payroll and payroll related expenses and legal fees . 30 corporate and other years ended october 31 , ( $ in thousands ) 2011 2010 increase / ( decrease ) corporate expenses $ ( 88,662 ) $ ( 84,324 ) $ 4,338 5.1 % corporate expenses increased by $ 4.3 million , or 5.1 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase in corporate expenses was primarily related to : a $ 5.1 million increase in share-based
| cash flows from financing activities . our cash flows from financing activities reflect primarily the issuance of debt and the repayment of long-term debt . during 2010 , our net cash flows used in financing activities continuing operations were $ 3.3 million , primarily reflecting the payment of $ 27.0 million to repurchase portions of our senior notes , partially offset by $ 26.1 million in proceeds from the exercise of stock option and purchase plans . during 2009 , our net cash flows provided by financing activities continuing operations were $ 89.4 million , primarily reflecting $ 358.1 million in proceeds from the issuance of our 3.75 % convertible notes , net of equity-related issuance costs , $ 169.0 million in proceeds from the issuance of common stock and warrants , net of issuance costs , and $ 5.0 million received from the termination of the interest rate swap agreements associated with our senior notes , partially offset by the payment of $ 329.6 million to repurchase portions of our senior notes , the payment of $ 76.7 million to purchase a convertible note hedge associated with the 3.75 % convertible notes , $ 22.5 million in net repayments under our $ 1.0 billion credit facility , the payment of $ 8.1 million in deferred financing costs associated with the 3.75 % convertible notes and the payment of $ 4.6 million to purchase shares of our common stock to fund a supplemental employee retirement plan . during 2008 , our net cash flows provided by financing activities continuing operations were $ 268.6 million , primarily reflecting $ 324.5 million in net borrowings under our $ 1.0 billion credit facility , partially offset by the payment of $ 25.6 million to repurchase portions of our senior notes , the payment of $ 20.0 million to repurchase shares of our common stock and the payment of $ 10.8 million in deferred financing costs to refinance our $ 1.0 billion credit facility .
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the operations of linc are included in the facility solutions segment as of the acquisition date . 20 summary of key financial performance indicators during the second half of 2011 and continuing throughout 2012 , the u.s. economy was generally weak and the company faced increasing competitive pricing pressures which led to a reduction in scope of work and certain contract losses from the company 's clients . this competitive environment impacted overall margins in fiscal 2012. further , a significant portion of the revenues in the facility solutions segment is generated from contracts with the u.s. government . the company is continually assessing the potential impact that the size , composition , and timing of congressional approval of the annual federal budget will have on its government clients . in addition , the company monitors and assesses the potential impact of u.s. government policy and strategy changes on its business . while the volume of bid activity and request for proposals for future awards remains active , the company 's government business has experienced and may continue to experience delays in new contract awards and in the start dates of currently awarded contracts or early termination of existing contracts . in addition , during the year ended october 31 , 2012 , there were unfavorable developments in certain general liability and workers ' compensation claims for certain policy years prior to fiscal 2012. certain general liability claims related to earlier policy years experienced losses significantly higher than were previously estimated . workers ' compensation expense was unfavorable in california and other states where the company maintains a significant presence . specifically in california , workers ' compensation claims were favorable for older years , but adverse for more current years due primarily to california 's post-reform workers ' compensation environment . in addition , some of the unfavorable workers ' compensation development may be the result of the company 's continuing attempt to achieve earlier settlement of claims . offsetting the unfavorable workers ' compensation developments in california and other states was the impact of a favorable reform in illinois , and more specifically relating to reduced medical costs associated with the reform . the company has also implemented a series of initiatives to improve the management of general liability claims . further , the recognition within the company 's annual actuarial assessment of the loss experience for policy years in which linc was a member of a group captive , also resulted in a favorable insurance adjustment . after analyzing the historical loss development patterns , comparing the loss development against benchmarks , adjusting for known operational claims handling changes , and applying actuarial projection methods to determine the estimate of ultimate losses , the company increased its expected reserves for prior-year claims , which resulted in an increase in the related insurance expense of $ 7.3 million during fiscal year ended october 31 , 2012 and was recorded as part of corporate expenses . these factors , along with higher payroll and payroll related expenses , and the accrual of certain legal settlement costs , have negatively impacted the company 's operating results in 2012. financial overview revenues increased by $ 53.4 million , or 1.3 % , in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to revenues associated with the timing of the linc acquisition , which occurred on december 1 , 2010 , new business within the security and janitorial segments , and additional revenues in the facility solutions segment from new abm building and energy solutions ( abes ) contracts . the increase in revenues was partially offset by the continuing impact of reduction in scope of work and contract losses starting in fiscal 2011 and the termination of certain u.s. government contracts in iraq earlier in the fiscal year . operating profit decreased by $ 21.0 million , or 17.9 % in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the decrease was primarily related to an increase in self-insurance expense related to prior year claims primarily as a result of unfavorable developments in certain general liability and workers ' compensation claims during the year ended october 31 , 2012 and higher payroll and payroll related expenses , primarily from higher state unemployment insurance rates and the impact of one additional working day in the year ended october 31 , 2012. the decrease in operating profit was also related to higher legal settlement costs and the continuing impact of increasing competitive pricing pressures and contract losses starting in fiscal 2011 , including the termination of certain u.s. government contracts in iraq earlier in the fiscal year . in addition to revenues and operating profit , the company 's management views operating cash flows as a good indicator of financial performance , as strong operating cash flows provide opportunities for growth both organically and through acquisitions . operating cash flows primarily depend on : revenue levels ; the quality and timing of collections of accounts receivable , including receivables from government contracts which generally have longer collection periods ; the timing of payments to suppliers and other vendors ; the timing and amount of income tax payments ; and the timing and amount of payments on insured claims . the company 's net cash provided by continuing operating activities was $ 148.9 million , $ 156.8 million and $ 140.7 million in the years ended october 31 , 2012 , 2011 and 2010 , respectively . the company 's largest operating segment is the janitorial segment , which generated approximately 55.7 % of the company 's revenues and approximately 67.3 % of the company 's operating profit , excluding expenses allocated to corporate , in the year ended october 31 , 2012 . story_separator_special_tag the average outstanding balances under the company 's line of credit were $ 369.1 million and $ 156.7 million in the year ended october 31 , 2011 and october 31 , 2010 , respectively . provision for income taxes the effective tax rate on income from continuing operations for the years ended october 31 , 2011 and 2010 was 35.0 % and 38.6 % , respectively . the tax provision for the year ended october 31 , 2011 includes a tax benefit of $ 4.7 million related to a re-measurement of certain unrecognized tax benefits , partially offset by other discrete tax costs of $ 1.9 million , primarily related to the true-up of prior year tax balances including a reduction in anticipated employment based tax credits . 28 segment information segment revenues and operating profits for the years ended october 31 , 2011 and 2010 were as follows : replace_table_token_11_th janitorial replace_table_token_12_th janitorial revenues increased by $ 74.1 million , or 3.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with diversco , which was acquired on june 30 , 2010 , and additional revenues from new business . the period-over-period increase in revenues attributable to diversco in 2011 was $ 49.8 million . operating profit increased by $ 0.6 million , or 0.4 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 0.2 % , to 5.9 % in the year ended october 31 , 2011 from 6.1 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to the increase in revenue , partially offset by higher payroll and payroll related expenses as a result of one additional working day in the year ended october 31 , 2011 and the impact of higher state unemployment insurance rates that went into effect on january 1 , 2011 , as well as increases in fuel costs . 29 facility solutions replace_table_token_13_th facility solutions revenues increased by $ 516.8 million , or 135.1 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with the acquisition of linc , which was acquired on december 1 , 2010. the revenues attributable to linc in 2011 were $ 512.9 million . operating profit increased by $ 10.5 million , or 45.6 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 2.3 % , to 3.7 % in the year ended october 31 , 2011 from 6.0 % in the year ended october 31 , 2010. the increase in operating profit is primarily related to the operating profit associated with linc , which was $ 11.1 million ( excluding transaction costs and the interest expense associated with the borrowings under the company 's line of credit used to finance the acquisition , which were recorded within corporate expenses ) in the year ended october 31 , 2011. parking replace_table_token_14_th parking revenues increased by $ 146.3 million , or 31.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was related to revenues associated with the acquisition of l & r , which was acquired on october 1 , 2010 , partially offset by lost business as a result of the weaker u.s. economy . the period-over-period increase in revenues attributable to l & r in 2011 was $ 154.5 million . operating profit increased by $ 1.5 million , or 6.7 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins decreased by 0.9 % , to 3.9 % in the year ended october 31 , 2011 from 4.8 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to the increase in revenues , partially offset by an increase in payroll related expenses associated with higher state unemployment insurance rates that went into effect on january 1 , 2011 and an increase in legal costs related to a contract settlement . security replace_table_token_15_th security revenues increased by $ 14.1 million , or 4.2 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase was primarily related to revenues associated with the acquisition of diversco , which was acquired on june 30 , 2010 , and additional revenues from new business . the period-over-period increase in revenues attributable to diversco in the year ended october 31 , 2011 was $ 7.4 million . operating profit increased by $ 0.5 million , or 6.4 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. operating profit margins increased by 0.1 % , to 2.3 % in the year ended october 31 , 2011 from 2.2 % in the year ended october 31 , 2010. the increase in operating profit was primarily related to a reduction in general and administrative expenses , predominantly payroll and payroll related expenses and legal fees . 30 corporate and other years ended october 31 , ( $ in thousands ) 2011 2010 increase / ( decrease ) corporate expenses $ ( 88,662 ) $ ( 84,324 ) $ 4,338 5.1 % corporate expenses increased by $ 4.3 million , or 5.1 % , during the year ended october 31 , 2011 , as compared to the year ended october 31 , 2010. the increase in corporate expenses was primarily related to : a $ 5.1 million increase in share-based
| cash flows operating activities net cash provided by operating activities decreased by $ 9.4 million in the year ended october 31 , 2012 as compared to the year ended october 31 , 2011. the decrease was primarily related to the decrease in income from continuing operations before income taxes and timing of payments made for vendor invoices and other accrued liabilities , partially offset by the timing of payments made for insurance claims and trade accounts receivable collections received from clients . net cash provided by operating activities increased by $ 10.1 million in the year ended october 31 , 2011 as compared to the year ended october 31 , 2010. the increase was primarily related to the timing of payments made on vendor invoices , partially offset by the timing of collections received from clients ( which includes longer collection periods pertaining to the company 's government business ) . the cash flows from operating activities in the year ended october 31 , 2011 were also impacted by higher cash paid for income taxes ( net of refunds received ) and interest paid on the line of credit , as compared to the year ended october 31 , 2010. investing activities net cash used in investing activities decreased by $ 277.6 million in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the decrease was primarily related to $ 290.3 million cash paid , net of cash acquired , for the linc acquisition , during the year ended october 31 , 2011 , partially offset by $ 5.5 million cash paid , net of cash acquired , in connection with an acquisition made in fiscal 2012 , a $ 5.9 million increase in fixed asset additions , and the redemption of an auction rate security of $ 5.0 million in the prior year .
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during the year ended december 31 , 2017 , we recognized approximately $ 374,000 of royalty expense . following the signing of the new collaboration agreement , we retained a right to offset $ 15.0 million of future royalty payments . this offset will be reduced by up to $ 5.0 million upon the earlier of the approval of iluvien for posterior uveitis in any eu country or january 1 , 2020 , unless certain conditions under the new collaboration agreement are not met . 42 we commenced operations in june 2003. since our inception we have incurred significant losses . as of december 31 , 2017 , we had accumulated a deficit of $ 399.1 million . we expect to incur substantial losses through the continued commercialization of iluvien as we : continue the commercialization of iluvien in the u.s. and eea and , through our distributors , in the middle east , italy and spain ; continue to seek regulatory approval of iluvien in other jurisdictions and for other indications ; evaluate the use of iluvien for the treatment of other diseases ; and advance the clinical development of any future products or product candidates either currently in our pipeline , or that we may license or acquire in the future . as of december 31 , 2017 , we had approximately $ 24.1 million in cash and cash equivalents . on january 5 , 2018 , we entered into a $ 40.0 million loan and security agreement ( 2018 loan agreement ) with solar capital ltd. ( solar capital ) . under the 2018 loan agreement , we borrowed the entire $ 40.0 million as a term loan that matures on july 1 , 2022. we used the proceeds of the 2018 loan agreement loan to refinance the previous loan agreement with hercules capital , inc. ( hercules term loan agreement ) and to pay closing expenses associated with the 2018 loan agreement . we expect to use the remaining loan proceeds to provide additional working capital for general corporate purposes . ( see note 9 of our notes to consolidated financial statements below . ) our revenues for the fiscal years ended december 31 , 2017 and 2016 were generated from product sales primarily in the u.s. , germany , portugal and the united kingdom . in the u.s. , two large pharmaceutical distributors accounted for 73 % and 75 % of our consolidated revenues for the years ended december 31 , 2017 and 2016 , respectively . these distributors purchase iluvien from us , maintain inventories of iluvien and sell downstream to physician offices , pharmacies and hospitals . internationally , in countries where we sell direct , our customers are hospitals , clinics and pharmacies . we sometimes refer to physician offices , pharmacies , hospitals and clinics as end users . in international countries where we sell to distributors , these distributors maintain inventory levels of iluvien and sell to their customers . 43 results of operations replace_table_token_3_th revenue we began generating revenue from iluvien in 2013 , but do not expect positive cash flow from operations until late 2018 , if at all . in addition to generating revenue from product sales , we intend to seek to generate revenue from other sources such as upfront fees , milestone payments in connection with collaborative or strategic relationships , and royalties resulting from the licensing of iluvien or any future product candidates and other intellectual property . net revenue increased by approximately $ 1.6 million , or 5 % , to approximately $ 35.9 million for the year ended december 31 , 2017 , compared to approximately $ 34.3 million for the year ended december 31 , 2016. the increase was primarily attributable to increased sales volume in the u.s. and international segments , offset by the timing of the ordering of our two large u.s. distributors . cost of goods sold , excluding depreciation and amortization , and gross profit gross profit is affected by costs of goods sold , which includes ( a ) costs of manufactured goods sold and ( b ) payments to psivida in the form of ( 1 ) royalty payments under the new collaboration agreement ( after july 1 , 2017 ) , and ( 2 ) payments based on a percentage of net profits under our previous agreement with psivida ( before july 1 , 2017 ) . additionally , revenue from our international distributors fluctuates depending on the timing of the shipment of iluvien to the distributor and the distributors ' sales of iluvien to their customers . cost of goods sold , excluding depreciation and amortization increased by approximately $ 1.1 million , or 48 % , to approximately $ 3.4 million for the year ended december 31 , 2017 , compared to approximately $ 2.3 million for the year ended december 31 , 2016. the increase was primarily attributable to increases of approximately $ 370,000 in profit share and royalty expenses payable to psivida and $ 310,000 of costs associated with certain parts used to manufacture iluvien that were no longer unusable . 44 gross profit increased by approximately $ 500,000 , or 2 % , to approximately $ 32.5 million for the year ended december 31 , 2017 , compared to approximately $ 32.0 million for the year ended december 31 , 2016. gross margin was 90 % and 93 % for the years ended december 31 , 2017 and 2016 , respectively . the change in gross margin was primarily impacted by profit share expense and royalty expense , in each case , payable to psivida . story_separator_special_tag for the year ended december 31 , 2017 , net cash provided by our financing activities was approximately $ 5.7 million . in the second and third quarters of 2017 , we sold a total of 4,203,015 shares of our common stock through our at-the-market offering , resulting in total gross proceeds of approximately $ 6.0 million , prior to the payment of by $ 180,000 of related commissions , issuance costs and placement agent fees . for the year ended december 31 , 2016 , net cash provided by our financing activities was approximately $ 25.4 million . in august 2016 , we closed an underwritten public offering in which we sold and issued 18,900,000 shares of our common stock at a price to the public of $ 1.40 per share , resulting in gross proceeds of $ 26,460,000. in june and july 2016 , we sold a total of 662,779 shares of our common stock through our at-the-market offering , resulting in total gross proceeds of $ 1.2 million . offsetting these increases were payments of approximately $ 1.3 million relating to common stock issuance costs , $ 1.1 million associated with the amendments of our hercules term loan agreement and $ 230,000 in payments on capital leases . 50 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we evaluate these estimates and judgments , including those described below . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . these estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results and experiences may differ materially from these estimates . we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements . product revenue we recognize revenue from our product sales when persuasive evidence of an arrangement exists , title to product and associated risk of loss have passed to the customer , the price is fixed or determinable , and collection from the customer is reasonably assured . title passes generally upon receipt by the customer . precise information regarding the receipt of product by the customer is not always readily available . in these cases , we estimate the date of receipt based upon shipping policies by geographic location . our shipping policies require delivery within 24 hours of shipment in most instances . taxes that are collected from customers and remitted to governmental authorities , primarily in europe , are not included in revenue . in the u.s. , we sell iluvien to a limited number of pharmaceutical distributors who in turn sell the product downstream to physician offices , pharmacies and hospitals . revenue is recorded net of provisions for estimated rebates , wholesaler chargebacks , distribution related fees , and other deductions . calculating these provisions involves management 's estimates and judgments . we review our estimates of rebates , chargebacks and other applicable provisions each period and record any necessary adjustments in the current period 's net product sales . in the international segment , in countries where we sell direct we recognize revenue at the time of sale to hospitals , pharmacies , and physician practices . revenue is recorded net of provisions for contractual rebates , cash discounts , and other deductions . in countries where we utilize a distributor , we recognize revenue in accordance with the terms of the respective distributor agreements , which may reflect revenue recognition upon the initial purchase of product by the distributor or upon sale to the end user at which time we recognize royalty revenue , or both . from time to time , we may recognize milestone revenue as it is earned . research and development costs research and development expenditures are expensed as incurred , pursuant to asc 730 , research and development . costs to license technology to be used in our research and development that have not reached technological feasibility , defined as regulatory approval for iluvien or any future products or product candidates , and have no alternative future use are expensed when incurred . payments to licensors that relate to the achievement of preapproval development milestones are recorded as research and development expense when incurred . clinical trial prepaid and accrued expenses we record prepaid assets and accrued liabilities related to clinical trials associated with contract research organizations ( cros ) , clinical trial investigators and other vendors based upon amounts paid and the estimated amount of work completed on each clinical trial . the financial terms of agreements vary from vendor to vendor and may result in uneven payment flows . as such , if we have advanced funds exceeding our estimate of the work completed , we record a prepaid asset . if our estimate of the work completed exceeds the amount paid , an accrued liability is recorded . all such costs are charged to research and development expenses based on these estimates . our estimates may or may not match the actual services performed by the organizations as determined by patient enrollment levels and related activities . we monitor patient enrollment levels and related activities to the extent possible through internal reviews , correspondence and discussions with our cros and review of contractual terms . however , if we have incomplete or inaccurate information , we may underestimate or
| cash flows operating activities net cash provided by operating activities decreased by $ 9.4 million in the year ended october 31 , 2012 as compared to the year ended october 31 , 2011. the decrease was primarily related to the decrease in income from continuing operations before income taxes and timing of payments made for vendor invoices and other accrued liabilities , partially offset by the timing of payments made for insurance claims and trade accounts receivable collections received from clients . net cash provided by operating activities increased by $ 10.1 million in the year ended october 31 , 2011 as compared to the year ended october 31 , 2010. the increase was primarily related to the timing of payments made on vendor invoices , partially offset by the timing of collections received from clients ( which includes longer collection periods pertaining to the company 's government business ) . the cash flows from operating activities in the year ended october 31 , 2011 were also impacted by higher cash paid for income taxes ( net of refunds received ) and interest paid on the line of credit , as compared to the year ended october 31 , 2010. investing activities net cash used in investing activities decreased by $ 277.6 million in the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the decrease was primarily related to $ 290.3 million cash paid , net of cash acquired , for the linc acquisition , during the year ended october 31 , 2011 , partially offset by $ 5.5 million cash paid , net of cash acquired , in connection with an acquisition made in fiscal 2012 , a $ 5.9 million increase in fixed asset additions , and the redemption of an auction rate security of $ 5.0 million in the prior year .
