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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
| debt total debt increased $ 67.7 million from the prior year , primarily due to issuances of long-term debt of $ 882.8 million , largely offset by scheduled maturities and principal payments of $ 800.0 million and the effects of foreign exchange on outstanding long-term debt balances . the following table shows the details of our long-term debt issuances in 2016 ( $ in millions ) : replace_table_token_21_th ( 1 ) this $ 125.0 million principal amount was repaid in 2016. the floating interest rate shown is as of the final payment date . ( 2 ) floating interest rate at december 31 , 2016 . 46 the following table shows the carrying value of our debt obligations by major component , including off-balance sheet debt , as of december 31 , 2016 ( in millions ) : replace_table_token_22_th ( 1 ) off-balance sheet debt represents the estimated present value of committed operating lease payments and is equal to the amount reported as off-balance sheet assets . see `` note 7 . debt `` in part ii , item 8 of this form 10-k. equity total equity increased $ 67.0 million from the prior year , primarily due to net income of $ 257.1 million , $ 12.8 million from the effects of post-retirement benefit plan adjustments , and $ 10.4 million from the effects of share-based compensation . these increases were partially offset by stock repurchases of $ 120.1 million , $ 68.1 million related to dividends , and $ 26.0 million of foreign currency translation adjustments due to the balance sheet effects of a stronger us dollar . see `` note 19 . shareholders ' equity `` in part ii , item 8 of this form 10-k. cash flow discussion we generate a significant amount of cash from operating activities and from our investment portfolio proceeds .
| 1 |
on may 10 , 2018 , we sold the residence inn in tampa , fl for approximately $ 24.0 million in cash . the sale resulted in a gain of approximately $ 400,000 for the year ended december 31 , 2018 and is included in “ gain ( loss ) on sale of hotel properties ” 46 in the consolidated statement of operations . the company also repaid approximately $ 22.5 million of debt associated with the hotel property . on june 13 , 2018 , we refinanced seven mortgage loans with existing outstanding balances totaling $ 1.068 billion . the new financing is comprised of six separate mortgage loans that total approximately $ 1.270 billion . each has a two-year initial term with five one-year extension options , subject to the satisfaction of certain conditions . the original principal amounts of each mortgage loan and the hotel properties securing each mortgage loan are set forth in the following table : mortgage loan principal amount ( in thousands ) interest rate secured hotel properties a $ 180,720 libor + 3.65 % courtyard columbus tipton lakes courtyard scottsdale old town residence inn phoenix airport springhill suites manhattan beach springhill suites plymouth meeting residence inn las vegas hughes center residence inn newark b $ 174,400 libor + 3.39 % courtyard newark springhill suites bwi courtyard oakland airport courtyard plano legacy residence inn plano towneplace suites manhattan beach courtyard basking ridge c $ 221,040 libor + 3.73 % sheraton san diego mission valley sheraton bucks county hilton ft. worth hyatt regency coral gables hilton minneapolis d $ 262,640 libor + 4.02 % hilton santa fe embassy suites dulles marriott beverly hills one ocean marriott suites dallas market center e ( 1 ) $ 216,320 libor + 4.36 % marriott memphis east embassy suites philadelphia airport sheraton anchorage lakeway resort & spa marriott fremont f $ 215,120 libor + 3.68 % w atlanta downtown embassy suites flagstaff embassy suites walnut creek marriott bridgewater marriott durham research triangle park _ ( 1 ) on july 3 , 2018 , we purchased $ 56.3 million of mezzanine debt related to the pool e loan that was issued in conjunction with the june 13 , 2018 refinancing . the net floating interest rate after the purchase of the pool e loan is libor + 2.73 % . on june 26 , 2018 , ashford trust entered into the enhanced return funding program agreement and amendment no . 1 to the amended and restated advisory agreement ( the “ erfp agreement ” ) with ashford inc. and ashford llc . the erfp agreement amended our amended and restated advisory agreement , among other things , to name ashford inc. and its subsidiaries as the company 's sole and exclusive provider of asset management , project management and other services offered by ashford inc. or any of its subsidiaries and to revise the payment terms such that the base fee and reimbursable expenses will be paid monthly . the independent members of the board of directors of each of ashford inc. and us , with the assistance of separate and independent legal counsel , engaged to negotiate the erfp agreement on behalf of ashford inc. and us , respectively . the erfp agreement generally provides that ashford llc will provide funding to facilitate the acquisition of properties by ashford trust op that are recommended by ashford llc , in an aggregate amount of up to $ 50 million ( subject to increase to up to $ 100 million by mutual agreement ) . each funding will equal 10 % of the property acquisition price and will be made either at the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition , in exchange for furniture , fixture and equipment for use at the acquired property or any other property owned by ashford trust op . the initial term of