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during the year ended december 31 , 2017 , we recognized approximately $ 374,000 of royalty expense . following the signing of the new collaboration agreement , we retained a right to offset $ 15.0 million of future royalty payments . this offset will be reduced by up to $ 5.0 million upon the earlier of the approval of iluvien for posterior uveitis in any eu country or january 1 , 2020 , unless certain conditions under the new collaboration agreement are not met . 42 we commenced operations in june 2003. since our inception we have incurred significant losses . as of december 31 , 2017 , we had accumulated a deficit of $ 399.1 million . we expect to incur substantial losses through the continued commercialization of iluvien as we : continue the commercialization of iluvien in the u.s. and eea and , through our distributors , in the middle east , italy and spain ; continue to seek regulatory approval of iluvien in other jurisdictions and for other indications ; evaluate the use of iluvien for the treatment of other diseases ; and advance the clinical development of any future products or product candidates either currently in our pipeline , or that we may license or acquire in the future . as of december 31 , 2017 , we had approximately $ 24.1 million in cash and cash equivalents . on january 5 , 2018 , we entered into a $ 40.0 million loan and security agreement ( 2018 loan agreement ) with solar capital ltd. ( solar capital ) . under the 2018 loan agreement , we borrowed the entire $ 40.0 million as a term loan that matures on july 1 , 2022. we used the proceeds of the 2018 loan agreement loan to refinance the previous loan agreement with hercules capital , inc. ( hercules term loan agreement ) and to pay closing expenses associated with the 2018 loan agreement . we expect to use the remaining loan proceeds to provide additional working capital for general corporate purposes . ( see note 9 of our notes to consolidated financial statements below . ) our revenues for the fiscal years ended december 31 , 2017 and 2016 were generated from product sales primarily in the u.s. , germany , portugal and the united kingdom . in the u.s. , two large pharmaceutical distributors accounted for 73 % and 75 % of our consolidated revenues for the years ended december 31 , 2017 and 2016 , respectively . these distributors purchase iluvien from us , maintain inventories of iluvien and sell downstream to physician offices , pharmacies and hospitals . internationally , in countries where we sell direct , our customers are hospitals , clinics and pharmacies . we sometimes refer to physician offices , pharmacies , hospitals and clinics as end users . in international countries where we sell to distributors , these distributors maintain inventory levels of iluvien and sell to their customers . 43 results of operations replace_table_token_3_th revenue we began generating revenue from iluvien in 2013 , but do not expect positive cash flow from operations until late 2018 , if at all . in addition to generating revenue from product sales , we intend to seek to generate revenue from other sources such as upfront fees , milestone payments in connection with collaborative or strategic relationships , and royalties resulting from the licensing of iluvien or any future product candidates and other intellectual property . net revenue increased by approximately $ 1.6 million , or 5 % , to approximately $ 35.9 million for the year ended december 31 , 2017 , compared to approximately $ 34.3 million for the year ended december 31 , 2016. the increase was primarily attributable to increased sales volume in the u.s. and international segments , offset by the timing of the ordering of our two large u.s. distributors . cost of goods sold , excluding depreciation and amortization , and gross profit gross profit is affected by costs of goods sold , which includes ( a ) costs of manufactured goods sold and ( b ) payments to psivida in the form of ( 1 ) royalty payments under the new collaboration agreement ( after july 1 , 2017 ) , and ( 2 ) payments based on a percentage of net profits under our previous agreement with psivida ( before july 1 , 2017 ) . additionally , revenue from our international distributors fluctuates depending on the timing of the shipment of iluvien to the distributor and the distributors ' sales of iluvien to their customers . cost of goods sold , excluding depreciation and amortization increased by approximately $ 1.1 million , or 48 % , to approximately $ 3.4 million for the year ended december 31 , 2017 , compared to approximately $ 2.3 million for the year ended december 31 , 2016. the increase was primarily attributable to increases of approximately $ 370,000 in profit share and royalty expenses payable to psivida and $ 310,000 of costs associated with certain parts used to manufacture iluvien that were no longer unusable . 44 gross profit increased by approximately $ 500,000 , or 2 % , to approximately $ 32.5 million for the year ended december 31 , 2017 , compared to approximately $ 32.0 million for the year ended december 31 , 2016. gross margin was 90 % and 93 % for the years ended december 31 , 2017 and 2016 , respectively . the change in gross margin was primarily impacted by profit share expense and royalty expense , in each case , payable to psivida . story_separator_special_tag for the year ended december 31 , 2017 , net cash provided by our financing activities was approximately $ 5.7 million . in the second and third quarters of 2017 , we sold a total of 4,203,015 shares of our common stock through our at-the-market offering , resulting in total gross proceeds of approximately $ 6.0 million , prior to the payment of by $ 180,000 of related commissions , issuance costs and placement agent fees . for the year ended december 31 , 2016 , net cash provided by our financing activities was approximately $ 25.4 million . in august 2016 , we closed an underwritten public offering in which we sold and issued 18,900,000 shares of our common stock at a price to the public of $ 1.40 per share , resulting in gross proceeds of $ 26,460,000. in june and july 2016 , we sold a total of 662,779 shares of our common stock through our at-the-market offering , resulting in total gross proceeds of $ 1.2 million . offsetting these increases were payments of approximately $ 1.3 million relating to common stock issuance costs , $ 1.1 million associated with the amendments of our hercules term loan agreement and $ 230,000 in payments on capital leases . 50 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we evaluate these estimates and judgments , including those described below . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . these estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results and experiences may differ materially from these estimates . we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements . product revenue we recognize revenue from our product sales when persuasive evidence of an arrangement exists , title to product and associated risk of loss have passed to the customer , the price is fixed or determinable , and collection from the customer is reasonably assured . title passes generally upon receipt by the customer . precise information regarding the receipt of product by the customer is not always readily available . in these cases , we estimate the date of receipt based upon shipping policies by geographic location . our shipping policies require delivery within 24 hours of shipment in most instances . taxes that are collected from customers and remitted to governmental authorities , primarily in europe , are not included in revenue . in the u.s. , we sell iluvien to a limited number of pharmaceutical distributors who in turn sell the product downstream to physician offices , pharmacies and hospitals . revenue is recorded net of provisions for estimated rebates , wholesaler chargebacks , distribution related fees , and other deductions . calculating these provisions involves management 's estimates and judgments . we review our estimates of rebates , chargebacks and other applicable provisions each period and record any necessary adjustments in the current period 's net product sales . in the international segment , in countries where we sell direct we recognize revenue at the time of sale to hospitals , pharmacies , and physician practices . revenue is recorded net of provisions for contractual rebates , cash discounts , and other deductions . in countries where we utilize a distributor , we recognize revenue in accordance with the terms of the respective distributor agreements , which may reflect revenue recognition upon the initial purchase of product by the distributor or upon sale to the end user at which time we recognize royalty revenue , or both . from time to time , we may recognize milestone revenue as it is earned . research and development costs research and development expenditures are expensed as incurred , pursuant to asc 730 , research and development . costs to license technology to be used in our research and development that have not reached technological feasibility , defined as regulatory approval for iluvien or any future products or product candidates , and have no alternative future use are expensed when incurred . payments to licensors that relate to the achievement of preapproval development milestones are recorded as research and development expense when incurred . clinical trial prepaid and accrued expenses we record prepaid assets and accrued liabilities related to clinical trials associated with contract research organizations ( cros ) , clinical trial investigators and other vendors based upon amounts paid and the estimated amount of work completed on each clinical trial . the financial terms of agreements vary from vendor to vendor and may result in uneven payment flows . as such , if we have advanced funds exceeding our estimate of the work completed , we record a prepaid asset . if our estimate of the work completed exceeds the amount paid , an accrued liability is recorded . all such costs are charged to research and development expenses based on these estimates . our estimates may or may not match the actual services performed by the organizations as determined by patient enrollment levels and related activities . we monitor patient enrollment levels and related activities to the extent possible through internal reviews , correspondence and discussions with our cros and review of contractual terms . however , if we have incomplete or inaccurate information , we may underestimate or
| liquidity and capital resources since inception , we have incurred recurring losses , negative cash flow from operations and have accumulated a deficit of $ 399.1 million through december 31 , 2017. we have funded our operations through the public and private placement of common stock , convertible preferred stock , warrants , the sale of certain assets of the non-prescription business in which we were previously engaged and certain debt facilities . in september 2014 , we entered into a sales agreement with cowen and company , llc ( cowen ) to offer shares of our common stock from time to time through cowen , as our sales agent for the offer and sale of the shares up to an aggregate offering price of $ 35.0 million . we paid a commission equal to 3 % of the gross proceeds from the sales of shares of our common stock under the sales agreement . in 2015 , we sold a total of 268,978 shares of our common stock at a weighted average price of $ 3.07 per share through our at-the-market offering , for total gross proceeds of approximately $ 825,000 , reduced by approximately $ 100,000 of related commissions , issuance costs and placement agent fees . we used the net proceeds from this offering for general corporate purposes and working capital . in 2016 , we sold a total of 662,779 shares of our common stock at a weighted average price of $ 1.83 per share through our at-the-market offering , for total gross proceeds of approximately $ 1.2 million , reduced by approximately $ 60,000 of related commissions , issuance costs and placement agent fees . in 2017 , we sold 4,203,015 shares of our common stock at a weighted average price of $ 1.43 per share through our at-the-market offering , for total gross proceeds of approximately $ 6.0 million , reduced by approximately $ 180,000 of related commissions , issuance costs and placement agent fees . we used the net proceeds from this offering for general corporate purposes and working capital .
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however , we continue to evaluate other mineral properties for acquisition , and we hold a portfolio of mineral exploration properties and assets for future sale , joint venture or to create a royalty up to the development stage of the project ( development activities include , among other things , completion of a feasibility study for the identification of proven and probable reserves , as well as permitting and preparing a deposit for mining ) . at that point , or sometime prior to that point , we would likely attempt to sell a given mineral property , pursue its development either on our own , or through a joint venture with a partner that has expertise in mining operations , or obtain a royalty from a third party that continues to advance the property . although our mineral properties may be developed in the future by us , through a joint venture or by a third party , we have never developed a mineral property . in addition to focusing on its mineral exploration properties and the evaluation of mineral properties for acquisition , solitario also evaluates potential strategic corporate transactions as a means to acquire and interest in new precious and base metal properties and assets with exploration potential as well as other potential corporate transactions and combinations determined to be favorable to solitario . our geographic focus for the evaluation of potential mineral property assets is in north and south america ; however , we have conducted property evaluations for potential acquisition in other parts of the world . at december 31 , 2019 , we consider our carried interest in our florida canyon project in peru and our interest in the lik project in alaska to be our core mineral property assets . in addition , at december 31 , 2019 , we have one exploration property in peru . we are conducting independent exploration activities in peru and through joint ventures operated by our partners in peru and the united states . we conduct potential acquisition evaluations in other countries of both south and north america . as of december 31 , 2019 , we have significant balances of cash and short-term investments that we anticipate using , in part , to fund planned 2020 exploration , to further the exploration of our lik project , conduct exploration on the la promesa project in peru , and to potentially acquire additional mineral property assets . the fluctuations in commodity prices of base and precious metals has contributed to a challenging environment for mineral exploration and development , which has created opportunities as well as challenges for the potential acquisition of advanced mineral exploration projects or other related assets at potentially attractive terms . in analyzing our activities , the most significant aspect relates to results of our exploration and potential development activities and those of our joint venture partners on a property-by-property basis . when our exploration or potential development activities , including drilling , sampling and geologic testing , indicate a project may not be economic or contain sufficient geologic or economic potential we may impair or completely write-off the property . another significant factor in the success or failure of our activities is the price of commodities . for example , when the price of zinc is down , the value of zinc-bearing mineral properties decreases ; however , when the price of zinc is up it may become more difficult and expensive to locate and acquire new zinc-bearing mineral properties with potential to have economic deposits . 28 the potential sale , joint venture or development of our mineral properties will occur , if at all , on an infrequent basis . historically , we have recorded revenues and met our need for capital in the past through ( i ) the sale of properties and assets ; ( ii ) joint venture payments , including delay rental payments ; ( iii ) a royalty sale on our former mt . hamilton property ; ( iv ) the sale of our shares of vendetta and kinross common stock ; ( v ) long-term debt secured by our mineral property ; ( vi ) short-term margin borrowing ; and ( vii ) issuances of common stock . during 2019 we recorded mineral property income of $ 408,000 from the royalty sale , discussed above . during 2018 we recorded mineral property income from the sale of our yanacocha royalty of $ 502,000. in 2015 we recorded a gain on the sale of our interest in mount hamilton llc of $ 12,309,000. during june 2012 , we sold a royalty interest in our mt . hamilton project to sandstorm gold ltd. for $ 10,000,000. previous to the sale of our interest in mt . hamilton llc , our last significant cash proceeds from a property or asset sale were recorded in 2000 upon the sale of our former yanacocha property for $ 6,000,000. proceeds from the sale or joint venture of properties , although significant when they occur , have not been a consistent annual source of cash and would occur in the future , if at all , on an infrequent basis . we have reduced our exposure to the costs of our exploration activities in the past through the use of joint ventures . although we anticipate the use of joint venture funding for some of our exploration activities will continue for the foreseeable future , we can provide no assurance that these or other sources of capital will be available in sufficient amounts to meet our needs , if at all . ( c ) . story_separator_special_tag our net 2019 mineral and surface property rental and option payments , included in exploration expense , were $ 13,000. our 2020 total exploration property rentals and option payments for properties we own , have under joint venture , or operate are estimated to be approximately $ 859,000. assuming that our joint ventures continue in their current status and that we do not appreciably change our property positions on existing properties , we estimate that our joint venture partners will pay on our behalf or reimburse us approximately $ 816,000 of these annual payments . these obligations are detailed below under “ contractual obligations . ” in addition , we may be required to make further payments in the future if we elect to exercise our options under those agreements or if we enter into new agreements . 32 environmental compliance we are subject to various federal , state and local environmental laws and regulations in the countries where we operate . we are required to obtain permits in advance of initiating certain of our exploration activities , to monitor and report on certain activities to appropriate authorities , and to perform remediation of environmental disturbance as a result of certain of our activities . historically , the nature of our activities of review , acquisition and exploration of properties prior to the establishment of reserves , which may include mapping , sampling , geochemistry and geophysical studies , as well as some limited exploration drilling , has not resulted in significant environmental impacts in the past . we have historically carried on our required environmental remediation expenditures and activities , if any , concurrently with our exploration activities and expenditures . the expenditures to comply with our environmental obligations are included in our exploration expenditures in the statement of operations and have not been material to our capital or exploration expenditures and have not had a material effect on our financial position . for the years ended december 31 , 2019 and 2018 , we have not capitalized any costs related to environmental control facilities . we do not anticipate our exploration activities will result in any material new or additional environmental expenditures or liabilities in the near future . contractual obligations the following table provides an analysis of our contractual obligations : replace_table_token_11_th ( 1 ) lease obligation on our wheat ridge colorado office . ( 3 ) mineral property payments under lease and property claim and concession payments for the next year , net of joint venture payments . ( g ) . exploration joint ventures , royalty and other properties the following discussion relates to an analysis of our anticipated property exploration plans as of december 31 , 2019. please also see note 2 , “ mineral properties , ” to the consolidated financial statements in item 8 , “ financial statements and supplementary data , ” and our discussion of our properties under item 2 , “ properties ” of this annual report on form 10-k for a more complete discussion of all of our mineral properties . florida canyon the florida canyon project is an advanced-stage high-grade zinc project in peru . based on extensive exploration and development work conducted to date , we believe the property has potential to be developed into a mine over the next several years . the project is held in a joint venture between nexa ( 61 % ) and solitario ( 39 % ) . solitario and nexa jointly completed a pea in 2017 that incorporated a variety of nexa-generated prefeasibility studies into the analysis . the pea evaluation included resource estimation , mining and processing recovery estimates , a preliminary mining and processing plan , infrastructure layout , environmental considerations and an economic analysis based on certain base case parameters . the pea envisioned an underground mining operation with a 2,500 tonne per day floatation mill for processing , resulting in a 12.5-year mine life . concentrates would be trucked to nexa 's cajamarquilla zinc smelter facility in lima , peru . the terrain at florida canyon is steep and previous project access supporting surface and underground work programs was conducted by helicopter . the lack of road access restricted the scope of field activities to further advance the project . during 2019 limited work was undertaken on road access to the project , and nexa expects to continue to work on completing the road access during 2020. during 2019 , nexa completed the drilling program and several significant drill intercepts were encountered . solitario reported the results of the drill intercepts during 2019. nexa is evaluating the results of the drilling program and solitario anticipates nexa will continue the exploration of florida canyon during 2020. should nexa complete the road , heavy equipment will be able to enter the project area and allow feasibility related activities to proceed more efficiently . important future activities that may be facilitated by the completion of the road are the construction of an underground tunnel into the karen-milagros high-grade zinc zone , detailed underground resource/reserve definition drilling , surface drilling designed to increase the project resources and additional feasibility-related studies . solitario 's payments of $ 1,580,000 related to the drilling program are in the form of an advance on solitario 's commitment to fund 30 % of any future development of florida canyon under the original joint venture agreement between solitario and nexa . accordingly , in the event florida canyon is developed , which can not be assured at this time , the funds paid to nexa related to the drilling program , will reduce the amount of solitario 's obligation to fund 30 % of future development costs , and / or repay any loans from nexa for future development costs at florida canyon . 33 lik project the lik project is an advanced-staged high-grade zinc project . the project is held in a joint venture between teck ( 50 % ) and solitario ( 50
| liquidity and capital resources since inception , we have incurred recurring losses , negative cash flow from operations and have accumulated a deficit of $ 399.1 million through december 31 , 2017. we have funded our operations through the public and private placement of common stock , convertible preferred stock , warrants , the sale of certain assets of the non-prescription business in which we were previously engaged and certain debt facilities . in september 2014 , we entered into a sales agreement with cowen and company , llc ( cowen ) to offer shares of our common stock from time to time through cowen , as our sales agent for the offer and sale of the shares up to an aggregate offering price of $ 35.0 million . we paid a commission equal to 3 % of the gross proceeds from the sales of shares of our common stock under the sales agreement . in 2015 , we sold a total of 268,978 shares of our common stock at a weighted average price of $ 3.07 per share through our at-the-market offering , for total gross proceeds of approximately $ 825,000 , reduced by approximately $ 100,000 of related commissions , issuance costs and placement agent fees . we used the net proceeds from this offering for general corporate purposes and working capital . in 2016 , we sold a total of 662,779 shares of our common stock at a weighted average price of $ 1.83 per share through our at-the-market offering , for total gross proceeds of approximately $ 1.2 million , reduced by approximately $ 60,000 of related commissions , issuance costs and placement agent fees . in 2017 , we sold 4,203,015 shares of our common stock at a weighted average price of $ 1.43 per share through our at-the-market offering , for total gross proceeds of approximately $ 6.0 million , reduced by approximately $ 180,000 of related commissions , issuance costs and placement agent fees . we used the net proceeds from this offering for general corporate purposes and working capital .
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however , we continue to evaluate other mineral properties for acquisition , and we hold a portfolio of mineral exploration properties and assets for future sale , joint venture or to create a royalty up to the development stage of the project ( development activities include , among other things , completion of a feasibility study for the identification of proven and probable reserves , as well as permitting and preparing a deposit for mining ) . at that point , or sometime prior to that point , we would likely attempt to sell a given mineral property , pursue its development either on our own , or through a joint venture with a partner that has expertise in mining operations , or obtain a royalty from a third party that continues to advance the property . although our mineral properties may be developed in the future by us , through a joint venture or by a third party , we have never developed a mineral property . in addition to focusing on its mineral exploration properties and the evaluation of mineral properties for acquisition , solitario also evaluates potential strategic corporate transactions as a means to acquire and interest in new precious and base metal properties and assets with exploration potential as well as other potential corporate transactions and combinations determined to be favorable to solitario . our geographic focus for the evaluation of potential mineral property assets is in north and south america ; however , we have conducted property evaluations for potential acquisition in other parts of the world . at december 31 , 2019 , we consider our carried interest in our florida canyon project in peru and our interest in the lik project in alaska to be our core mineral property assets . in addition , at december 31 , 2019 , we have one exploration property in peru . we are conducting independent exploration activities in peru and through joint ventures operated by our partners in peru and the united states . we conduct potential acquisition evaluations in other countries of both south and north america . as of december 31 , 2019 , we have significant balances of cash and short-term investments that we anticipate using , in part , to fund planned 2020 exploration , to further the exploration of our lik project , conduct exploration on the la promesa project in peru , and to potentially acquire additional mineral property assets . the fluctuations in commodity prices of base and precious metals has contributed to a challenging environment for mineral exploration and development , which has created opportunities as well as challenges for the potential acquisition of advanced mineral exploration projects or other related assets at potentially attractive terms . in analyzing our activities , the most significant aspect relates to results of our exploration and potential development activities and those of our joint venture partners on a property-by-property basis . when our exploration or potential development activities , including drilling , sampling and geologic testing , indicate a project may not be economic or contain sufficient geologic or economic potential we may impair or completely write-off the property . another significant factor in the success or failure of our activities is the price of commodities . for example , when the price of zinc is down , the value of zinc-bearing mineral properties decreases ; however , when the price of zinc is up it may become more difficult and expensive to locate and acquire new zinc-bearing mineral properties with potential to have economic deposits . 28 the potential sale , joint venture or development of our mineral properties will occur , if at all , on an infrequent basis . historically , we have recorded revenues and met our need for capital in the past through ( i ) the sale of properties and assets ; ( ii ) joint venture payments , including delay rental payments ; ( iii ) a royalty sale on our former mt . hamilton property ; ( iv ) the sale of our shares of vendetta and kinross common stock ; ( v ) long-term debt secured by our mineral property ; ( vi ) short-term margin borrowing ; and ( vii ) issuances of common stock . during 2019 we recorded mineral property income of $ 408,000 from the royalty sale , discussed above . during 2018 we recorded mineral property income from the sale of our yanacocha royalty of $ 502,000. in 2015 we recorded a gain on the sale of our interest in mount hamilton llc of $ 12,309,000. during june 2012 , we sold a royalty interest in our mt . hamilton project to sandstorm gold ltd. for $ 10,000,000. previous to the sale of our interest in mt . hamilton llc , our last significant cash proceeds from a property or asset sale were recorded in 2000 upon the sale of our former yanacocha property for $ 6,000,000. proceeds from the sale or joint venture of properties , although significant when they occur , have not been a consistent annual source of cash and would occur in the future , if at all , on an infrequent basis . we have reduced our exposure to the costs of our exploration activities in the past through the use of joint ventures . although we anticipate the use of joint venture funding for some of our exploration activities will continue for the foreseeable future , we can provide no assurance that these or other sources of capital will be available in sufficient amounts to meet our needs , if at all . ( c ) . story_separator_special_tag our net 2019 mineral and surface property rental and option payments , included in exploration expense , were $ 13,000. our 2020 total exploration property rentals and option payments for properties we own , have under joint venture , or operate are estimated to be approximately $ 859,000. assuming that our joint ventures continue in their current status and that we do not appreciably change our property positions on existing properties , we estimate that our joint venture partners will pay on our behalf or reimburse us approximately $ 816,000 of these annual payments . these obligations are detailed below under “ contractual obligations . ” in addition , we may be required to make further payments in the future if we elect to exercise our options under those agreements or if we enter into new agreements . 32 environmental compliance we are subject to various federal , state and local environmental laws and regulations in the countries where we operate . we are required to obtain permits in advance of initiating certain of our exploration activities , to monitor and report on certain activities to appropriate authorities , and to perform remediation of environmental disturbance as a result of certain of our activities . historically , the nature of our activities of review , acquisition and exploration of properties prior to the establishment of reserves , which may include mapping , sampling , geochemistry and geophysical studies , as well as some limited exploration drilling , has not resulted in significant environmental impacts in the past . we have historically carried on our required environmental remediation expenditures and activities , if any , concurrently with our exploration activities and expenditures . the expenditures to comply with our environmental obligations are included in our exploration expenditures in the statement of operations and have not been material to our capital or exploration expenditures and have not had a material effect on our financial position . for the years ended december 31 , 2019 and 2018 , we have not capitalized any costs related to environmental control facilities . we do not anticipate our exploration activities will result in any material new or additional environmental expenditures or liabilities in the near future . contractual obligations the following table provides an analysis of our contractual obligations : replace_table_token_11_th ( 1 ) lease obligation on our wheat ridge colorado office . ( 3 ) mineral property payments under lease and property claim and concession payments for the next year , net of joint venture payments . ( g ) . exploration joint ventures , royalty and other properties the following discussion relates to an analysis of our anticipated property exploration plans as of december 31 , 2019. please also see note 2 , “ mineral properties , ” to the consolidated financial statements in item 8 , “ financial statements and supplementary data , ” and our discussion of our properties under item 2 , “ properties ” of this annual report on form 10-k for a more complete discussion of all of our mineral properties . florida canyon the florida canyon project is an advanced-stage high-grade zinc project in peru . based on extensive exploration and development work conducted to date , we believe the property has potential to be developed into a mine over the next several years . the project is held in a joint venture between nexa ( 61 % ) and solitario ( 39 % ) . solitario and nexa jointly completed a pea in 2017 that incorporated a variety of nexa-generated prefeasibility studies into the analysis . the pea evaluation included resource estimation , mining and processing recovery estimates , a preliminary mining and processing plan , infrastructure layout , environmental considerations and an economic analysis based on certain base case parameters . the pea envisioned an underground mining operation with a 2,500 tonne per day floatation mill for processing , resulting in a 12.5-year mine life . concentrates would be trucked to nexa 's cajamarquilla zinc smelter facility in lima , peru . the terrain at florida canyon is steep and previous project access supporting surface and underground work programs was conducted by helicopter . the lack of road access restricted the scope of field activities to further advance the project . during 2019 limited work was undertaken on road access to the project , and nexa expects to continue to work on completing the road access during 2020. during 2019 , nexa completed the drilling program and several significant drill intercepts were encountered . solitario reported the results of the drill intercepts during 2019. nexa is evaluating the results of the drilling program and solitario anticipates nexa will continue the exploration of florida canyon during 2020. should nexa complete the road , heavy equipment will be able to enter the project area and allow feasibility related activities to proceed more efficiently . important future activities that may be facilitated by the completion of the road are the construction of an underground tunnel into the karen-milagros high-grade zinc zone , detailed underground resource/reserve definition drilling , surface drilling designed to increase the project resources and additional feasibility-related studies . solitario 's payments of $ 1,580,000 related to the drilling program are in the form of an advance on solitario 's commitment to fund 30 % of any future development of florida canyon under the original joint venture agreement between solitario and nexa . accordingly , in the event florida canyon is developed , which can not be assured at this time , the funds paid to nexa related to the drilling program , will reduce the amount of solitario 's obligation to fund 30 % of future development costs , and / or repay any loans from nexa for future development costs at florida canyon . 33 lik project the lik project is an advanced-staged high-grade zinc project . the project is held in a joint venture between teck ( 50 % ) and solitario ( 50
| cash as of december 31 , 2019 , we had $ 574,000 in cash . we intend to utilize a portion of this cash and a portion of our short-term investments , discussed below , to fund our ordinary overhead , operational costs , exploration activities and the potential acquisition of mineral properties and other assets over the next several years . we may also use a portion of these assets to repurchase shares of our common stock , pursuant to the terms of a stock buy-back program discussed below . short-term investments as of december 31 , 2019 , we have $ 6,829,000 of our current assets in united states treasury securities ( “ usts ” ) with maturities of 30 days to 17 months . the usts are recorded at their fair value , based upon quoted market prices . the usts are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset . we anticipate we will roll over that portion of our usts not used for operating costs or mineral property acquisitions as they mature during 2020. marketable equity securities our marketable equity securities are classified as available-for-sale and are carried at fair value , which is based upon market quotes of the underlying securities . we owned 100,000 shares of kinross common stock at december 31 , 2019. the kinross shares are recorded at their fair value of $ 474,000 at december 31 , 2019. as of december 31 , 2019 , we own 14,350,000 shares of vendetta common stock recorded at their fair market value of $ 556,000 based upon quoted market prices .
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timber revenue in 2015 was earned under a 2014 stumpage agreement which expires in june , 2016 internal maintenance programs for age class timber and storm protection measures . surface income decreased by $ 212,319 from 2014. surface income includes income from farm leases , right of way grants , hunting leases and other surface leases . this decrease was primarily due to two right of way agreements executed during 2014 which are not recurring revenue . outlook for fiscal year 2016 the company continues to actively search for lands that meet our criteria of timberland with mineral potential . during 2015 , the company purchased 200 acres of timberland and reviewed over 6,000 acres for potential acquisition . with the significant drop in oil and gas prices , the company anticipates that finding acceptable land at reasonable fair values during 2016 is likely . the company may consider land purchases outside of southwest louisiana . 6 the average price per bbl and mcf has dropped significantly during 2015 and the prices in the last quarter of 2015 were the lowest for the year . the company expects oil and gas revenues to continue to be depressed during 2016. due to these low average prices , the company anticipates producers will decrease their exploration and production expenditures in 2016. the company anticipates 2016 oil and gas revenues to be equal to or less than 2015 revenues . the company is actively marketing it timber and believes that it will be successful in executing stumpage agreement ( s ) during 2016. the company anticipates higher timber revenues in 2016. the company believes the potential for increased surface revenue in 2016 is likely due to the economic activity in southwest louisiana . however , at this time the company is not able to quantify the increased revenue potential . story_separator_special_tag commission 's ( “ coso ” ) internal control - integrated framework ( 2013 ) in assessing the effectiveness of the company 's icfr . management shall determine icfr ineffective if a material weakness exists in the controls . management has assessed the company 's icfr as effective as of december 31 , 2015. this annual report does not include an attestation report of the company 's registered public accounting firm regarding internal control over financial reporting . management 's report was not subject to attestation by the company 's registered public accounting firm pursuant to rules of the securities and exchange commission that permit the company to provide only management 's report in this annual report . during the quarter ending december 31 , 2015 , the company 's management followed the coso internal control - integrated framework ( 2013 ) when assessing the icfr . during the quarter ending december 31 , 2015 , there have been no changes in the company 's internal control over financial reporting that has materially affected or is reasonably likely to affect , the company 's internal control over financial reporting . item 9b . other information none . 9 part iii item 10. directors , executive officers , promoters and control persons ; compliance with section 16 ( a ) of the exchange act the information required by item 10 as to directors , nominees for directors , reports under section 16 of the securities exchange act of 1934 , the registrant 's audit committee and an audit committee financial expert is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . executive officers of registrant are as follows : name age position with registrant brian r. jones 55 president , treasurer and director charles d. viccellio 82 secretary and director the occupations of such executive officers during the last five years and other principal affiliations are : name occupations brian r. jones president since april 25 , 2013 , treasurer and director since december 1 , 2006 ; managing member of brian r. jones cpa , llc . charles d. viccellio secretary since 1997 and director since 1996. retired attorney from the law firm of stockwell , sievert , viccellio , clements & shaddock , llp . there are no family relationships between any of our directors , except mrs. leach and mrs. werner are mother and daughter , and executive officers or any arrangement or understanding between any of our executive officers and any other person pursuant to which any executive officer was appointed to his office . the company has adopted a code of ethics that applies to officers , directors and employees . a copy of the code of ethics will be provided by writing the president at p.o . box 1864 , lake charles , louisiana 70602 . 10 item 11. executive compensation the information required by item 11 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 12. security ownership of certain beneficial owners and management and related stockholder matters the information required by item 12 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . item 13. certain relationships and related transactions the information required by item 13 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 14. principal accountants fees and services the information required by item 14 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . 11 part iv item 15. exhibits story_separator_special_tag timber revenue in 2015 was earned under a 2014 stumpage agreement which expires in june , 2016 internal maintenance programs for age class timber and storm protection measures . surface income decreased by $ 212,319 from 2014. surface income includes income from farm leases , right of way grants , hunting leases and other surface leases . this decrease was primarily due to two right of way agreements executed during 2014 which are not recurring revenue . outlook for fiscal year 2016 the company continues to actively search for lands that meet our criteria of timberland with mineral potential . during 2015 , the company purchased 200 acres of timberland and reviewed over 6,000 acres for potential acquisition . with the significant drop in oil and gas prices , the company anticipates that finding acceptable land at reasonable fair values during 2016 is likely . the company may consider land purchases outside of southwest louisiana . 6 the average price per bbl and mcf has dropped significantly during 2015 and the prices in the last quarter of 2015 were the lowest for the year . the company expects oil and gas revenues to continue to be depressed during 2016. due to these low average prices , the company anticipates producers will decrease their exploration and production expenditures in 2016. the company anticipates 2016 oil and gas revenues to be equal to or less than 2015 revenues . the company is actively marketing it timber and believes that it will be successful in executing stumpage agreement ( s ) during 2016. the company anticipates higher timber revenues in 2016. the company believes the potential for increased surface revenue in 2016 is likely due to the economic activity in southwest louisiana . however , at this time the company is not able to quantify the increased revenue potential . story_separator_special_tag commission 's ( “ coso ” ) internal control - integrated framework ( 2013 ) in assessing the effectiveness of the company 's icfr . management shall determine icfr ineffective if a material weakness exists in the controls . management has assessed the company 's icfr as effective as of december 31 , 2015. this annual report does not include an attestation report of the company 's registered public accounting firm regarding internal control over financial reporting . management 's report was not subject to attestation by the company 's registered public accounting firm pursuant to rules of the securities and exchange commission that permit the company to provide only management 's report in this annual report . during the quarter ending december 31 , 2015 , the company 's management followed the coso internal control - integrated framework ( 2013 ) when assessing the icfr . during the quarter ending december 31 , 2015 , there have been no changes in the company 's internal control over financial reporting that has materially affected or is reasonably likely to affect , the company 's internal control over financial reporting . item 9b . other information none . 9 part iii item 10. directors , executive officers , promoters and control persons ; compliance with section 16 ( a ) of the exchange act the information required by item 10 as to directors , nominees for directors , reports under section 16 of the securities exchange act of 1934 , the registrant 's audit committee and an audit committee financial expert is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . executive officers of registrant are as follows : name age position with registrant brian r. jones 55 president , treasurer and director charles d. viccellio 82 secretary and director the occupations of such executive officers during the last five years and other principal affiliations are : name occupations brian r. jones president since april 25 , 2013 , treasurer and director since december 1 , 2006 ; managing member of brian r. jones cpa , llc . charles d. viccellio secretary since 1997 and director since 1996. retired attorney from the law firm of stockwell , sievert , viccellio , clements & shaddock , llp . there are no family relationships between any of our directors , except mrs. leach and mrs. werner are mother and daughter , and executive officers or any arrangement or understanding between any of our executive officers and any other person pursuant to which any executive officer was appointed to his office . the company has adopted a code of ethics that applies to officers , directors and employees . a copy of the code of ethics will be provided by writing the president at p.o . box 1864 , lake charles , louisiana 70602 . 10 item 11. executive compensation the information required by item 11 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 12. security ownership of certain beneficial owners and management and related stockholder matters the information required by item 12 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . item 13. certain relationships and related transactions the information required by item 13 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 14. principal accountants fees and services the information required by item 14 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . 11 part iv item 15. exhibits
| cash as of december 31 , 2019 , we had $ 574,000 in cash . we intend to utilize a portion of this cash and a portion of our short-term investments , discussed below , to fund our ordinary overhead , operational costs , exploration activities and the potential acquisition of mineral properties and other assets over the next several years . we may also use a portion of these assets to repurchase shares of our common stock , pursuant to the terms of a stock buy-back program discussed below . short-term investments as of december 31 , 2019 , we have $ 6,829,000 of our current assets in united states treasury securities ( “ usts ” ) with maturities of 30 days to 17 months . the usts are recorded at their fair value , based upon quoted market prices . the usts are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset . we anticipate we will roll over that portion of our usts not used for operating costs or mineral property acquisitions as they mature during 2020. marketable equity securities our marketable equity securities are classified as available-for-sale and are carried at fair value , which is based upon market quotes of the underlying securities . we owned 100,000 shares of kinross common stock at december 31 , 2019. the kinross shares are recorded at their fair value of $ 474,000 at december 31 , 2019. as of december 31 , 2019 , we own 14,350,000 shares of vendetta common stock recorded at their fair market value of $ 556,000 based upon quoted market prices .
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timber revenue in 2015 was earned under a 2014 stumpage agreement which expires in june , 2016 internal maintenance programs for age class timber and storm protection measures . surface income decreased by $ 212,319 from 2014. surface income includes income from farm leases , right of way grants , hunting leases and other surface leases . this decrease was primarily due to two right of way agreements executed during 2014 which are not recurring revenue . outlook for fiscal year 2016 the company continues to actively search for lands that meet our criteria of timberland with mineral potential . during 2015 , the company purchased 200 acres of timberland and reviewed over 6,000 acres for potential acquisition . with the significant drop in oil and gas prices , the company anticipates that finding acceptable land at reasonable fair values during 2016 is likely . the company may consider land purchases outside of southwest louisiana . 6 the average price per bbl and mcf has dropped significantly during 2015 and the prices in the last quarter of 2015 were the lowest for the year . the company expects oil and gas revenues to continue to be depressed during 2016. due to these low average prices , the company anticipates producers will decrease their exploration and production expenditures in 2016. the company anticipates 2016 oil and gas revenues to be equal to or less than 2015 revenues . the company is actively marketing it timber and believes that it will be successful in executing stumpage agreement ( s ) during 2016. the company anticipates higher timber revenues in 2016. the company believes the potential for increased surface revenue in 2016 is likely due to the economic activity in southwest louisiana . however , at this time the company is not able to quantify the increased revenue potential . story_separator_special_tag commission 's ( “ coso ” ) internal control - integrated framework ( 2013 ) in assessing the effectiveness of the company 's icfr . management shall determine icfr ineffective if a material weakness exists in the controls . management has assessed the company 's icfr as effective as of december 31 , 2015. this annual report does not include an attestation report of the company 's registered public accounting firm regarding internal control over financial reporting . management 's report was not subject to attestation by the company 's registered public accounting firm pursuant to rules of the securities and exchange commission that permit the company to provide only management 's report in this annual report . during the quarter ending december 31 , 2015 , the company 's management followed the coso internal control - integrated framework ( 2013 ) when assessing the icfr . during the quarter ending december 31 , 2015 , there have been no changes in the company 's internal control over financial reporting that has materially affected or is reasonably likely to affect , the company 's internal control over financial reporting . item 9b . other information none . 9 part iii item 10. directors , executive officers , promoters and control persons ; compliance with section 16 ( a ) of the exchange act the information required by item 10 as to directors , nominees for directors , reports under section 16 of the securities exchange act of 1934 , the registrant 's audit committee and an audit committee financial expert is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . executive officers of registrant are as follows : name age position with registrant brian r. jones 55 president , treasurer and director charles d. viccellio 82 secretary and director the occupations of such executive officers during the last five years and other principal affiliations are : name occupations brian r. jones president since april 25 , 2013 , treasurer and director since december 1 , 2006 ; managing member of brian r. jones cpa , llc . charles d. viccellio secretary since 1997 and director since 1996. retired attorney from the law firm of stockwell , sievert , viccellio , clements & shaddock , llp . there are no family relationships between any of our directors , except mrs. leach and mrs. werner are mother and daughter , and executive officers or any arrangement or understanding between any of our executive officers and any other person pursuant to which any executive officer was appointed to his office . the company has adopted a code of ethics that applies to officers , directors and employees . a copy of the code of ethics will be provided by writing the president at p.o . box 1864 , lake charles , louisiana 70602 . 10 item 11. executive compensation the information required by item 11 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 12. security ownership of certain beneficial owners and management and related stockholder matters the information required by item 12 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . item 13. certain relationships and related transactions the information required by item 13 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 14. principal accountants fees and services the information required by item 14 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . 11 part iv item 15. exhibits story_separator_special_tag timber revenue in 2015 was earned under a 2014 stumpage agreement which expires in june , 2016 internal maintenance programs for age class timber and storm protection measures . surface income decreased by $ 212,319 from 2014. surface income includes income from farm leases , right of way grants , hunting leases and other surface leases . this decrease was primarily due to two right of way agreements executed during 2014 which are not recurring revenue . outlook for fiscal year 2016 the company continues to actively search for lands that meet our criteria of timberland with mineral potential . during 2015 , the company purchased 200 acres of timberland and reviewed over 6,000 acres for potential acquisition . with the significant drop in oil and gas prices , the company anticipates that finding acceptable land at reasonable fair values during 2016 is likely . the company may consider land purchases outside of southwest louisiana . 6 the average price per bbl and mcf has dropped significantly during 2015 and the prices in the last quarter of 2015 were the lowest for the year . the company expects oil and gas revenues to continue to be depressed during 2016. due to these low average prices , the company anticipates producers will decrease their exploration and production expenditures in 2016. the company anticipates 2016 oil and gas revenues to be equal to or less than 2015 revenues . the company is actively marketing it timber and believes that it will be successful in executing stumpage agreement ( s ) during 2016. the company anticipates higher timber revenues in 2016. the company believes the potential for increased surface revenue in 2016 is likely due to the economic activity in southwest louisiana . however , at this time the company is not able to quantify the increased revenue potential . story_separator_special_tag commission 's ( “ coso ” ) internal control - integrated framework ( 2013 ) in assessing the effectiveness of the company 's icfr . management shall determine icfr ineffective if a material weakness exists in the controls . management has assessed the company 's icfr as effective as of december 31 , 2015. this annual report does not include an attestation report of the company 's registered public accounting firm regarding internal control over financial reporting . management 's report was not subject to attestation by the company 's registered public accounting firm pursuant to rules of the securities and exchange commission that permit the company to provide only management 's report in this annual report . during the quarter ending december 31 , 2015 , the company 's management followed the coso internal control - integrated framework ( 2013 ) when assessing the icfr . during the quarter ending december 31 , 2015 , there have been no changes in the company 's internal control over financial reporting that has materially affected or is reasonably likely to affect , the company 's internal control over financial reporting . item 9b . other information none . 9 part iii item 10. directors , executive officers , promoters and control persons ; compliance with section 16 ( a ) of the exchange act the information required by item 10 as to directors , nominees for directors , reports under section 16 of the securities exchange act of 1934 , the registrant 's audit committee and an audit committee financial expert is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . executive officers of registrant are as follows : name age position with registrant brian r. jones 55 president , treasurer and director charles d. viccellio 82 secretary and director the occupations of such executive officers during the last five years and other principal affiliations are : name occupations brian r. jones president since april 25 , 2013 , treasurer and director since december 1 , 2006 ; managing member of brian r. jones cpa , llc . charles d. viccellio secretary since 1997 and director since 1996. retired attorney from the law firm of stockwell , sievert , viccellio , clements & shaddock , llp . there are no family relationships between any of our directors , except mrs. leach and mrs. werner are mother and daughter , and executive officers or any arrangement or understanding between any of our executive officers and any other person pursuant to which any executive officer was appointed to his office . the company has adopted a code of ethics that applies to officers , directors and employees . a copy of the code of ethics will be provided by writing the president at p.o . box 1864 , lake charles , louisiana 70602 . 10 item 11. executive compensation the information required by item 11 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 12. security ownership of certain beneficial owners and management and related stockholder matters the information required by item 12 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities exchange act of 1934 and is incorporated herein by reference . item 13. certain relationships and related transactions the information required by item 13 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . item 14. principal accountants fees and services the information required by item 14 is included in the registrant 's definitive proxy statement to be filed pursuant to section 14 ( a ) of the securities and exchange act of 1934 and is incorporated herein by reference . 11 part iv item 15. exhibits
| liquidity and capital resources the company 's current assets totaled $ 6,201,002 and total liabilities equaled $ 347,169 at december 31 , 2015. additional sources of liquidity include the company 's available bank line of credit for $ 5,000,000. in the opinion of management , current cash flow from operations , cash and cash equivalents , investments and the available line of credit are adequate for projected operation and possible land purchases . critical accounting policies the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . actual results could differ from those estimates . the most significant accounting estimates inherent in the preparation of our financial statements include the following items : our accounts receivable consist of incomes received after year end for royalties produced prior to year-end . when there are royalties that have not been received at the time of the preparation of the financial statements for months in the prior year , we estimate the amount to be received based on the last month 's royalties that were received from that particular company . we do not maintain an allowance for doubtful accounts because other than the accrual for earned but not received royalties , we have no accounts receivable . the company accounts for income taxes in accordance with asc topic 740 , income taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities . when land is purchased with standing timber , the cost is divided between land and timber . reforestation costs are capitalized and added to the timber asset account . the timber asset is depleted when the timber is harvested based on the relationship between the carrying value of the timber and the total timber volume estimated to be harvested over the harvest cycle .