the erfp agreement is two years ( the “ initial term ” ) , unless earlier terminated pursuant to the terms of the erfp agreement . at the end of the initial term , the erfp agreement shall automatically renew for successive one-year 47 periods ( each such period a “ renewal term ” ) unless either ashford inc. or ashford trust provides written notice to the other at least sixty days in advance of the expiration of the initial term or renewal term , as applicable , that such notifying party intends not to renew the erfp agreement . on june 29 , 2018 , the company acquired a 100 % interest in the 252 -room hilton alexandria old town in alexandria , virginia for $ 111.0 million before acquisition costs . in connection with our acquisition ashford llc was obligated to provide us with approximately $ 11.1 million in exchange for ff & e at our hotel properties . as of december 31 , 2018 , ashford trust had received $ 11.1 million of cash in exchange for ff & e that was subsequently leased back to ashford trust rent-free under the erfp agreement . on july 3 , 2018 , we purchased $ 56.3 million of mezzanine debt related to the pool e loan that was issued in conjunction with the june 13 , 2018 refinancing . the net floating interest rate after the purchase of the pool e loan is libor + 2.73 % . on august 8 , 2018 , in connection with ashford inc. 's acquisition of premier from remington lodging , we : ( i ) amended and restated our mutual exclusivity agreement and hotel master management agreement with remington lodging , in each case to apply only with respect to property management ( and not project management ) services ; and ( ii ) entered into a mutual exclusivity agreement and master project management with premier , in each case to apply with respect to project management services . story_separator_special_tag unrealized gain ( loss ) on derivatives . unrealized loss on derivatives de creased $ 624,000 or 22.3 % , to $ 2.2 million during 2018 compared to 2017 . in 2018 , we recognized unrealized losses of $ 2.7 million from interest rate caps and $ 488,000 from interest rate floors , partially offset by unrealized gains of $ 988,000 from cmbx tranches . in 2017 , we recognized unrealized losses of $ 4.2 million , $ 2.4 million and $ 758,000 associated with the remaining cmbx tranches , interest rate floors , and interest rate caps , respectively , partially offset by unrealized gains of $ 4.2 million associated with the reclassification to other income ( expense ) for the recognition of realized losses from cmbx tranche terminations and $ 427,000 associated with the reclassification to other income ( expense ) for maturities of options on futures contracts . the fair value of interest rate floors and interest rate derivatives are primarily based on movements in the libor forward curve and the passage of time . the fair value of options on futures contracts is determined based on the last reported settlement price as of the measurement date . the fair value of credit default swaps is based on the change in value of cmbx indices . income tax ( expense ) benefit . income tax ( expense ) benefit changed $ 5.0 million , from an income tax benefit of $ 2.2 million in 2017 to income tax expense of $ 2.8 million in 2018 . the change in income tax ( expense ) benefit is primarily due to an increase in taxable income recognized by our trs entities , which was partially due to the renewal of a significant portion of the company 's trs leases in january 2018 and is also partially due to having utilized all of our available trs net operating losses . ( income ) loss from consolidated entities attributable to noncontrolling interests . our noncontrolling interest partner in consolidated entities was allocated losses of $ 30,000 and $ 110,000 during 2018 and 2017 , respectively . net ( income ) loss attributable to redeemable noncontrolling interests in operating partnership . noncontrolling interests in our operating partnership were allocated their proportionate share of net loss of $ 29.3 million and $ 21.6 million in 2018 and 2017 , respectively . redeemable noncontrolling interests represented ownership interests of 14.64 % and 15.52 % in the operating partnership at december 31 , 2018 and 2017 , respectively . 52 comparison of year ended december 31 , 2017 with year ended december 31 , 2016 all hotel properties owned during the years ended december 31 , 2017 and 2016 have been included in our results of operations during the respective periods in which they were owned . based on when a hotel property was acquired or disposed , operating results for certain hotel properties are not comparable for the years ended december 31 , 2017 and 2016 . the hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties . the following acquisitions and dispositions affect reporting comparability related to our consolidated financial statements : replace_table_token_12_th ( 1 ) collectively referred to as “ hotel dispositions ” the following table illustrates the key performance indicators of the hotel properties and worldquest included in our results of operations : replace_table_token_13_th the following table illustrates the key performance indicators of the 120 hotel properties and worldquest that were included for the full years ended december 31 , 2017 and 2016 , respectively : replace_table_token_14_th net income ( loss ) attributable to the company . net loss attributable to the company increased $ 20.7 million , from $ 46.3 million for the year ended december 31 , 2016 ( “ 2016 ” ) to $ 67.0 million for