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arr should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items . arr is not a forecast and the active contracts at the end of a reporting period used in calculating arr may or may not be extended or renewed by our customers . the following chart summarizes our annualized recurring revenue , or arr ( in millions ) : arr for a given period is the annualized revenue derived from subscription contracts with a defined contract value . this excludes contracts that are not recurring , are one-time in nature , or where the contract value fluctuates based on defined metrics . arr is currently one of our key performance metrics to assess the health and trajectory of our recurring business . arr does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies . arr should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items . arr is not a forecast and the active contracts at the end of a reporting period used in calculating arr may or may not be extended or renewed by our customers . 36 includes : ◦ trade management services business , excluding one-time service requests . ◦ u.s. and nordic annual listing fees , ir and esg products , including subscription contracts for ir insight , boardvantage and onereport , and ir advisory services . ◦ proprietary market data and index data subscriptions as well as subscription contracts for evestment , solovis , dwa tools and services , nasdaq fund network and quandl . also includes guaranteed minimum on futures contracts within the index business . ◦ active market technology support and saas subscription contracts . the following chart summarizes our saas revenues for the years ended december 31 , 2018 , 2019 and 2020 ( in millions ) : financial summary the following table summarizes our financial performance for the year ended december 31 , 2020 when compared to the same period in 2019 and for the year ended december 31 , 2019 when compared with the same period in 2018. for a detailed discussion of our results of operations , see “ segment operating results ” below . replace_table_token_3_th in countries with currencies other than the u.s. dollar , revenues and expenses are translated using monthly average exchange rates . impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “ item 7a . quantitative and qualitative disclosures about market risk . ” 37 segment operating results the following table shows our revenues by segment , transaction-based expenses for our market services segment and total revenues less transaction-based expenses : replace_table_token_4_th ( 1 ) for the year ended december 31 , 2019 and 2018 , other revenues include the revenues from the bwise enterprise governance , risk and compliance software platform , which was sold in march 2019 , and for the year ended december 31 , 2018 , other revenues also include revenues from the public relations solutions and digital media services businesses which were sold in april 2018. prior to the sale dates , these revenues were included in our ir & esg services business within our corporate platforms segment . 38 the following charts show our market services , corporate platforms , investment intelligence , and market technology segments as a percentage of our total revenues less transaction-based expenses of $ 2,903 million in 2020 , $ 2,535 million in 2019 , and $ 2,526 million in 2018 : 39 market services the following table shows total revenues , transaction-based expenses , and total revenues less transaction-based expenses from our market services segment : replace_table_token_5_th ( 1 ) includes section 31 fees of $ 69 million in 2020 , $ 43 mil lion in 2019 , and $ 39 million in 2018. section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded in transaction-based expenses . ( 2 ) includes section 31 fees of $ 586 m illion in 2020 , $ 337 m illion in 2019 , and $ 343 million in 2018. section 31 fees are recorded as cash equity trading revenues with a corresponding amount recorded in transaction-based expenses . equity derivative trading and clearing revenues equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses increased in 2020 compared with 2019. the increase in equity derivative trading and clearing revenues was primarily due to higher u.s. industry trading volumes , a higher u.s. gross capt ure rate , and higher section 31 pass-through fee revenue , partial ly offset by lower overall u.s. matched market share executed on nasdaq 's exchanges . the increase in equity derivative trading and clearing revenues less transaction-based expenses was primarily due to higher u.s. industry trading volumes , partially offset by a lower u.s. net capture rate and lower overall u.s. matched market share executed on nasdaq 's exchanges . section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded as transaction-based expenses . in the u.s. , we are assessed these fees from the sec and pass them through to our customers in the form of incremental fees . pass-through fees can increase or decrease due to rate changes by the sec , our percentage of the overall industry volumes processed on our systems , and differences in actual dollar value of shares traded . since the amount recorded in revenues is equal to the amount recorded as transaction-based expenses , there is no impact on our revenues less transaction-based expenses . story_separator_special_tag 46 the following table shows reconciliations between u.s. gaap net income attributable to nasdaq and diluted earnings per share and non-gaap net income attributable to nasdaq and diluted earnings per share : replace_table_token_13_th liquidity and capital resources historically , we have funded our operating activities and met our commitments through cash generated by operations , augmented by the periodic issuance of our common stock and debt . currently , our cost and availability of funding remain healthy . in response to the uncertainties posed by covid-19 and related economic impacts , we took actions to strengthen our liquidity and cash position and to reduce our refinancing risk . in march 2020 , we observed that conditions in the market for tier 2 commercial paper issuers were deteriorating , impacting both costs and actionable duration of commercial paper issues . to mitigate funding uncertainties and as a precautionary measure to maximize our liquidity and increase our available cash on hand , nasdaq borrowed $ 799 million under the revolving credit commitment of the 2017 credit facility . see “ early extinguishment of 2017 credit facility , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion of the 2017 credit facility . in april 2020 , we issued the 2050 notes and used the net proceeds from the 2050 notes to repay a portion of amounts previously borrowed under the 2017 credit facility . for further discussion of the 2050 notes , see “ 3.25 % senior unsecured notes due 2050 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements . in june 2020 , the remaining outstanding amount under the 2017 credit facility was repaid using cash on hand . in june 2020 , we also repaid all outstanding borrowings under our commercial paper program . 47 other financing transactions in february 2020 , we issued the 2030 notes . we primarily used the net proceeds from the 2030 notes to redeem the 2021 notes and for other general corporate purposes . see “ 0.875 % senior unsecured notes due 2030 , ” and “ early extinguishment of 3.875 % senior unsecured notes due 2021 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion . in december 2020 , we issued the 2022 notes , 2031 notes and 2040 notes . the net proceeds were used to partially finance the acquisition of verafin . for further discussion of these notes , see “ senior unsecured notes due 2022 , 2031 and 2040 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements . for further discussion of the acquisition of verafin , see “ acquisition of verafin , ” of note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements . in december 2020 , we also terminated the 2017 credit facility and entered into the 2020 credit facility . see “ credit facilities , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion . as of december 31 , 2020 , our sources and uses of cash were not materially impacted by covid-19 and we have not identified any material liquidity deficiencies as a result of the covid-19 pandemic . we will continue to closely monitor and manage our liquidity and capital resources . in addition , we continue to prudently assess our capital deployment strategy through balancing acquisitions , internal investments , debt repayments , and shareholder return activity including share repurchases and dividends . other liquidity and capital considerations in the near term , we expect that our operations and the availability under our revolving credit facility and commercial paper program will provide sufficient cash to fund our operating expenses , capital expenditures , debt repayments , any share repurchases , and any dividends . in january 2021 , we increased the size of our commercial paper program from $ 1 billion to $ 1.25 billion . in february 2021 , we issued $ 475 million of commercial paper to partially fund the acquisition of verafin . for further discussion of the acquisition of verafin , see “ acquisition of verafin , ” of note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements . as part of the purchase price consideration of a prior acquisition , nasdaq has contingent future obligations to issue 992,247 shares of nasdaq common stock annually through 2027. see “ non-cash contingent consideration , ” of note 18 , “ commitments , contingencies and guarantees , ” to the consolidated financial statements for further discussion . the value of various assets and liabilities , including cash and cash equivalents , receivables , accounts payable and accrued expenses , the current portion of long-term debt , and commercial paper , can fluctuate from month to month . working capital ( calculated as current assets less current liabilities ) was $ 2,736 million as of december 31 , 2020 , compared with $ 63 million as of december 31 , 2019 , an increase of $ 2,673 million . current asset balance changes increased working capital by $ 3,370 million , with increases in cash and cash equivalents , primarily due to net proceeds of $ 1.9 billion from issuances of long-term debt in the fourth quarter of 2020 for the acquisition of verafin , default funds and margin deposits , receivables , net , and restricted cash and cash equivalents , partially offset by decreases in financial investments and other current assets . current liability balance changes decreased working capital by $ 697 million , due to increases in default funds and margin deposits , section 31 fees payable to the sec , accrued personnel costs , accounts payable and accrued expenses , and deferred revenue , partially offset by decreases in short-term debt and
| liquidity and capital resources the company 's current assets totaled $ 6,201,002 and total liabilities equaled $ 347,169 at december 31 , 2015. additional sources of liquidity include the company 's available bank line of credit for $ 5,000,000. in the opinion of management , current cash flow from operations , cash and cash equivalents , investments and the available line of credit are adequate for projected operation and possible land purchases . critical accounting policies the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . actual results could differ from those estimates . the most significant accounting estimates inherent in the preparation of our financial statements include the following items : our accounts receivable consist of incomes received after year end for royalties produced prior to year-end . when there are royalties that have not been received at the time of the preparation of the financial statements for months in the prior year , we estimate the amount to be received based on the last month 's royalties that were received from that particular company . we do not maintain an allowance for doubtful accounts because other than the accrual for earned but not received royalties , we have no accounts receivable . the company accounts for income taxes in accordance with asc topic 740 , income taxes , which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities . when land is purchased with standing timber , the cost is divided between land and timber . reforestation costs are capitalized and added to the timber asset account . the timber asset is depleted when the timber is harvested based on the relationship between the carrying value of the timber and the total timber volume estimated to be harvested over the harvest cycle .
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arr should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items . arr is not a forecast and the active contracts at the end of a reporting period used in calculating arr may or may not be extended or renewed by our customers . the following chart summarizes our annualized recurring revenue , or arr ( in millions ) : arr for a given period is the annualized revenue derived from subscription contracts with a defined contract value . this excludes contracts that are not recurring , are one-time in nature , or where the contract value fluctuates based on defined metrics . arr is currently one of our key performance metrics to assess the health and trajectory of our recurring business . arr does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies . arr should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items . arr is not a forecast and the active contracts at the end of a reporting period used in calculating arr may or may not be extended or renewed by our customers . 36 includes : ◦ trade management services business , excluding one-time service requests . ◦ u.s. and nordic annual listing fees , ir and esg products , including subscription contracts for ir insight , boardvantage and onereport , and ir advisory services . ◦ proprietary market data and index data subscriptions as well as subscription contracts for evestment , solovis , dwa tools and services , nasdaq fund network and quandl . also includes guaranteed minimum on futures contracts within the index business . ◦ active market technology support and saas subscription contracts . the following chart summarizes our saas revenues for the years ended december 31 , 2018 , 2019 and 2020 ( in millions ) : financial summary the following table summarizes our financial performance for the year ended december 31 , 2020 when compared to the same period in 2019 and for the year ended december 31 , 2019 when compared with the same period in 2018. for a detailed discussion of our results of operations , see “ segment operating results ” below . replace_table_token_3_th in countries with currencies other than the u.s. dollar , revenues and expenses are translated using monthly average exchange rates . impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “ item 7a . quantitative and qualitative disclosures about market risk . ” 37 segment operating results the following table shows our revenues by segment , transaction-based expenses for our market services segment and total revenues less transaction-based expenses : replace_table_token_4_th ( 1 ) for the year ended december 31 , 2019 and 2018 , other revenues include the revenues from the bwise enterprise governance , risk and compliance software platform , which was sold in march 2019 , and for the year ended december 31 , 2018 , other revenues also include revenues from the public relations solutions and digital media services businesses which were sold in april 2018. prior to the sale dates , these revenues were included in our ir & esg services business within our corporate platforms segment . 38 the following charts show our market services , corporate platforms , investment intelligence , and market technology segments as a percentage of our total revenues less transaction-based expenses of $ 2,903 million in 2020 , $ 2,535 million in 2019 , and $ 2,526 million in 2018 : 39 market services the following table shows total revenues , transaction-based expenses , and total revenues less transaction-based expenses from our market services segment : replace_table_token_5_th ( 1 ) includes section 31 fees of $ 69 million in 2020 , $ 43 mil lion in 2019 , and $ 39 million in 2018. section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded in transaction-based expenses . ( 2 ) includes section 31 fees of $ 586 m illion in 2020 , $ 337 m illion in 2019 , and $ 343 million in 2018. section 31 fees are recorded as cash equity trading revenues with a corresponding amount recorded in transaction-based expenses . equity derivative trading and clearing revenues equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses increased in 2020 compared with 2019. the increase in equity derivative trading and clearing revenues was primarily due to higher u.s. industry trading volumes , a higher u.s. gross capt ure rate , and higher section 31 pass-through fee revenue , partial ly offset by lower overall u.s. matched market share executed on nasdaq 's exchanges . the increase in equity derivative trading and clearing revenues less transaction-based expenses was primarily due to higher u.s. industry trading volumes , partially offset by a lower u.s. net capture rate and lower overall u.s. matched market share executed on nasdaq 's exchanges . section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded as transaction-based expenses . in the u.s. , we are assessed these fees from the sec and pass them through to our customers in the form of incremental fees . pass-through fees can increase or decrease due to rate changes by the sec , our percentage of the overall industry volumes processed on our systems , and differences in actual dollar value of shares traded . since the amount recorded in revenues is equal to the amount recorded as transaction-based expenses , there is no impact on our revenues less transaction-based expenses . story_separator_special_tag 46 the following table shows reconciliations between u.s. gaap net income attributable to nasdaq and diluted earnings per share and non-gaap net income attributable to nasdaq and diluted earnings per share : replace_table_token_13_th liquidity and capital resources historically , we have funded our operating activities and met our commitments through cash generated by operations , augmented by the periodic issuance of our common stock and debt . currently , our cost and availability of funding remain healthy . in response to the uncertainties posed by covid-19 and related economic impacts , we took actions to strengthen our liquidity and cash position and to reduce our refinancing risk . in march 2020 , we observed that conditions in the market for tier 2 commercial paper issuers were deteriorating , impacting both costs and actionable duration of commercial paper issues . to mitigate funding uncertainties and as a precautionary measure to maximize our liquidity and increase our available cash on hand , nasdaq borrowed $ 799 million under the revolving credit commitment of the 2017 credit facility . see “ early extinguishment of 2017 credit facility , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion of the 2017 credit facility . in april 2020 , we issued the 2050 notes and used the net proceeds from the 2050 notes to repay a portion of amounts previously borrowed under the 2017 credit facility . for further discussion of the 2050 notes , see “ 3.25 % senior unsecured notes due 2050 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements . in june 2020 , the remaining outstanding amount under the 2017 credit facility was repaid using cash on hand . in june 2020 , we also repaid all outstanding borrowings under our commercial paper program . 47 other financing transactions in february 2020 , we issued the 2030 notes . we primarily used the net proceeds from the 2030 notes to redeem the 2021 notes and for other general corporate purposes . see “ 0.875 % senior unsecured notes due 2030 , ” and “ early extinguishment of 3.875 % senior unsecured notes due 2021 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion . in december 2020 , we issued the 2022 notes , 2031 notes and 2040 notes . the net proceeds were used to partially finance the acquisition of verafin . for further discussion of these notes , see “ senior unsecured notes due 2022 , 2031 and 2040 , ” of note 9 , “ debt obligations , ” to the consolidated financial statements . for further discussion of the acquisition of verafin , see “ acquisition of verafin , ” of note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements . in december 2020 , we also terminated the 2017 credit facility and entered into the 2020 credit facility . see “ credit facilities , ” of note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion . as of december 31 , 2020 , our sources and uses of cash were not materially impacted by covid-19 and we have not identified any material liquidity deficiencies as a result of the covid-19 pandemic . we will continue to closely monitor and manage our liquidity and capital resources . in addition , we continue to prudently assess our capital deployment strategy through balancing acquisitions , internal investments , debt repayments , and shareholder return activity including share repurchases and dividends . other liquidity and capital considerations in the near term , we expect that our operations and the availability under our revolving credit facility and commercial paper program will provide sufficient cash to fund our operating expenses , capital expenditures , debt repayments , any share repurchases , and any dividends . in january 2021 , we increased the size of our commercial paper program from $ 1 billion to $ 1.25 billion . in february 2021 , we issued $ 475 million of commercial paper to partially fund the acquisition of verafin . for further discussion of the acquisition of verafin , see “ acquisition of verafin , ” of note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements . as part of the purchase price consideration of a prior acquisition , nasdaq has contingent future obligations to issue 992,247 shares of nasdaq common stock annually through 2027. see “ non-cash contingent consideration , ” of note 18 , “ commitments , contingencies and guarantees , ” to the consolidated financial statements for further discussion . the value of various assets and liabilities , including cash and cash equivalents , receivables , accounts payable and accrued expenses , the current portion of long-term debt , and commercial paper , can fluctuate from month to month . working capital ( calculated as current assets less current liabilities ) was $ 2,736 million as of december 31 , 2020 , compared with $ 63 million as of december 31 , 2019 , an increase of $ 2,673 million . current asset balance changes increased working capital by $ 3,370 million , with increases in cash and cash equivalents , primarily due to net proceeds of $ 1.9 billion from issuances of long-term debt in the fourth quarter of 2020 for the acquisition of verafin , default funds and margin deposits , receivables , net , and restricted cash and cash equivalents , partially offset by decreases in financial investments and other current assets . current liability balance changes decreased working capital by $ 697 million , due to increases in default funds and margin deposits , section 31 fees payable to the sec , accrued personnel costs , accounts payable and accrued expenses , and deferred revenue , partially offset by decreases in short-term debt and
| net cash used in investing activities net cash used in investing activities for 2020 primarily related to $ 188 million of purchases of property and equipment and $ 157 million of cash used for acquisitions , net of cash and cash equivalents acquired , partially offset by $ 119 million of proceeds from the net sales of securities . net cash used in investing activities for 2019 primarily relates to $ 206 million of cash used for acquisitions , net of cash and cash equivalents acquired , $ 127 million of purchases of property and equipment , and $ 36 million of net purchases of securities , partially offset by receipt of cash of $ 132 million related to our 2019 divestiture . net cash used in ( provided by ) financing activities net cash provided by financing activities for 2020 primarily related to $ 3,811 million of proceeds from issuances of long-term debt and the utilization of our credit commitment , partially offset by $ 1,472 million in repayments of borrowings under our credit commitment and debt obligations , $ 391 million of net repayments of commercial paper , $ 320 million of dividend payments to our shareholders , and $ 222 million in repurchases of common stock . net cash used in financing activities for 2019 primarily relates to $ 1,215 million in repayments of debt obligations , $ 305 million of dividend payments to our shareholders , and $ 200 million in repurchases of common stock , partially offset by $ 680 million from proceeds related to long-term debt issuances and $ 116 million in net borrowings of commercial paper . see note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements for further discussion of our acquisitions and divestiture . see note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion of our debt obligations . 51 see “ share repurchase program , ” and “ cash dividends on common stock , ” of note 12 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of our share repurchase program and cash dividends paid on our common stock .
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the divestiture of american reliable insurance company ( `` aric `` ) also contributed to the decrease in net income . total revenues decreased $ 365,948 to $ 2,543,105 for twelve months 2015 from $ 2,909,053 for twelve months 2014. the decrease was primarily due to the divestiture of aric , combined with lower lender-placed homeowners insurance net earned premiums . the decline in lender-placed homeowners insurance net earned premiums is primarily due to a decline in placement rates , lower premium rates and previously disclosed loss of client business . these items were partially offset by an increase in fees and other income reflecting contributions from mortgage solutions businesses . the twelve months 2015 expense ratio increased 620 basis points compared with twelve months 2014. the increase was primarily due to lower net earned premiums and higher legal costs related to outstanding matters . in addition , growth in fee-based businesses , which have higher expense ratios than our insurance products , contributed to the increase . for 2016 , we expect assurant specialty property net income and net earned premiums to decrease compared with twelve months 2015 reflecting the ongoing normalization of lender-placed insurance business partially offset by increased efficiencies , including the implementation of new technology , and other expense savings initiatives . contributions from multi-family housing and mortgage solutions businesses are expected to partially offset the decline . in addition , catastrophe losses may affect overall results . 36 as previously announced , the company concluded a comprehensive review of strategic alternatives for its health business and expects to substantially complete the process to exit the health insurance market in 2016. during the remainder of the exit process , we expect to incur up to $ 50,000 of additional exit-related charges , as well as certain overhead expenses that are excluded from the premium deficiency reserve accrual . in addition , the company signed a definitive agreement to sell its assurant employee benefits segment to sun life . the transaction is expected to close by the end of first quarter 2016. for more information , see notes 3 and 4 of the notes to the consolidated financial statements included elsewhere in this report . critical factors affecting results our results depend on the appropriateness of our product pricing , underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims , returns on and values of invested assets and our ability to manage our expenses . factors affecting these items , including unemployment , difficult conditions in financial markets and the global economy , may have a material adverse effect on our results of operations or financial condition . for more information on these factors , see “ item 1a – risk factors . ” management believes the company will have sufficient liquidity to satisfy its needs over the next twelve months including the ability to pay interest on our senior notes and dividends on our common stock . for twelve months 2015 , net cash provided by operating activities , including the effect of exchange rate changes and the reclassification of assets held for sale on cash and cash equivalents , totaled $ 192,483 ; net cash provided by investing activities totaled $ 264,293 and net cash used in financing activities totaled $ 487,127 . we had $ 1,288,305 in cash and cash equivalents as of december 31 , 2015. please see “ – liquidity and capital resources , ” below for further details . revenues we generate revenues primarily from the sale of our insurance policies and service contracts and from investment income earned on our investments . sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income . under the universal life insurance guidance , income earned on preneed life insurance policies sold after january 1 , 2009 are presented within policy fee income net of policyholder benefits . under the limited pay insurance guidance , the consideration received on preneed policies sold prior to january 1 , 2009 is presented separately as net earned premiums , with policyholder benefits expense being shown separately . our premium and fee income is supplemented by income earned from our investment portfolio . we recognize revenue from interest payments , dividends and sales of investments . currently , our investment portfolio is primarily invested in fixed maturity securities . both investment income and realized capital gains on these investments can be significantly affected by changes in interest rates . interest rate volatility can increase or reduce unrealized gains or losses in our investment portfolios . interest rates are highly sensitive to many factors , including governmental monetary policies , domestic and international economic and political conditions and other factors beyond our control . fluctuations in interest rates affect our returns on , and the market value of , fixed maturity and short-term investments . the fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions . the fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates , while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates . we also have investments that carry pre-payment risk , such as mortgage-backed and asset-backed securities . interest rate fluctuations may cause actual net investment income and or cash flows from such investments to differ from estimates made at the time of investment . in periods of declining interest rates , mortgage prepayments generally increase and mortgage-backed securities , commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates . therefore , in these circumstances we may be required to reinvest those funds in lower-interest earning investments . story_separator_special_tag thus , any adjustment to prior years ' incurred claims is partially offset by a change in commission expense , which is included in the underwriting , general and administrative expenses line in our consolidated statements of operations . while management has used its best judgment in establishing its estimate of required reserves , different assumptions and variables could lead to significantly different reserve estimates . two key measures of loss activity are loss frequency , which is a measure of the number of claims per unit of insured exposure , and loss severity , which is a measure of the average size of claims . factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns . factors affecting loss severity include changes in policy limits , retentions , rate of inflation and judicial interpretations . if the actual level of loss frequency and severity are higher or lower than expected , the ultimate reserves required will be different than management 's estimate . the effect of higher and lower levels of loss frequency and severity levels on our ultimate costs for claims occurring in 2015 would be as follows : replace_table_token_11_th reserving for asbestos and other claims 42 our property and warranty line of business includes exposure to asbestos , environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1985. this exposure arose from a contract that we discontinued writing many years ago . we carry case reserves , as recommended by the various pool managers , and ibnr reserves totaling $ 30,519 ( before reinsurance ) and $ 27,721 ( net of reinsurance ) at december 31 , 2015. we believe the balance of case and ibnr reserves for these liabilities are adequate . however , any estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficiently detailed data , reporting delays and absence of a generally accepted actuarial methodology for those exposures . there are significant unresolved industry legal issues , including such items as whether coverage exists and what constitutes a claim . in addition , the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain . however , based on information currently available , and after consideration of the reserves reflected in the consolidated financial statements , we do not believe that changes in reserve estimates for these claims are likely to be material . deferred acquisition costs only direct incremental costs associated with the successful acquisition of new or renewal insurance contracts are deferred , to the extent that such costs are deemed recoverable from future premiums or gross profits . acquisition costs primarily consist of commissions and premium taxes . certain direct response advertising expenses are deferred when the primary purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and the direct response advertising results in probable future benefits . the deferred acquisition costs ( “ dac ” ) asset is tested annually to ensure that future premiums or gross profits are sufficient to support the amortization of the asset . such testing involves the use of best estimate assumptions to determine if anticipated future policy premiums and investment income are adequate to cover all dac and related claims , benefits and expenses . to the extent a deficiency exists , it is recognized immediately by a charge to the consolidated statements of operations and a corresponding reduction in the dac asset . if the deficiency is greater than unamortized dac , a liability will be accrued for the excess deficiency . long duration contracts acquisition costs for preneed life insurance policies issued prior to january 1 , 2009 and certain discontinued life insurance policies have been deferred and amortized in proportion to anticipated premiums over the premium-paying period . these acquisition costs consist primarily of first year commissions paid to agents . for preneed investment-type annuities , preneed life insurance policies with discretionary death benefit growth issued after january 1 , 2009 , universal life insurance policies and investment-type annuity contracts that are no longer offered , dac is amortized in proportion to the present value of estimated gross profits from investment , mortality , expense margins and surrender charges over the estimated life of the policy or contract . estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized , with corresponding credits or charges included in aoci . the assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities . acquisition costs relating to group worksite products , which typically have high front-end costs and are expected to remain in force for an extended period of time , consist primarily of first year commissions to brokers , costs of issuing new certificates and compensation to sales representatives . these acquisition costs are front-end loaded , thus they are deferred and amortized over the estimated terms of the underlying contracts . short duration contracts acquisition costs relating to property contracts , warranty and extended service contracts and single premium credit insurance contracts are amortized over the term of the contracts in relation to premiums earned . acquisition costs relating to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts . acquisition costs relating to group term life , group disability , group dental and group vision consist primarily of compensation to sales representatives . these acquisition costs are front-end loaded ; thus , they are deferred and amortized over the estimated terms of the underlying contracts . investments we regularly monitor our investment portfolio to ensure investments that may be other-than-temporarily impaired are identified
| net cash used in investing activities net cash used in investing activities for 2020 primarily related to $ 188 million of purchases of property and equipment and $ 157 million of cash used for acquisitions , net of cash and cash equivalents acquired , partially offset by $ 119 million of proceeds from the net sales of securities . net cash used in investing activities for 2019 primarily relates to $ 206 million of cash used for acquisitions , net of cash and cash equivalents acquired , $ 127 million of purchases of property and equipment , and $ 36 million of net purchases of securities , partially offset by receipt of cash of $ 132 million related to our 2019 divestiture . net cash used in ( provided by ) financing activities net cash provided by financing activities for 2020 primarily related to $ 3,811 million of proceeds from issuances of long-term debt and the utilization of our credit commitment , partially offset by $ 1,472 million in repayments of borrowings under our credit commitment and debt obligations , $ 391 million of net repayments of commercial paper , $ 320 million of dividend payments to our shareholders , and $ 222 million in repurchases of common stock . net cash used in financing activities for 2019 primarily relates to $ 1,215 million in repayments of debt obligations , $ 305 million of dividend payments to our shareholders , and $ 200 million in repurchases of common stock , partially offset by $ 680 million from proceeds related to long-term debt issuances and $ 116 million in net borrowings of commercial paper . see note 4 , “ acquisitions and divestiture , ” to the consolidated financial statements for further discussion of our acquisitions and divestiture . see note 9 , “ debt obligations , ” to the consolidated financial statements for further discussion of our debt obligations . 51 see “ share repurchase program , ” and “ cash dividends on common stock , ” of note 12 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of our share repurchase program and cash dividends paid on our common stock .
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the divestiture of american reliable insurance company ( `` aric `` ) also contributed to the decrease in net income . total revenues decreased $ 365,948 to $ 2,543,105 for twelve months 2015 from $ 2,909,053 for twelve months 2014. the decrease was primarily due to the divestiture of aric , combined with lower lender-placed homeowners insurance net earned premiums . the decline in lender-placed homeowners insurance net earned premiums is primarily due to a decline in placement rates , lower premium rates and previously disclosed loss of client business . these items were partially offset by an increase in fees and other income reflecting contributions from mortgage solutions businesses . the twelve months 2015 expense ratio increased 620 basis points compared with twelve months 2014. the increase was primarily due to lower net earned premiums and higher legal costs related to outstanding matters . in addition , growth in fee-based businesses , which have higher expense ratios than our insurance products , contributed to the increase . for 2016 , we expect assurant specialty property net income and net earned premiums to decrease compared with twelve months 2015 reflecting the ongoing normalization of lender-placed insurance business partially offset by increased efficiencies , including the implementation of new technology , and other expense savings initiatives . contributions from multi-family housing and mortgage solutions businesses are expected to partially offset the decline . in addition , catastrophe losses may affect overall results . 36 as previously announced , the company concluded a comprehensive review of strategic alternatives for its health business and expects to substantially complete the process to exit the health insurance market in 2016. during the remainder of the exit process , we expect to incur up to $ 50,000 of additional exit-related charges , as well as certain overhead expenses that are excluded from the premium deficiency reserve accrual . in addition , the company signed a definitive agreement to sell its assurant employee benefits segment to sun life . the transaction is expected to close by the end of first quarter 2016. for more information , see notes 3 and 4 of the notes to the consolidated financial statements included elsewhere in this report . critical factors affecting results our results depend on the appropriateness of our product pricing , underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims , returns on and values of invested assets and our ability to manage our expenses . factors affecting these items , including unemployment , difficult conditions in financial markets and the global economy , may have a material adverse effect on our results of operations or financial condition . for more information on these factors , see “ item 1a – risk factors . ” management believes the company will have sufficient liquidity to satisfy its needs over the next twelve months including the ability to pay interest on our senior notes and dividends on our common stock . for twelve months 2015 , net cash provided by operating activities , including the effect of exchange rate changes and the reclassification of assets held for sale on cash and cash equivalents , totaled $ 192,483 ; net cash provided by investing activities totaled $ 264,293 and net cash used in financing activities totaled $ 487,127 . we had $ 1,288,305 in cash and cash equivalents as of december 31 , 2015. please see “ – liquidity and capital resources , ” below for further details . revenues we generate revenues primarily from the sale of our insurance policies and service contracts and from investment income earned on our investments . sales of insurance policies are recognized in revenue as earned premiums while sales of administrative services are recognized as fee income . under the universal life insurance guidance , income earned on preneed life insurance policies sold after january 1 , 2009 are presented within policy fee income net of policyholder benefits . under the limited pay insurance guidance , the consideration received on preneed policies sold prior to january 1 , 2009 is presented separately as net earned premiums , with policyholder benefits expense being shown separately . our premium and fee income is supplemented by income earned from our investment portfolio . we recognize revenue from interest payments , dividends and sales of investments . currently , our investment portfolio is primarily invested in fixed maturity securities . both investment income and realized capital gains on these investments can be significantly affected by changes in interest rates . interest rate volatility can increase or reduce unrealized gains or losses in our investment portfolios . interest rates are highly sensitive to many factors , including governmental monetary policies , domestic and international economic and political conditions and other factors beyond our control . fluctuations in interest rates affect our returns on , and the market value of , fixed maturity and short-term investments . the fair market value of the fixed maturity securities in our investment portfolio and the investment income from these securities fluctuate depending on general economic and market conditions . the fair market value generally increases or decreases in an inverse relationship with fluctuations in interest rates , while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates . we also have investments that carry pre-payment risk , such as mortgage-backed and asset-backed securities . interest rate fluctuations may cause actual net investment income and or cash flows from such investments to differ from estimates made at the time of investment . in periods of declining interest rates , mortgage prepayments generally increase and mortgage-backed securities , commercial mortgage obligations and bonds are more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates . therefore , in these circumstances we may be required to reinvest those funds in lower-interest earning investments . story_separator_special_tag thus , any adjustment to prior years ' incurred claims is partially offset by a change in commission expense , which is included in the underwriting , general and administrative expenses line in our consolidated statements of operations . while management has used its best judgment in establishing its estimate of required reserves , different assumptions and variables could lead to significantly different reserve estimates . two key measures of loss activity are loss frequency , which is a measure of the number of claims per unit of insured exposure , and loss severity , which is a measure of the average size of claims . factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns . factors affecting loss severity include changes in policy limits , retentions , rate of inflation and judicial interpretations . if the actual level of loss frequency and severity are higher or lower than expected , the ultimate reserves required will be different than management 's estimate . the effect of higher and lower levels of loss frequency and severity levels on our ultimate costs for claims occurring in 2015 would be as follows : replace_table_token_11_th reserving for asbestos and other claims 42 our property and warranty line of business includes exposure to asbestos , environmental and other general liability claims arising from our participation in various reinsurance pools from 1971 through 1985. this exposure arose from a contract that we discontinued writing many years ago . we carry case reserves , as recommended by the various pool managers , and ibnr reserves totaling $ 30,519 ( before reinsurance ) and $ 27,721 ( net of reinsurance ) at december 31 , 2015. we believe the balance of case and ibnr reserves for these liabilities are adequate . however , any estimation of these liabilities is subject to greater than normal variation and uncertainty due to the general lack of sufficiently detailed data , reporting delays and absence of a generally accepted actuarial methodology for those exposures . there are significant unresolved industry legal issues , including such items as whether coverage exists and what constitutes a claim . in addition , the determination of ultimate damages and the final allocation of losses to financially responsible parties are highly uncertain . however , based on information currently available , and after consideration of the reserves reflected in the consolidated financial statements , we do not believe that changes in reserve estimates for these claims are likely to be material . deferred acquisition costs only direct incremental costs associated with the successful acquisition of new or renewal insurance contracts are deferred , to the extent that such costs are deemed recoverable from future premiums or gross profits . acquisition costs primarily consist of commissions and premium taxes . certain direct response advertising expenses are deferred when the primary purpose of the advertising is to elicit sales to customers who can be shown to have specifically responded to the advertising and the direct response advertising results in probable future benefits . the deferred acquisition costs ( “ dac ” ) asset is tested annually to ensure that future premiums or gross profits are sufficient to support the amortization of the asset . such testing involves the use of best estimate assumptions to determine if anticipated future policy premiums and investment income are adequate to cover all dac and related claims , benefits and expenses . to the extent a deficiency exists , it is recognized immediately by a charge to the consolidated statements of operations and a corresponding reduction in the dac asset . if the deficiency is greater than unamortized dac , a liability will be accrued for the excess deficiency . long duration contracts acquisition costs for preneed life insurance policies issued prior to january 1 , 2009 and certain discontinued life insurance policies have been deferred and amortized in proportion to anticipated premiums over the premium-paying period . these acquisition costs consist primarily of first year commissions paid to agents . for preneed investment-type annuities , preneed life insurance policies with discretionary death benefit growth issued after january 1 , 2009 , universal life insurance policies and investment-type annuity contracts that are no longer offered , dac is amortized in proportion to the present value of estimated gross profits from investment , mortality , expense margins and surrender charges over the estimated life of the policy or contract . estimated gross profits include the impact of unrealized gains or losses on investments as if these gains or losses had been realized , with corresponding credits or charges included in aoci . the assumptions used for the estimates are consistent with those used in computing the policy or contract liabilities . acquisition costs relating to group worksite products , which typically have high front-end costs and are expected to remain in force for an extended period of time , consist primarily of first year commissions to brokers , costs of issuing new certificates and compensation to sales representatives . these acquisition costs are front-end loaded , thus they are deferred and amortized over the estimated terms of the underlying contracts . short duration contracts acquisition costs relating to property contracts , warranty and extended service contracts and single premium credit insurance contracts are amortized over the term of the contracts in relation to premiums earned . acquisition costs relating to monthly pay credit insurance business consist mainly of direct response advertising costs and are deferred and amortized over the estimated average terms and balances of the underlying contracts . acquisition costs relating to group term life , group disability , group dental and group vision consist primarily of compensation to sales representatives . these acquisition costs are front-end loaded ; thus , they are deferred and amortized over the estimated terms of the underlying contracts . investments we regularly monitor our investment portfolio to ensure investments that may be other-than-temporarily impaired are identified
| net cash provided by operating activities was $ 192,483 and $ 313,782 for the years ended december 31 , 2015 and 2014 , respectively . the decrease in cash provided by operating activities was primarily due to changes in the timing of payments and higher payments made on 2015 individual major medical policies . net cash provided by operating activities was $ 313,782 and $ 1,003,819 for the years ended december 31 , 2014 and 2013 , respectively . the decrease in cash provided by operating activities was primarily due to changes in the timing of payments and by amounts yet to be recovered under the 3r 's program , partially offset by increased net written premiums in assurant solutions , assurant health and assurant employee benefits . for more information on the 3r 's , please refer to assurant health 's results of operations section in this item 7. investing activities : net cash provided by investing activities was $ 264,293 and $ 63,889 for the years ended december 31 , 2015 and 2014 , respectively . the change in investing activities is primarily due to higher sales of fixed maturity securities , less cash spent on acquisitions and equity interests and the sale of aric to global indemnity group inc. during 2015. for more information on the aric sale , please see note 4 to the consolidated financial statements contained elsewhere in this report.
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the operating results of scepter have been included within our consolidated statement of story_separator_special_tag executive overview the company conducts its business activities in two distinct segments : the material handling segment and the distribution segment . the lawn and garden business is classified as discontinued operations and all historical information has been adjusted to reflect the discontinued operations presentation . the company designs , manufactures , and markets a variety of plastic and rubber products . these products range from plastic reusable material handling containers and small parts storage bins to plastic and rubber oem parts , tire repair materials , custom plastic and rubber products , consumer fuel containers , military water containers as well as ammunition packaging and shipping containers . our distribution segment is engaged in the distribution of tools , equipment and supplies used for tire , wheel and under vehicle service on passenger , heavy truck and off-road vehicles , as well as the manufacturing of tire repair and retreading products . results of operations : 2014 versus 2013 net sales : replace_table_token_7_th net sales for 2014 were $ 623.6 million , an increase of $ 38.9 million or 7 % compared to the prior year . net sales increased $ 39.4 million due to the inclusion of scepter corporation group ( `` scepter `` ) acquired july 2 , 2014. the increase in net sales also included $ 12.7 million of improved pricing to mitigate higher resin prices during the year . the increase in net sales was partially offset by lower sales volumes of $ 6.8 million and unfavorable foreign currency translation of $ 6.4 million . net sales in the material handling segment increased $ 51.5 million or 14 % in 2014 compared to 2013 . the increase in net sales was mainly attributable to the inclusion of $ 39.4 million of net sales from the date of acquisition of scepter that was completed july 2 , 2014. also contributing to the increase in net sales was improved pricing of $ 12.6 million to offset raw material costs , and higher volume of $ 5.9 million , driven by strong sales in the industrial , marine and recreational vehicle end markets . the increase in net sales was partially offset by unfavorable foreign currency translation of $ 6.4 million . net sales in the distribution segment decreased $ 12.6 million in 2014 compared to 2013 . the decrease in net sales was attributable to a decline in custom sales and the result of the closure of our canadian branches in the first quarter of 2014. cost of sales & gross profit : replace_table_token_8_th gross profit declined $ 8.3 million in 2014 compared to 2013 despite an increase in sales . gross profit margin as a percentage of sales decreased to 25.9 % for 2014 compared to 29.0 % in the prior year . a weakened demand for our material handling segment 's agricultural and food processing products , along with a challenging brazilian economy , lowered profitability versus the prior year . higher raw material costs during the year compared to the prior year also negatively impacted gross profit . raw material costs , primarily plastic resins , polypropylene and polyethylene , were on average , approximately 9 % higher in 2014 as compared to the prior year . also contributing to the reduction in gross margin was a $ 2.3 million inventory fair value adjustment resulting from our acquisition of scepter and approximately $ 1.0 million of restructuring and other unusual charges in 2014 , as compared to $ 0.2 million in 2013 . 23 selling , general and administrative expenses : replace_table_token_9_th selling , general and administrative ( “ sg & a ” ) expenses increased $ 13.5 million or 11 % from 2013. the inclusion of the scepter acquisition contributed $ 11.1 million of incremental sg & a costs in 2014 compared to the prior year . the increase in sg & a expenses in 2014 also included the establishment of a reserve related to a patent infringement legal suit of $ 3.0 million and approximately $ 3.6 million of transaction costs related to the acquisition of scepter . sg & a expenses were reduced by a decrease in employee related costs of $ 2.8 million , lower outside legal and professional costs of approximately $ 2.0 million , and lower administrative costs related to facilities of approximately $ 0.9 million . also in 2014 , a favorable adjustment of $ 1.2 million was recorded to reduce contingent consideration recorded in a prior period due to a change in projections used to estimate expected payments at december 31 , 2014. in addition , higher freight costs of $ 0.8 million were incurred during 2014 as compared to 2013. sg & a expenses for 2014 included restructuring and other unusual charges of approximately $ 2.2 million compared to $ 0.4 million in the prior year . shipping and handling costs , including freight , are primarily classified as sg & a expenses . interest expense : replace_table_token_10_th net interest expense was $ 8.5 million in 2014 compared to $ 4.5 million in 2013. the increase in net interest expense is due to the higher average debt balance . the increase in outstanding borrowings in 2014 compared to the prior year related to our senior unsecured notes and higher balance outstanding under our credit facility as a result of our scepter acquisition in july 2014. income taxes : replace_table_token_11_th the 2014 effective tax rate of 36.4 % compared to 33.5 % in 2013. the 2014 effective tax rate of 36.4 % reflects a $ 1.8 million reduction in net state andlocal income taxes , offset by the inability to benefit from losses in brazil , an increase of $ 0.6 million in non-deductible acquisition and a $ 0.9 million increase in compensation costs . story_separator_special_tag due to the repayment of the $ 35 million senior notes and net repayment on the credit facility during 2013. income taxes : replace_table_token_16_th the 2013 effective tax rate of 33.5 % reflects a $ 0.8 million reduction in net state and local income taxes and a $ 0.3 million increase in foreign tax incentives . the 2012 effective tax rate reflects approximately $ 0.4 million of tax benefits from changes in unrecognized tax benefits . discontinued operations : loss from discontinued operations , net of income taxes was $ 0.4 million for the year ended december 31 , 2013 compared to income from discontinued operations of $ 3.4 million in the prior year . discontinued operations are comprised of the lawn and garden business and wek . wek and the lawn and garden business were both held for sale at december 31 , 2013. net sales from discontinued operations decreased $ 5.1 million or 2.1 % for the year ended december 31 , 2013 compared to 2012. the decrease in net sales was due to lower sales volume of $ 9.9 million due to timing of customer orders for the coming season , as well as production and distribution start-up issues , primarily in the fourth quarter of 2013 from our business rationalization plan . net sales were also negatively impacted from the effect of unfavorable currency translation of $ 3.2 million . the decrease in net sales was partially offset by improved pricing of $ 8.0 million to help mitigate higher raw material costs . higher restructuring and other related charges of $ 9.3 million for the year ended december 31 , 2013 compared to $ 0.1 million in the prior year , which negatively impacted results . acquisitions on july 2 , 2014 , ca acquisition inc. , now known as scepter canada inc. , and a wholly-owned subsidiary of myers industries , inc. , completed the purchase of substantially all of the assets and assumption of certain liabilities of scepter corporation and certain real property of shi properties inc. , both located in scarborough , ontario , canada . contemporaneously with the asset acquisition , crown us acquisition company , now known as scepter us holding company , and another wholly-owned subsidiary of myers industries , inc. , completed the purchase of all of the issued and outstanding membership interests of eco one leasing , llc and scepter manufacturing , llc , both located in miami , oklahoma . eco one leasing , llc was subsequently merged into scepter manufacturing , llc . the total purchase price for these acquisitions ( collectively , “ scepter ” ) was $ 156.6 million in cash , which includes a final working capital adjustment . the acquisition of scepter was funded from net proceeds from additional 26 borrowings of approximately $ 134.1 million under the fourth amended and restated loan agreement and cash on hand of $ 22.5 million . in october 2012 , the company acquired 100 % of the stock of jamco , an illinois corporation for $ 15.2 million . the purchase price included a cash payment of $ 15.1 million , net of $ 0.1 million in cash acquired . jamco is a leading designer and manufacturer of heavy-duty industrial steel carts and safety cabinets . the company has made preliminary estimates of the valuation of assets and intangible assets of purchase price allocation . the business is included in the material handling segment . in july 2012 , the company acquired 100 % of the stock of novel , a brazil-based designer and manufacturer of reusable plastic crates and containers used for closed-loop shipping and storage . novel also produces a diverse range of plastic industrial safety products . the total purchase price was approximately $ 30.9 million , which includes a cash payment of $ 3.4 million , net of $ 0.6 million of cash acquired , assumed debt of approximately $ 26.0 million and contingent consideration of $ 0.9 million based on an earnout . the contingent consideration , which is recorded in other liabilities in the consolidated statements of financial position is dependent upon the results of novel exceeding predefined earnings before interest , taxes , depreciation and amortization over the next four years . the business is included in the material handling segment . financial condition & liquidity and capital resources cash provided by operating activities from continuing operations was $ 51.7 million for the year ended december 31 , 2014 compared to $ 74.9 million in 2013. the decrease of $ 23.2 million was attributable to decreased earnings , higher working capital and higher non-cash charges in 2014 compared to the prior year . net income from continuing operations was $ 9.0 million in 2014 compared to $ 26.4 million in 2013. non-cash charges including depreciation and amortization were $ 31.8 million in 2014 compared to non-cash charges of $ 23.2 million in 2013. story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; `` > , net of deferred financing costs , compared with $ 44.3 million at december 31 , 2013 . the increase in debt outstanding year-over-year is mainly due to cash proceeds of $ 89.0 million from our senior unsecured notes and the net additional borrowings under our amended loan agreement , primarily to fund the acquisition of scepter in july 2014. the company 's loan agreement provides available borrowing up to $ 300 million , reduced for letters of credit issued . as of december 31 , 2014 , the company had $ 4.3 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business . as of december 31 , 2014 , there was $ 158.6 million available under our loan agreement . as of december 31 , 2014 , the company was in compliance with all its debt covenants . the most restrictive financial covenants for all of the company 's debt are an interest
| net cash provided by operating activities was $ 192,483 and $ 313,782 for the years ended december 31 , 2015 and 2014 , respectively . the decrease in cash provided by operating activities was primarily due to changes in the timing of payments and higher payments made on 2015 individual major medical policies . net cash provided by operating activities was $ 313,782 and $ 1,003,819 for the years ended december 31 , 2014 and 2013 , respectively . the decrease in cash provided by operating activities was primarily due to changes in the timing of payments and by amounts yet to be recovered under the 3r 's program , partially offset by increased net written premiums in assurant solutions , assurant health and assurant employee benefits . for more information on the 3r 's , please refer to assurant health 's results of operations section in this item 7. investing activities : net cash provided by investing activities was $ 264,293 and $ 63,889 for the years ended december 31 , 2015 and 2014 , respectively . the change in investing activities is primarily due to higher sales of fixed maturity securities , less cash spent on acquisitions and equity interests and the sale of aric to global indemnity group inc. during 2015. for more information on the aric sale , please see note 4 to the consolidated financial statements contained elsewhere in this report.
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the operating results of scepter have been included within our consolidated statement of story_separator_special_tag executive overview the company conducts its business activities in two distinct segments : the material handling segment and the distribution segment . the lawn and garden business is classified as discontinued operations and all historical information has been adjusted to reflect the discontinued operations presentation . the company designs , manufactures , and markets a variety of plastic and rubber products . these products range from plastic reusable material handling containers and small parts storage bins to plastic and rubber oem parts , tire repair materials , custom plastic and rubber products , consumer fuel containers , military water containers as well as ammunition packaging and shipping containers . our distribution segment is engaged in the distribution of tools , equipment and supplies used for tire , wheel and under vehicle service on passenger , heavy truck and off-road vehicles , as well as the manufacturing of tire repair and retreading products . results of operations : 2014 versus 2013 net sales : replace_table_token_7_th net sales for 2014 were $ 623.6 million , an increase of $ 38.9 million or 7 % compared to the prior year . net sales increased $ 39.4 million due to the inclusion of scepter corporation group ( `` scepter `` ) acquired july 2 , 2014. the increase in net sales also included $ 12.7 million of improved pricing to mitigate higher resin prices during the year . the increase in net sales was partially offset by lower sales volumes of $ 6.8 million and unfavorable foreign currency translation of $ 6.4 million . net sales in the material handling segment increased $ 51.5 million or 14 % in 2014 compared to 2013 . the increase in net sales was mainly attributable to the inclusion of $ 39.4 million of net sales from the date of acquisition of scepter that was completed july 2 , 2014. also contributing to the increase in net sales was improved pricing of $ 12.6 million to offset raw material costs , and higher volume of $ 5.9 million , driven by strong sales in the industrial , marine and recreational vehicle end markets . the increase in net sales was partially offset by unfavorable foreign currency translation of $ 6.4 million . net sales in the distribution segment decreased $ 12.6 million in 2014 compared to 2013 . the decrease in net sales was attributable to a decline in custom sales and the result of the closure of our canadian branches in the first quarter of 2014. cost of sales & gross profit : replace_table_token_8_th gross profit declined $ 8.3 million in 2014 compared to 2013 despite an increase in sales . gross profit margin as a percentage of sales decreased to 25.9 % for 2014 compared to 29.0 % in the prior year . a weakened demand for our material handling segment 's agricultural and food processing products , along with a challenging brazilian economy , lowered profitability versus the prior year . higher raw material costs during the year compared to the prior year also negatively impacted gross profit . raw material costs , primarily plastic resins , polypropylene and polyethylene , were on average , approximately 9 % higher in 2014 as compared to the prior year . also contributing to the reduction in gross margin was a $ 2.3 million inventory fair value adjustment resulting from our acquisition of scepter and approximately $ 1.0 million of restructuring and other unusual charges in 2014 , as compared to $ 0.2 million in 2013 . 23 selling , general and administrative expenses : replace_table_token_9_th selling , general and administrative ( “ sg & a ” ) expenses increased $ 13.5 million or 11 % from 2013. the inclusion of the scepter acquisition contributed $ 11.1 million of incremental sg & a costs in 2014 compared to the prior year . the increase in sg & a expenses in 2014 also included the establishment of a reserve related to a patent infringement legal suit of $ 3.0 million and approximately $ 3.6 million of transaction costs related to the acquisition of scepter . sg & a expenses were reduced by a decrease in employee related costs of $ 2.8 million , lower outside legal and professional costs of approximately $ 2.0 million , and lower administrative costs related to facilities of approximately $ 0.9 million . also in 2014 , a favorable adjustment of $ 1.2 million was recorded to reduce contingent consideration recorded in a prior period due to a change in projections used to estimate expected payments at december 31 , 2014. in addition , higher freight costs of $ 0.8 million were incurred during 2014 as compared to 2013. sg & a expenses for 2014 included restructuring and other unusual charges of approximately $ 2.2 million compared to $ 0.4 million in the prior year . shipping and handling costs , including freight , are primarily classified as sg & a expenses . interest expense : replace_table_token_10_th net interest expense was $ 8.5 million in 2014 compared to $ 4.5 million in 2013. the increase in net interest expense is due to the higher average debt balance . the increase in outstanding borrowings in 2014 compared to the prior year related to our senior unsecured notes and higher balance outstanding under our credit facility as a result of our scepter acquisition in july 2014. income taxes : replace_table_token_11_th the 2014 effective tax rate of 36.4 % compared to 33.5 % in 2013. the 2014 effective tax rate of 36.4 % reflects a $ 1.8 million reduction in net state andlocal income taxes , offset by the inability to benefit from losses in brazil , an increase of $ 0.6 million in non-deductible acquisition and a $ 0.9 million increase in compensation costs . story_separator_special_tag due to the repayment of the $ 35 million senior notes and net repayment on the credit facility during 2013. income taxes : replace_table_token_16_th the 2013 effective tax rate of 33.5 % reflects a $ 0.8 million reduction in net state and local income taxes and a $ 0.3 million increase in foreign tax incentives . the 2012 effective tax rate reflects approximately $ 0.4 million of tax benefits from changes in unrecognized tax benefits . discontinued operations : loss from discontinued operations , net of income taxes was $ 0.4 million for the year ended december 31 , 2013 compared to income from discontinued operations of $ 3.4 million in the prior year . discontinued operations are comprised of the lawn and garden business and wek . wek and the lawn and garden business were both held for sale at december 31 , 2013. net sales from discontinued operations decreased $ 5.1 million or 2.1 % for the year ended december 31 , 2013 compared to 2012. the decrease in net sales was due to lower sales volume of $ 9.9 million due to timing of customer orders for the coming season , as well as production and distribution start-up issues , primarily in the fourth quarter of 2013 from our business rationalization plan . net sales were also negatively impacted from the effect of unfavorable currency translation of $ 3.2 million . the decrease in net sales was partially offset by improved pricing of $ 8.0 million to help mitigate higher raw material costs . higher restructuring and other related charges of $ 9.3 million for the year ended december 31 , 2013 compared to $ 0.1 million in the prior year , which negatively impacted results . acquisitions on july 2 , 2014 , ca acquisition inc. , now known as scepter canada inc. , and a wholly-owned subsidiary of myers industries , inc. , completed the purchase of substantially all of the assets and assumption of certain liabilities of scepter corporation and certain real property of shi properties inc. , both located in scarborough , ontario , canada . contemporaneously with the asset acquisition , crown us acquisition company , now known as scepter us holding company , and another wholly-owned subsidiary of myers industries , inc. , completed the purchase of all of the issued and outstanding membership interests of eco one leasing , llc and scepter manufacturing , llc , both located in miami , oklahoma . eco one leasing , llc was subsequently merged into scepter manufacturing , llc . the total purchase price for these acquisitions ( collectively , “ scepter ” ) was $ 156.6 million in cash , which includes a final working capital adjustment . the acquisition of scepter was funded from net proceeds from additional 26 borrowings of approximately $ 134.1 million under the fourth amended and restated loan agreement and cash on hand of $ 22.5 million . in october 2012 , the company acquired 100 % of the stock of jamco , an illinois corporation for $ 15.2 million . the purchase price included a cash payment of $ 15.1 million , net of $ 0.1 million in cash acquired . jamco is a leading designer and manufacturer of heavy-duty industrial steel carts and safety cabinets . the company has made preliminary estimates of the valuation of assets and intangible assets of purchase price allocation . the business is included in the material handling segment . in july 2012 , the company acquired 100 % of the stock of novel , a brazil-based designer and manufacturer of reusable plastic crates and containers used for closed-loop shipping and storage . novel also produces a diverse range of plastic industrial safety products . the total purchase price was approximately $ 30.9 million , which includes a cash payment of $ 3.4 million , net of $ 0.6 million of cash acquired , assumed debt of approximately $ 26.0 million and contingent consideration of $ 0.9 million based on an earnout . the contingent consideration , which is recorded in other liabilities in the consolidated statements of financial position is dependent upon the results of novel exceeding predefined earnings before interest , taxes , depreciation and amortization over the next four years . the business is included in the material handling segment . financial condition & liquidity and capital resources cash provided by operating activities from continuing operations was $ 51.7 million for the year ended december 31 , 2014 compared to $ 74.9 million in 2013. the decrease of $ 23.2 million was attributable to decreased earnings , higher working capital and higher non-cash charges in 2014 compared to the prior year . net income from continuing operations was $ 9.0 million in 2014 compared to $ 26.4 million in 2013. non-cash charges including depreciation and amortization were $ 31.8 million in 2014 compared to non-cash charges of $ 23.2 million in 2013. story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; `` > , net of deferred financing costs , compared with $ 44.3 million at december 31 , 2013 . the increase in debt outstanding year-over-year is mainly due to cash proceeds of $ 89.0 million from our senior unsecured notes and the net additional borrowings under our amended loan agreement , primarily to fund the acquisition of scepter in july 2014. the company 's loan agreement provides available borrowing up to $ 300 million , reduced for letters of credit issued . as of december 31 , 2014 , the company had $ 4.3 million of letters of credit issued related to insurance and other financing contracts in the ordinary course of business . as of december 31 , 2014 , there was $ 158.6 million available under our loan agreement . as of december 31 , 2014 , the company was in compliance with all its debt covenants . the most restrictive financial covenants for all of the company 's debt are an interest
| cash provided by working capital was $ 12.2 million in 2014 compared to cash provided of $ 27.0 million in 2013. in 2014 , cash provided by inventories was approximately $ 2.4 million compared to $ 3.0 million in 2013. in 2014 , the source of funds for accounts receivable was $ 2.7 million compared to the use of $ 2.0 million in 2013. in addition , as a result of timing of payments and extending vendor terms on accounts payable , positive cash flow was realized in both 2014 and 2013. capital expenditures were $ 24.2 million in 2014 compared to $ 20.7 million in 2013. capital spending in 2014 was higher than the preceding year as investments were made for new manufacturing focused on growth and productivity improvements in addition to higher spending due to scepter . in 2014 , the company paid approximately $ 156.6 million in connection with the acquisition of scepter which is included in the material handling segment . in 2013 , the company purchased an equity interest in a non-consolidated subsidiary , included in the distribution segment , for approximately $ 0.6 million . in 2012 , the company paid a combined total of $ 18.5 million in connection with the acquisitions of novel and jamco .
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our product is planned to consist of : ( i ) one or more telephony servers , ( ii ) a software phone which allow customers to place calls , view and or listen to advertising , and ( iii ) a server to store customer information and to keep customer records , call , credits and payment history , and which server will also contains our web site , support center and customer account portal . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , and second , from paid calls by our customers . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. since we are presently in the development stage of our business , we can provide no assurance that we will successfully sell any products or services related to our planned activities . 14 to date , we have been in contact with professional advisors regarding legal compliance , accounting disclosure statements and financial reporting . we have also begun our planning for developing a website and searching for a contractor to develop that website . we will retain such a contractor only after we secure further funding . we intend to launch our “ information only ” web site during the first quarter of the 2014 calendar year . our business activities during the next 12 months following will be focused on raising funds , the development of our website , the development of our product , the development of a network of resellers and the establishment of our brand name . we do not expect to earn any sales revenue during this time . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , second , from paid calls by our customers , and third from licensing or selling our software . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. we are however running low on funding and our directors provided the company with a $ 15,243 loan to continue operation . results of operations years ended september 30 , 2014 and 201 3 we did not earn any revenues during the years ended september 30 , 2014 and 2013. we incurred operating expenses in the amount of $ 19,125 and $ 16,466 for the years ended september 30 , 2014 and 2013 , respectively . operating expenses for the year ended september 30 , 2014 , were comprised of $ 15,727 in professional fees and $ 3,398 of general and administrative expenses . operating expenses for the year ended september 30 , 2013 , were comprised primarily of $ 9,925 of professional fees and office and $ 6,541 of general and administrative expenses . since inception we have incurred operating expenses of $ 92,549. from inception ( march 11 , 2010 ) through the year ended september 30 , 2013 we had no revenues and a net loss of $ 92,549. the following table provides selected financial data about our company for the years ended september 30 , 2014 and 2013. replace_table_token_1_th going concern we currently have no operations . our independent auditor has issued an audit opinion for first american group inc. , which includes a statement raising substantial doubt as to our ability to continue as a going concern . 15 story_separator_special_tag and only at this point will our revenues exceed our costs . we make the following assumptions in our projections above for year 2 : * we anticipate we will earn $ 20 cpm ( $ 0.02 every time a customer views an advertising ) on the basis of estimating 2 million impressions , which represents approximately 167,000 impression per month . * we anticipate we will earn $ 0.3 every time a customer clicks on advertising , on the basis of estimating 200,000 clicks or approximately 16,700 clicks per month . * when a customer fills in a form or takes a survey or clicks through and purchases a product , we will earn revenue . we are estimating a $ 1 per action and assuming that we will have 50,000 completions per year or approximately 4,200 completions per month . * we anticipate that many calls outside north america will incur cost to the customer . we are estimating 750,000 minutes , which is approximately 2000 customers making 300 chargeable minutes per month . since we are planning to provide this service as cheaply as possible to customers , we are only assuming $ 0.005 ( half a cent ) per minute profit . while going to make a phone call , a customer is likely to see multiple advertisements which will include a combination of banners and videos on the web site , the advertiser 's portal and our software phone . as well , people investigating our service , but not necessarily register , will earn us revenue because they will be viewing advertising . we can offer no assurance that we will be successful in developing and offering our products and services . any number of factors may impact our ability to develop our products and services , including our ability to obtain financing if and when necessary ; the availability of skilled personnel ; market acceptance of our products , if they are developed ; and our ability to gain market share . our business will fail if we can not successfully implement our business plan or if we can not develop or successfully market our products and services . since there is no minimum amount of shares that must be sold by the company , we may receive no proceeds or very minimal proceeds from the offering and story_separator_special_tag our product is planned to consist of : ( i ) one or more telephony servers , ( ii ) a software phone which allow customers to place calls , view and or listen to advertising , and ( iii ) a server to store customer information and to keep customer records , call , credits and payment history , and which server will also contains our web site , support center and customer account portal . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , and second , from paid calls by our customers . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. since we are presently in the development stage of our business , we can provide no assurance that we will successfully sell any products or services related to our planned activities . 14 to date , we have been in contact with professional advisors regarding legal compliance , accounting disclosure statements and financial reporting . we have also begun our planning for developing a website and searching for a contractor to develop that website . we will retain such a contractor only after we secure further funding . we intend to launch our “ information only ” web site during the first quarter of the 2014 calendar year . our business activities during the next 12 months following will be focused on raising funds , the development of our website , the development of our product , the development of a network of resellers and the establishment of our brand name . we do not expect to earn any sales revenue during this time . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , second , from paid calls by our customers , and third from licensing or selling our software . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. we are however running low on funding and our directors provided the company with a $ 15,243 loan to continue operation . results of operations years ended september 30 , 2014 and 201 3 we did not earn any revenues during the years ended september 30 , 2014 and 2013. we incurred operating expenses in the amount of $ 19,125 and $ 16,466 for the years ended september 30 , 2014 and 2013 , respectively . operating expenses for the year ended september 30 , 2014 , were comprised of $ 15,727 in professional fees and $ 3,398 of general and administrative expenses . operating expenses for the year ended september 30 , 2013 , were comprised primarily of $ 9,925 of professional fees and office and $ 6,541 of general and administrative expenses . since inception we have incurred operating expenses of $ 92,549. from inception ( march 11 , 2010 ) through the year ended september 30 , 2013 we had no revenues and a net loss of $ 92,549. the following table provides selected financial data about our company for the years ended september 30 , 2014 and 2013. replace_table_token_1_th going concern we currently have no operations . our independent auditor has issued an audit opinion for first american group inc. , which includes a statement raising substantial doubt as to our ability to continue as a going concern . 15 story_separator_special_tag and only at this point will our revenues exceed our costs . we make the following assumptions in our projections above for year 2 : * we anticipate we will earn $ 20 cpm ( $ 0.02 every time a customer views an advertising ) on the basis of estimating 2 million impressions , which represents approximately 167,000 impression per month . * we anticipate we will earn $ 0.3 every time a customer clicks on advertising , on the basis of estimating 200,000 clicks or approximately 16,700 clicks per month . * when a customer fills in a form or takes a survey or clicks through and purchases a product , we will earn revenue . we are estimating a $ 1 per action and assuming that we will have 50,000 completions per year or approximately 4,200 completions per month . * we anticipate that many calls outside north america will incur cost to the customer . we are estimating 750,000 minutes , which is approximately 2000 customers making 300 chargeable minutes per month . since we are planning to provide this service as cheaply as possible to customers , we are only assuming $ 0.005 ( half a cent ) per minute profit . while going to make a phone call , a customer is likely to see multiple advertisements which will include a combination of banners and videos on the web site , the advertiser 's portal and our software phone . as well , people investigating our service , but not necessarily register , will earn us revenue because they will be viewing advertising . we can offer no assurance that we will be successful in developing and offering our products and services . any number of factors may impact our ability to develop our products and services , including our ability to obtain financing if and when necessary ; the availability of skilled personnel ; market acceptance of our products , if they are developed ; and our ability to gain market share . our business will fail if we can not successfully implement our business plan or if we can not develop or successfully market our products and services . since there is no minimum amount of shares that must be sold by the company , we may receive no proceeds or very minimal proceeds from the offering and
| cash provided by working capital was $ 12.2 million in 2014 compared to cash provided of $ 27.0 million in 2013. in 2014 , cash provided by inventories was approximately $ 2.4 million compared to $ 3.0 million in 2013. in 2014 , the source of funds for accounts receivable was $ 2.7 million compared to the use of $ 2.0 million in 2013. in addition , as a result of timing of payments and extending vendor terms on accounts payable , positive cash flow was realized in both 2014 and 2013. capital expenditures were $ 24.2 million in 2014 compared to $ 20.7 million in 2013. capital spending in 2014 was higher than the preceding year as investments were made for new manufacturing focused on growth and productivity improvements in addition to higher spending due to scepter . in 2014 , the company paid approximately $ 156.6 million in connection with the acquisition of scepter which is included in the material handling segment . in 2013 , the company purchased an equity interest in a non-consolidated subsidiary , included in the distribution segment , for approximately $ 0.6 million . in 2012 , the company paid a combined total of $ 18.5 million in connection with the acquisitions of novel and jamco .
| 0 |
our product is planned to consist of : ( i ) one or more telephony servers , ( ii ) a software phone which allow customers to place calls , view and or listen to advertising , and ( iii ) a server to store customer information and to keep customer records , call , credits and payment history , and which server will also contains our web site , support center and customer account portal . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , and second , from paid calls by our customers . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. since we are presently in the development stage of our business , we can provide no assurance that we will successfully sell any products or services related to our planned activities . 14 to date , we have been in contact with professional advisors regarding legal compliance , accounting disclosure statements and financial reporting . we have also begun our planning for developing a website and searching for a contractor to develop that website . we will retain such a contractor only after we secure further funding . we intend to launch our “ information only ” web site during the first quarter of the 2014 calendar year . our business activities during the next 12 months following will be focused on raising funds , the development of our website , the development of our product , the development of a network of resellers and the establishment of our brand name . we do not expect to earn any sales revenue during this time . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , second , from paid calls by our customers , and third from licensing or selling our software . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. we are however running low on funding and our directors provided the company with a $ 15,243 loan to continue operation . results of operations years ended september 30 , 2014 and 201 3 we did not earn any revenues during the years ended september 30 , 2014 and 2013. we incurred operating expenses in the amount of $ 19,125 and $ 16,466 for the years ended september 30 , 2014 and 2013 , respectively . operating expenses for the year ended september 30 , 2014 , were comprised of $ 15,727 in professional fees and $ 3,398 of general and administrative expenses . operating expenses for the year ended september 30 , 2013 , were comprised primarily of $ 9,925 of professional fees and office and $ 6,541 of general and administrative expenses . since inception we have incurred operating expenses of $ 92,549. from inception ( march 11 , 2010 ) through the year ended september 30 , 2013 we had no revenues and a net loss of $ 92,549. the following table provides selected financial data about our company for the years ended september 30 , 2014 and 2013. replace_table_token_1_th going concern we currently have no operations . our independent auditor has issued an audit opinion for first american group inc. , which includes a statement raising substantial doubt as to our ability to continue as a going concern . 15 story_separator_special_tag and only at this point will our revenues exceed our costs . we make the following assumptions in our projections above for year 2 : * we anticipate we will earn $ 20 cpm ( $ 0.02 every time a customer views an advertising ) on the basis of estimating 2 million impressions , which represents approximately 167,000 impression per month . * we anticipate we will earn $ 0.3 every time a customer clicks on advertising , on the basis of estimating 200,000 clicks or approximately 16,700 clicks per month . * when a customer fills in a form or takes a survey or clicks through and purchases a product , we will earn revenue . we are estimating a $ 1 per action and assuming that we will have 50,000 completions per year or approximately 4,200 completions per month . * we anticipate that many calls outside north america will incur cost to the customer . we are estimating 750,000 minutes , which is approximately 2000 customers making 300 chargeable minutes per month . since we are planning to provide this service as cheaply as possible to customers , we are only assuming $ 0.005 ( half a cent ) per minute profit . while going to make a phone call , a customer is likely to see multiple advertisements which will include a combination of banners and videos on the web site , the advertiser 's portal and our software phone . as well , people investigating our service , but not necessarily register , will earn us revenue because they will be viewing advertising . we can offer no assurance that we will be successful in developing and offering our products and services . any number of factors may impact our ability to develop our products and services , including our ability to obtain financing if and when necessary ; the availability of skilled personnel ; market acceptance of our products , if they are developed ; and our ability to gain market share . our business will fail if we can not successfully implement our business plan or if we can not develop or successfully market our products and services . since there is no minimum amount of shares that must be sold by the company , we may receive no proceeds or very minimal proceeds from the offering and story_separator_special_tag our product is planned to consist of : ( i ) one or more telephony servers , ( ii ) a software phone which allow customers to place calls , view and or listen to advertising , and ( iii ) a server to store customer information and to keep customer records , call , credits and payment history , and which server will also contains our web site , support center and customer account portal . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , and second , from paid calls by our customers . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. since we are presently in the development stage of our business , we can provide no assurance that we will successfully sell any products or services related to our planned activities . 14 to date , we have been in contact with professional advisors regarding legal compliance , accounting disclosure statements and financial reporting . we have also begun our planning for developing a website and searching for a contractor to develop that website . we will retain such a contractor only after we secure further funding . we intend to launch our “ information only ” web site during the first quarter of the 2014 calendar year . our business activities during the next 12 months following will be focused on raising funds , the development of our website , the development of our product , the development of a network of resellers and the establishment of our brand name . we do not expect to earn any sales revenue during this time . we anticipate that our revenue will come from two primary sources : first , from the placement of advertising on our website and phone software , second , from paid calls by our customers , and third from licensing or selling our software . we anticipate that our operations will begin to generate revenue approximately 18 to 24 months following the date of filing of this form 10-k. we are however running low on funding and our directors provided the company with a $ 15,243 loan to continue operation . results of operations years ended september 30 , 2014 and 201 3 we did not earn any revenues during the years ended september 30 , 2014 and 2013. we incurred operating expenses in the amount of $ 19,125 and $ 16,466 for the years ended september 30 , 2014 and 2013 , respectively . operating expenses for the year ended september 30 , 2014 , were comprised of $ 15,727 in professional fees and $ 3,398 of general and administrative expenses . operating expenses for the year ended september 30 , 2013 , were comprised primarily of $ 9,925 of professional fees and office and $ 6,541 of general and administrative expenses . since inception we have incurred operating expenses of $ 92,549. from inception ( march 11 , 2010 ) through the year ended september 30 , 2013 we had no revenues and a net loss of $ 92,549. the following table provides selected financial data about our company for the years ended september 30 , 2014 and 2013. replace_table_token_1_th going concern we currently have no operations . our independent auditor has issued an audit opinion for first american group inc. , which includes a statement raising substantial doubt as to our ability to continue as a going concern . 15 story_separator_special_tag and only at this point will our revenues exceed our costs . we make the following assumptions in our projections above for year 2 : * we anticipate we will earn $ 20 cpm ( $ 0.02 every time a customer views an advertising ) on the basis of estimating 2 million impressions , which represents approximately 167,000 impression per month . * we anticipate we will earn $ 0.3 every time a customer clicks on advertising , on the basis of estimating 200,000 clicks or approximately 16,700 clicks per month . * when a customer fills in a form or takes a survey or clicks through and purchases a product , we will earn revenue . we are estimating a $ 1 per action and assuming that we will have 50,000 completions per year or approximately 4,200 completions per month . * we anticipate that many calls outside north america will incur cost to the customer . we are estimating 750,000 minutes , which is approximately 2000 customers making 300 chargeable minutes per month . since we are planning to provide this service as cheaply as possible to customers , we are only assuming $ 0.005 ( half a cent ) per minute profit . while going to make a phone call , a customer is likely to see multiple advertisements which will include a combination of banners and videos on the web site , the advertiser 's portal and our software phone . as well , people investigating our service , but not necessarily register , will earn us revenue because they will be viewing advertising . we can offer no assurance that we will be successful in developing and offering our products and services . any number of factors may impact our ability to develop our products and services , including our ability to obtain financing if and when necessary ; the availability of skilled personnel ; market acceptance of our products , if they are developed ; and our ability to gain market share . our business will fail if we can not successfully implement our business plan or if we can not develop or successfully market our products and services . since there is no minimum amount of shares that must be sold by the company , we may receive no proceeds or very minimal proceeds from the offering and
| liquidity and capital resources at september 30 , 2014 , we had a cash balance of $ 2,662. management does not believe that this amount will satisfy our cash requirements for the next twelve months . the directors of the company have been providing the company with shareholder loans in order to sustain the company . management believes that if subsequent private placements are successful , we will be able to generate sales revenue within the following twelve months thereof . however , additional equity financing may not be available to us on acceptable terms or at all , and thus we could fail to satisfy our future cash requirements . if we are unsuccessful in raising the additional proceeds through a private placement offering we will then have to seek additional funds through debt financing , which would be highly difficult for a new development stage company to secure . therefore , the company is highly dependent upon the success of the anticipated private placement offering and failure thereof would result in the company having to seek capital from other sources such as debt financing , which may not even be available to the company . however , if such financing were available , because we are a development stage company with no operations to date , it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate . at such time these funds are required , management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load . if we can not raise additional proceeds via a private placement of its common stock or secure debt financing it would be required to cease business operations . as a result , investors in our common stock would lose all of their investment .
| 1 |
any forward-looking statements involve known and unknown risks , uncertainties , and other factors that may cause our actual results , performance , or achievements to be materially different from any future results , performance , or achievements expressed or implied by such forward-looking statements . such factors include , among others , potential tariffs , our ability to maintain liquidity , our maintenance of patent protection , the impact of current and future court decisions regarding current litigation , our ability to maintain favorable third party manufacturing and supplier arrangements and relationships , foreign trade risk , our ability to quickly increase capacity in response to an increase in demand , our ability to access the market , our ability to maintain or decrease production costs , our ability to continue to finance research and development as well as operations and expansion of production , the impact of larger market players , specifically bd , in providing devices to the safety market , and other factors referenced in item 1a . risk factors . given these uncertainties , undue reliance should not be placed on forward-looking statements . 10 overview we have been manufacturing and marketing our products since 1997. vanishpoint ® syringes comprised 84.9 % of our sales in 2018. we also manufacture and market the easypoint ® needle , blood collection tube holder , iv safety catheter , and vanishpoint ® blood collection set . we currently provide other safety medical products in addition to safety products utilizing retractable technology . one such product is the patient safe ® syringe , which is uniquely designed to reduce the risk of bloodstream infections associated with catheter hub contamination . in the second quarter of 2016 , we began selling the easypoint ® needle . easypoint ® needles made up 10.3 % of revenues in 2018. the easypoint ® is a retractable needle that can be used with luer lock syringes , luer slip syringes , and prefilled syringes to give injections . the easypoint ® needle can also be used to aspirate fluids and collect blood . based on industry-wide trends , we anticipate that demand may increase for the easypoint ® needle . historically , unit sales have increased in the latter part of the year due , in part , to the demand for syringes during the flu season . our products have been and continue to be distributed nationally and internationally through numerous distributors . although we have made limited progress in some areas , such as the alternate care market , our volumes are not as high as they should be given the nature and quality of our products and the federal and state legislation requiring the use of safe needle devices . the alternate care market is composed of facilities that provide long-term nursing and out-patient surgery , emergency care , physician services , health clinics , and retail pharmacies . we continue to pursue various strategies to have better access to the hospital market , as well as other markets , including attempting to gain access to the market through our sales efforts , our innovative technology , introduction of new products , and , when necessary , litigation . we have reported in the past that our progress is limited principally due to the practices engaged in by bd , the dominant maker and seller of disposable syringes . we initiated an antitrust and false advertising lawsuit in 2007 against bd . although a district court judgment in 2015 awarded us approximately $ 340 million in antitrust damages from bd and the fifth circuit affirmed a finding of false advertising liability against bd , we were ultimately awarded a take nothing judgment in august 2017 and the case was dismissed . we appealed that ruling and oral arguments occurred october 3 , 2018. on march 26 , 2019 , the u.s. court of appeals for the fifth circuit issued an opinion affirming the take nothing judgment . we are evaluating this ruling and conferring with legal counsel regarding possible future action . our litigation expenses were significantly less in 2017 and 2018 than previous years . 2017 costs related to additional compensation , bonuses to ms. larios and mr. cowan , and stock option expense related to options granted in 2016 affect comparability of 2018 results to 2017 results . in november 2018 , we terminated 19 employees earning total annual compensation of approximately $ 1.12 million . some of these positions may be filled in the future . severance costs associated with the 2018 terminations were $ 244 thousand . in january 2018 , congress imposed another two-year moratorium on the 2.3 % medical device excise tax imposed by internal revenue code section 4191. thus , the medical device excise tax is not expected to go into effect until january 1 , 2020. in 2016 , we granted a right to three of our executive officers to purchase shares directly from the company . thomas j. shaw was the only officer to exercise such right prior to expiration , buying a total of three million shares in two transactions in 2017 for an aggregate purchase price of $ 2.35 million . we received approximately $ 1 million from our insurance carrier in the second quarter of 2017 and used these funds to repair our buildings from earlier storm damage . the remaining proceeds of $ 261 thousand were recognized as insurance proceeds in the fourth quarter of 2018. product purchases from our chinese manufacturers have enabled us to increase manufacturing capacity with little capital outlay and have provided a competitive manufacturing cost . story_separator_special_tag in 2018 , our chinese manufacturers 11 produced approximately 85.3 % of our products . in the event that we become unable to purchase products from our chinese manufacturers , we would need to find an alternate manufacturer for the blood collection set , iv catheter , patient safe ® syringe , 0.5ml insulin syringe , 0.5ml autodisable syringe , and 2ml , 5ml , and 10ml syringes and we would increase domestic production for the 1ml and 3ml syringes . in 1995 , we entered into a license agreement with thomas j. shaw for the exclusive right to manufacture , market , and distribute products utilizing his patented automated retraction technology and other patented technology . this technology is the subject of various patents and patent applications owned by mr. shaw . the license agreement generally provides for quarterly payments of a 5 % royalty fee on gross sales . with increased volumes , our manufacturing unit costs have generally tended to decline . factors that could affect our unit costs include increases in costs by third party manufacturers , changing production volumes , costs of petroleum products , and transportation costs . increases in such costs may not be recoverable through price increases of our products . results of operations the following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties . our actual future results could differ materially from our historical results of operations and those discussed in the forward-looking statements . all period references are to our fiscal years ended december 2018 , 2017 , or 2016. dollar amounts have been rounded for ease of reading . comparison of year ended december 31 , 2018 and year ended december 31 , 2017 domestic sales accounted for 86.1 % and 78.3 % of the revenues in 2018 and 2017 , respectively . domestic revenues increased 6.0 % principally due to increased volume mitigated by lower average price . domestic unit sales increased 12.0 % . domestic unit sales were 81.0 % of total unit sales for 2018. international revenues decreased from $ 7.5 million in 2017 to $ 4.6 million in 2018 , primarily due to lower volumes . overall unit sales decreased 3.8 % . our international orders may be subject to significant fluctuation over time . such orders may fluctuate due to health initiatives at various times as well as economic conditions . cost of manufactured product decreased $ 1.5 million principally due to lower volumes and lower unit cost of manufacture . royalty expense increased $ 80 thousand due to increased gross sales . gross profit margins increased from 28.9 % in 2017 to 30.7 % in 2018 principally due to lower cost of manufacturing . operating expenses decreased 14.2 % from the prior year due to lower legal expense , no bonuses paid in 2018 , lower travel and entertainment cost , decreased costs of engineering samples , and no stock option expense in 2018. these decreases were mitigated by severance costs . recognition of insurance proceeds of $ 261 thousand is due to actual building repairs being less than the insurance payment . the loss from operations was $ 1.3 million in 2018 compared to a loss from operations of $ 3.8 million in 2017. we recorded $ 188 thousand in tax benefits in connection with the enactment of the tax cut and jobs act ( the act ) on december 22 , 2017. the act established new tax provisions that affect us including the elimination of the corporate alternative minimum tax and changing rules related to uses and limitations of net operating loss carry forwards created after december 31 , 2017. carry forward credits from alternative minimum taxes paid in prior years became refundable in tax years beginning january 1 , 2018. such credits were , however , subject to sequestration . however , in january 2019 , the irs had a ruling that provided that alternative minimum tax payments are not subject to sequestration , bringing the total benefit to $ 202 thousand , an increase of $ 13 thousand from last year . 12 cash flow from operations was negative $ 1.2 million in 2018 due to our net loss , increased inventory , and use of insurance proceeds for repairs . the decrease in cash was mitigated by a decrease in accounts receivable and an increase in liabilities . in 2018 , we transferred $ 3 million from our cash accounts into securities with maturities of one to three years . this transfer significantly affects our net decrease in cash in 2018. however , the securities may increase investment income in the future . comparison of year ended december 31 , 2017 and year ended december 31 , 2016 domestic sales accounted for 78.3 % and 88.2 % of the revenues in 2017 and 2016 , respectively . domestic revenues increased 2.7 % principally due to increased sales of easypoint ® and the blood collection set . domestic unit sales increased 7.1 % . domestic unit sales were 69.5 % of total unit sales for 2017. international revenues increased from $ 3.5 million in 2016 to $ 7.5 million in 2017 , primarily due to increased volumes mitigated by lower average prices . overall unit sales increased 28.3 % . our international orders may be subject to significant fluctuation over time . such orders may fluctuate due to health initiatives at various times as well as economic conditions . cost of manufactured product increased $ 4.7 million principally due to higher volumes . royalty expense increased $ 337 thousand due to increased gross sales . gross profit margins decreased from 34.7 % in 2016 to 28.9 % in 2017 principally due to a larger portion of international sales which bear a lower average sales price . operating expenses decreased 0.7 % from the prior year due to decreased legal expenses and no impairment costs incurred in 2017 , offset by increased
| liquidity and capital resources at september 30 , 2014 , we had a cash balance of $ 2,662. management does not believe that this amount will satisfy our cash requirements for the next twelve months . the directors of the company have been providing the company with shareholder loans in order to sustain the company . management believes that if subsequent private placements are successful , we will be able to generate sales revenue within the following twelve months thereof . however , additional equity financing may not be available to us on acceptable terms or at all , and thus we could fail to satisfy our future cash requirements . if we are unsuccessful in raising the additional proceeds through a private placement offering we will then have to seek additional funds through debt financing , which would be highly difficult for a new development stage company to secure . therefore , the company is highly dependent upon the success of the anticipated private placement offering and failure thereof would result in the company having to seek capital from other sources such as debt financing , which may not even be available to the company . however , if such financing were available , because we are a development stage company with no operations to date , it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate . at such time these funds are required , management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load . if we can not raise additional proceeds via a private placement of its common stock or secure debt financing it would be required to cease business operations . as a result , investors in our common stock would lose all of their investment .
| 0 |
any forward-looking statements involve known and unknown risks , uncertainties , and other factors that may cause our actual results , performance , or achievements to be materially different from any future results , performance , or achievements expressed or implied by such forward-looking statements . such factors include , among others , potential tariffs , our ability to maintain liquidity , our maintenance of patent protection , the impact of current and future court decisions regarding current litigation , our ability to maintain favorable third party manufacturing and supplier arrangements and relationships , foreign trade risk , our ability to quickly increase capacity in response to an increase in demand , our ability to access the market , our ability to maintain or decrease production costs , our ability to continue to finance research and development as well as operations and expansion of production , the impact of larger market players , specifically bd , in providing devices to the safety market , and other factors referenced in item 1a . risk factors . given these uncertainties , undue reliance should not be placed on forward-looking statements . 10 overview we have been manufacturing and marketing our products since 1997. vanishpoint ® syringes comprised 84.9 % of our sales in 2018. we also manufacture and market the easypoint ® needle , blood collection tube holder , iv safety catheter , and vanishpoint ® blood collection set . we currently provide other safety medical products in addition to safety products utilizing retractable technology . one such product is the patient safe ® syringe , which is uniquely designed to reduce the risk of bloodstream infections associated with catheter hub contamination . in the second quarter of 2016 , we began selling the easypoint ® needle . easypoint ® needles made up 10.3 % of revenues in 2018. the easypoint ® is a retractable needle that can be used with luer lock syringes , luer slip syringes , and prefilled syringes to give injections . the easypoint ® needle can also be used to aspirate fluids and collect blood . based on industry-wide trends , we anticipate that demand may increase for the easypoint ® needle . historically , unit sales have increased in the latter part of the year due , in part , to the demand for syringes during the flu season . our products have been and continue to be distributed nationally and internationally through numerous distributors . although we have made limited progress in some areas , such as the alternate care market , our volumes are not as high as they should be given the nature and quality of our products and the federal and state legislation requiring the use of safe needle devices . the alternate care market is composed of facilities that provide long-term nursing and out-patient surgery , emergency care , physician services , health clinics , and retail pharmacies . we continue to pursue various strategies to have better access to the hospital market , as well as other markets , including attempting to gain access to the market through our sales efforts , our innovative technology , introduction of new products , and , when necessary , litigation . we have reported in the past that our progress is limited principally due to the practices engaged in by bd , the dominant maker and seller of disposable syringes . we initiated an antitrust and false advertising lawsuit in 2007 against bd . although a district court judgment in 2015 awarded us approximately $ 340 million in antitrust damages from bd and the fifth circuit affirmed a finding of false advertising liability against bd , we were ultimately awarded a take nothing judgment in august 2017 and the case was dismissed . we appealed that ruling and oral arguments occurred october 3 , 2018. on march 26 , 2019 , the u.s. court of appeals for the fifth circuit issued an opinion affirming the take nothing judgment . we are evaluating this ruling and conferring with legal counsel regarding possible future action . our litigation expenses were significantly less in 2017 and 2018 than previous years . 2017 costs related to additional compensation , bonuses to ms. larios and mr. cowan , and stock option expense related to options granted in 2016 affect comparability of 2018 results to 2017 results . in november 2018 , we terminated 19 employees earning total annual compensation of approximately $ 1.12 million . some of these positions may be filled in the future . severance costs associated with the 2018 terminations were $ 244 thousand . in january 2018 , congress imposed another two-year moratorium on the 2.3 % medical device excise tax imposed by internal revenue code section 4191. thus , the medical device excise tax is not expected to go into effect until january 1 , 2020. in 2016 , we granted a right to three of our executive officers to purchase shares directly from the company . thomas j. shaw was the only officer to exercise such right prior to expiration , buying a total of three million shares in two transactions in 2017 for an aggregate purchase price of $ 2.35 million . we received approximately $ 1 million from our insurance carrier in the second quarter of 2017 and used these funds to repair our buildings from earlier storm damage . the remaining proceeds of $ 261 thousand were recognized as insurance proceeds in the fourth quarter of 2018. product purchases from our chinese manufacturers have enabled us to increase manufacturing capacity with little capital outlay and have provided a competitive manufacturing cost . story_separator_special_tag in 2018 , our chinese manufacturers 11 produced approximately 85.3 % of our products . in the event that we become unable to purchase products from our chinese manufacturers , we would need to find an alternate manufacturer for the blood collection set , iv catheter , patient safe ® syringe , 0.5ml insulin syringe , 0.5ml autodisable syringe , and 2ml , 5ml , and 10ml syringes and we would increase domestic production for the 1ml and 3ml syringes . in 1995 , we entered into a license agreement with thomas j. shaw for the exclusive right to manufacture , market , and distribute products utilizing his patented automated retraction technology and other patented technology . this technology is the subject of various patents and patent applications owned by mr. shaw . the license agreement generally provides for quarterly payments of a 5 % royalty fee on gross sales . with increased volumes , our manufacturing unit costs have generally tended to decline . factors that could affect our unit costs include increases in costs by third party manufacturers , changing production volumes , costs of petroleum products , and transportation costs . increases in such costs may not be recoverable through price increases of our products . results of operations the following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties . our actual future results could differ materially from our historical results of operations and those discussed in the forward-looking statements . all period references are to our fiscal years ended december 2018 , 2017 , or 2016. dollar amounts have been rounded for ease of reading . comparison of year ended december 31 , 2018 and year ended december 31 , 2017 domestic sales accounted for 86.1 % and 78.3 % of the revenues in 2018 and 2017 , respectively . domestic revenues increased 6.0 % principally due to increased volume mitigated by lower average price . domestic unit sales increased 12.0 % . domestic unit sales were 81.0 % of total unit sales for 2018. international revenues decreased from $ 7.5 million in 2017 to $ 4.6 million in 2018 , primarily due to lower volumes . overall unit sales decreased 3.8 % . our international orders may be subject to significant fluctuation over time . such orders may fluctuate due to health initiatives at various times as well as economic conditions . cost of manufactured product decreased $ 1.5 million principally due to lower volumes and lower unit cost of manufacture . royalty expense increased $ 80 thousand due to increased gross sales . gross profit margins increased from 28.9 % in 2017 to 30.7 % in 2018 principally due to lower cost of manufacturing . operating expenses decreased 14.2 % from the prior year due to lower legal expense , no bonuses paid in 2018 , lower travel and entertainment cost , decreased costs of engineering samples , and no stock option expense in 2018. these decreases were mitigated by severance costs . recognition of insurance proceeds of $ 261 thousand is due to actual building repairs being less than the insurance payment . the loss from operations was $ 1.3 million in 2018 compared to a loss from operations of $ 3.8 million in 2017. we recorded $ 188 thousand in tax benefits in connection with the enactment of the tax cut and jobs act ( the act ) on december 22 , 2017. the act established new tax provisions that affect us including the elimination of the corporate alternative minimum tax and changing rules related to uses and limitations of net operating loss carry forwards created after december 31 , 2017. carry forward credits from alternative minimum taxes paid in prior years became refundable in tax years beginning january 1 , 2018. such credits were , however , subject to sequestration . however , in january 2019 , the irs had a ruling that provided that alternative minimum tax payments are not subject to sequestration , bringing the total benefit to $ 202 thousand , an increase of $ 13 thousand from last year . 12 cash flow from operations was negative $ 1.2 million in 2018 due to our net loss , increased inventory , and use of insurance proceeds for repairs . the decrease in cash was mitigated by a decrease in accounts receivable and an increase in liabilities . in 2018 , we transferred $ 3 million from our cash accounts into securities with maturities of one to three years . this transfer significantly affects our net decrease in cash in 2018. however , the securities may increase investment income in the future . comparison of year ended december 31 , 2017 and year ended december 31 , 2016 domestic sales accounted for 78.3 % and 88.2 % of the revenues in 2017 and 2016 , respectively . domestic revenues increased 2.7 % principally due to increased sales of easypoint ® and the blood collection set . domestic unit sales increased 7.1 % . domestic unit sales were 69.5 % of total unit sales for 2017. international revenues increased from $ 3.5 million in 2016 to $ 7.5 million in 2017 , primarily due to increased volumes mitigated by lower average prices . overall unit sales increased 28.3 % . our international orders may be subject to significant fluctuation over time . such orders may fluctuate due to health initiatives at various times as well as economic conditions . cost of manufactured product increased $ 4.7 million principally due to higher volumes . royalty expense increased $ 337 thousand due to increased gross sales . gross profit margins decreased from 34.7 % in 2016 to 28.9 % in 2017 principally due to a larger portion of international sales which bear a lower average sales price . operating expenses decreased 0.7 % from the prior year due to decreased legal expenses and no impairment costs incurred in 2017 , offset by increased
| liquidity and capital resources at the present time , management does not intend to publicly raise equity capital . due to the funds received from prior litigation and direct purchase of stock , we have sufficient cash reserves and intend to rely on operations , cash reserves , and debt financing , when available , as the primary ongoing sources of cash . our ability to obtain additional funds through loans is uncertain . in 2018 , we transferred $ 3 million from our cash accounts into securities with maturities of one to three years . this transfer significantly affects our net decrease in cash in 2018. however , the securities may increase investment income in the future . historical sources of liquidity we have historically funded operations primarily from the proceeds from revenues , private placements , litigation settlements , and loans . 13 internal sources of liquidity margins and market access to routinely achieve positive or break even quarters , we need increased access to hospital markets which has been difficult to obtain . we will continue to attempt to gain access to the market through our sales efforts , innovative technology , the introduction of new products , and , when necessary , litigation . we continue to focus on methods of upgrading our manufacturing capability and efficiency in order to reduce costs .
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finally , we expect remarketing income to be lower than 2016. we anticipate rail international 's segment profit in 2017 to grow slightly compared to 2016 on a local currency basis . higher lease revenue , resulting from modest fleet growth and continued strong utilization , as well as lower maintenance expenses , will drive this increase . we expect asc 's segment profit in 2017 to be higher than 2016. we anticipate higher revenue , due to similar tonnage carried at more favorable freight rates . in addition , operating expenses are expected to decrease , as we plan to have one fewer vessel in service during 2017 compared to 2016. we believe portfolio management 's segment profit in 2017 will be lower than 2016. we will benefit from the continuation of strong financial results at the rolls-royce partners finance affiliates ; however , this will be offset by substantially lower remarketing income , as the magnitude of residual sharing fees received in 2016 will not be replicated . 29 segment operations segment profit is an internal performance measure used by the chief executive officer to assess the performance of each segment in a given period . segment profit includes all revenues , pretax earnings from affiliates , and net gains on asset dispositions that are attributable to the segments , as well as expenses that management believes are directly associated with the financing , maintenance , and operation of the revenue earning assets . segment profit excludes selling , general and administrative expenses , income taxes , and certain other amounts not allocated to the segments . these amounts are included in other . we allocate debt balances and related interest expense to each segment based upon predetermined debt to equity leverage ratios . due to the changes in the composition of our segments , we modified segment leverage levels for 2016. the leverage levels for 2016 were 5:1 for rail north america , 3:1 for rail international , 1.5:1 for asc , and 1:1 for portfolio management . prior to 2016 , the leverage levels were 5:1 for rail north america , 2:1 for rail international , 1.5:1 for asc , and 3:1 for portfolio management . we believe that by using this leverage and interest expense allocation methodology , each operating segment 's financial performance reflects appropriate risk-adjusted borrowing costs . rail north america segment summary at december 31 , 2016 , rail north america 's wholly owned fleet , excluding boxcars , consisted of approximately 104,500 cars . fleet utilization , excluding boxcars , was 98.9 % at the end of 2016 , compared to 99.1 % at the end of 2015 , and 99.2 % at the end of 2014 . fleet utilization for approximately 17,700 boxcars was 93.8 % at the end of 2016 compared to 97.7 % at the end of 2015 , and 92.7 % at the end of 2014. in 2014 , we acquired more than 18,500 boxcars from general electric railcar services corporation for approximately $ 340 million ( the `` boxcar fleet `` ) . the downturn in the rail market continued in 2016 , as the oversupply of railcars resulted in a challenging lease rate environment . during the year , the lease price index ( the `` lpi `` , see definition below ) decreased 20.3 % , compared to increases of 32.2 % in 2015 , and 38.8 % in 2014 . lease terms on renewals for cars in the lpi averaged 32 months in 2016 , compared to 54 months in 2015 , and 66 months in 2014 . during 2016 , an average of approximately 103,900 railcars , excluding boxcars , were on lease , compared to 106,000 in 2015 , and 105,800 in 2014 . the decrease in railcars on lease in the current year is largely due to railcars that were sold or scrapped in an effort to optimize the composition of our fleet . the decline in demand , and the resulting decline in lease rates , was broad-based , but was particularly severe among cars serving the energy markets . during 2016 , we recorded impairment losses of $ 31.2 million , including $ 29.8 million related specifically to certain railcars in flammable service that we believe have been permanently and negatively impacted by regulatory changes . in 2014 , we entered into a long-term supply agreement with trinity rail group , llc ( `` trinity `` ) a subsidiary of trinity industries that took effect in mid-2016 . under the terms of that agreement , we may order up to 8,950 newly built railcars over a four-year period from march , 2016 through march , 2020. we may order either tank or freight cars ; however , we expect that the majority of the order will be for tank cars . as of december 31 , 2016 , 3,173 railcars have been ordered , of which 776 railcars have been delivered . pursuant to the terms of the agreement , the parties conducted a review of the contract pricing in january 2017 as it no longer reflected market rates . based on this review , the parties agreed to reduce contract pricing for future orders pursuant to the terms of the agreement . under a prior supply agreement with trinity entered into in 2011 , we ordered 12,500 newly built railcars , of which 12,313 railcars have been delivered as of december 31 , 2016. as of december 31 , 2016 , leases for approximately 15,100 railcars in our term lease fleet and approximately 5,200 boxcars are scheduled to expire in 2017. these amounts exclude railcars on leases that are scheduled to expire in 2017 but have already been renewed or assigned to a new lessee . story_separator_special_tag investment volume asc 's investments in each of 2016 , 2015 , and 2014 consisted of structural and mechanical upgrades to our vessels . portfolio management segment summary a significant portion of portfolio management 's segment profit is generated by the rolls-royce & partners finance companies . the rolls-royce & partners finance companies ( collectively the “ rrpf affiliates ” ) are a group of fifteen 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 $ 51.8 million for 2016 , $ 65.5 million for 2015 , and $ 55.9 million for 2014 . the rrpf affiliates owned 407 aircraft engines at the end of 2016 compared to 436 at the end of 2015 and 433 at the end of 40 2014. operating results and remarketing income for the rrpf affiliates continued to be strong in 2016. however , impairment losses recorded for certain models of aircraft spare engines negatively impacted overall income at the rrpf affiliates in 2016. in 2015 , we made the decision to exit the majority of our marine investments , including six chemical parcel tankers ( the `` nordic vessels `` ) , most of our inland marine vessels , and our 50 % interest in the cardinal marine joint venture . as a result , we initially recognized impairment losses of $ 30.8 million on the nordic vessels and $ 19.0 million on the cardinal marine joint venture in 2015. further , an additional $ 1.8 million of impairment losses were recorded for certain of the nordic vessels in 2016. subsequently , we completed the sales of all six of the nordic vessels , our 50 % interest in the cardinal marine joint venture , and the majority of our inland marine assets for total proceeds of $ 59.9 million and $ 124.4 million in 2016 and 2015. these sales resulted in net gains of $ 4.2 million and $ 21.6 million for 2016 and 2015. we also recognized a gain of $ 1.0 million in 2016 , resulting from contingent proceeds received from the sale of the cardinal marine joint venture . based on the valuation of our remaining inland marine assets held for sale at december 31 , 2016 , we recorded further impairment losses of $ 4.9 million . we expect to sell the remaining targeted inland marine assets in 2017. upon final completion of these sales , portfolio management will continue to own and operate other marine investments , consisting primarily of five liquefied gas carrying vessels ( the `` norgas vessels `` ) . in 2016 , we also realized residual sharing income of $ 82.8 million . proceeds of $ 49.1 million were recorded as a result of the settlement of a residual sharing agreement . this agreement was originally entered into in 2001 and related to a residual guarantee we provided on certain rail assets in the u.k. receipt of the settlement fee concludes our participation in this transaction . additionally , a customer sold its interest in two leased nuclear power plant facilities and , as manager of the leases , we received residual sharing fees of $ 30.1 million . in 2014 , we sold our investments in the intermodal investment fund v and intermodal investment fund vii affiliates and received aggregate cash proceeds of $ 18.3 million . portfolio management 's total asset base was $ 593.5 million at december 31 , 2016 , compared to $ 636.5 million at december 31 , 2015 , and $ 813.3 million at december 31 , 2014 . the following table shows portfolio management 's segment results for the years ended december 31 ( in millions ) : replace_table_token_17_th 41 segment profit in 2016 , segment profit was $ 136.9 million , compared to $ 49.8 million in 2015 . segment profit in 2016 included income of $ 49.1 million related to the settlement of a residual sharing agreement . in addition , segment profit in 2016 was impacted by a net pre-tax loss of approximately $ 1.5 million associated with the planned exit of the majority of marine investments , compared to a net pre-tax loss of approximately $ 28.2 million in 2015. excluding the impact of these items , segment profit was $ 11.3 million higher in 2016 primarily due to higher residual sharing gains on managed portfolio sales , partially offset by lower rrpf affiliate income . in 2015 , segment profit was $ 49.8 million , compared to $ 68.2 million in 2014. the decrease was driven by a net loss of approximately $ 28.2 million associated with the planned exit of the majority of the marine investments . excluding this net loss , segment profit increased $ 9.8 million primarily due to higher rrpf affiliate income and higher residual sharing fees on managed portfolio sales . revenues in 2016 , lease revenue decreased $ 16.4 million , primarily due to the impact of the sales of leased assets in both years . marine operating revenue decreased $ 19.6 million , largely due to the absence of revenue from the nordic vessels that were sold during 2015 and 2016. in 2015 , lease revenue decreased $ 7.5 million , primarily due to the impact of sales of leased assets in both years . marine operating revenue increased $ 5.6 million , primarily due to higher revenue from the nordic vessels and higher inland marine revenue , partially offset by lower revenue from the norgas vessels . other revenue decreased $ 3.0 million primarily due to lower investment fund distributions in 2015 and lower interest income resulting from the repayment of loans in both years . 42 expenses in 2016 , marine operating expense decreased $ 15.9 million , primarily due to the absence of the nordic vessels that were sold during 2015
| liquidity and capital resources at the present time , management does not intend to publicly raise equity capital . due to the funds received from prior litigation and direct purchase of stock , we have sufficient cash reserves and intend to rely on operations , cash reserves , and debt financing , when available , as the primary ongoing sources of cash . our ability to obtain additional funds through loans is uncertain . in 2018 , we transferred $ 3 million from our cash accounts into securities with maturities of one to three years . this transfer significantly affects our net decrease in cash in 2018. however , the securities may increase investment income in the future . historical sources of liquidity we have historically funded operations primarily from the proceeds from revenues , private placements , litigation settlements , and loans . 13 internal sources of liquidity margins and market access to routinely achieve positive or break even quarters , we need increased access to hospital markets which has been difficult to obtain . we will continue to attempt to gain access to the market through our sales efforts , innovative technology , the introduction of new products , and , when necessary , litigation . we continue to focus on methods of upgrading our manufacturing capability and efficiency in order to reduce costs .
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