the year ended december 31 , 2017 ( “ 2017 ” ) as a result of the factors discussed below . revenue . rooms revenue from our hotel properties and worldquest decreased $ 37.1 million , or 3.1 % , to $ 1.1 billion during 2017 compared to 2016. this decrease is primarily attributable to lower rooms revenue of $ 54.3 million related to our hotel dispositions , partially offset by higher rooms revenue of $ 17.3 million from our comparable hotel properties and worldquest , which experienced a 1.4 % increase in room rates and a 32 basis point increase in occupancy . food and beverage revenue decreased $ 18.4 million , or 7.3 % , to $ 234.8 million during 2017 compared to 2016. this decrease is attributable to lower food and beverage revenue of $ 9.4 million from our hotel dispositions and $ 9.0 million from our comparable hotel properties and worldquest . the decrease in our comparable hotel properties and worldquest is primarily attributable to approximately $ 1.6 million associated with the renovation of the dfw airport marriott in irving , texas and unfavorable year over year changes in the july 4th holiday calendar moving from the weekend to midweek . other hotel revenue , which consists mainly of internet access , parking , and spa , increased $ 1.3 million , or 2.3 % , to $ 58.2 million during 2017 compared to 2016. this increase is primarily attributable to higher other revenue of $ 3.0 million from our 53 comparable hotel properties and worldquest , partially offset by lower other revenue of $ 1.6 million from our hotel dispositions . other non-hotel revenue increased $ 1.4 million , or 81.1 % , to $ 3.2 million in 2017. hotel operating expenses . hotel operating expenses decreased $ 31.1 million , or 3.3 % , to $ 907.3 million during 2017 compared to 2016. hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees . direct expenses decreased $
| debt total debt increased $ 67.7 million from the prior year , primarily due to issuances of long-term debt of $ 882.8 million , largely offset by scheduled maturities and principal payments of $ 800.0 million and the effects of foreign exchange on outstanding long-term debt balances . the following table shows the details of our long-term debt issuances in 2016 ( $ in millions ) : replace_table_token_21_th ( 1 ) this $ 125.0 million principal amount was repaid in 2016. the floating interest rate shown is as of the final payment date . ( 2 ) floating interest rate at december 31 , 2016 . 46 the following table shows the carrying value of our debt obligations by major component , including off-balance sheet debt , as of december 31 , 2016 ( in millions ) : replace_table_token_22_th ( 1 ) off-balance sheet debt represents the estimated present value of committed operating lease payments and is equal to the amount reported as off-balance sheet assets . see `` note 7 . debt `` in part ii , item 8 of this form 10-k. equity total equity increased $ 67.0 million from the prior year , primarily due to net income of $ 257.1 million , $ 12.8 million from the effects of post-retirement benefit plan adjustments , and $ 10.4 million from the effects of share-based compensation . these increases were partially offset by stock repurchases of $ 120.1 million , $ 68.1 million related to dividends , and $ 26.0 million of foreign currency translation adjustments due to the balance sheet effects of a stronger us dollar . see `` note 19 . shareholders ' equity `` in part ii , item 8 of this form 10-k. cash flow discussion we generate a significant amount of cash from operating activities and from our investment portfolio proceeds .
| 0 |
on may 10 , 2018 , we sold the residence inn in tampa , fl for approximately $ 24.0 million in cash . the sale resulted in a gain of approximately $ 400,000 for the year ended december 31 , 2018 and is included in “ gain ( loss ) on sale of hotel properties ” 46 in the consolidated statement of operations . the company also repaid approximately $ 22.5 million of debt associated with the hotel property . on june 13 , 2018 , we refinanced seven mortgage loans with existing outstanding balances totaling $ 1.068 billion . the new financing is comprised of six separate mortgage loans that total approximately $ 1.270 billion . each has a two-year initial term with five one-year extension options , subject to the satisfaction of certain conditions . the original principal amounts of each mortgage loan and the hotel properties securing each mortgage loan are set forth in the following table : mortgage loan principal amount ( in thousands ) interest rate secured hotel properties a $ 180,720 libor + 3.65 % courtyard columbus tipton lakes courtyard scottsdale old town residence inn phoenix airport springhill suites manhattan beach springhill suites plymouth meeting residence inn las vegas hughes center residence inn newark b $ 174,400 libor + 3.39 % courtyard newark springhill suites bwi courtyard oakland airport courtyard plano legacy residence inn plano towneplace suites manhattan beach courtyard basking ridge c $ 221,040 libor + 3.73 % sheraton san diego mission valley sheraton bucks county hilton ft. worth hyatt regency coral gables hilton minneapolis d $ 262,640 libor + 4.02 % hilton santa fe embassy suites dulles marriott beverly hills one ocean marriott suites dallas market center e ( 1 ) $ 216,320 libor + 4.36 % marriott memphis east embassy suites philadelphia airport sheraton anchorage lakeway resort & spa marriott fremont f $ 215,120 libor + 3.68 % w atlanta downtown embassy suites flagstaff embassy suites walnut creek marriott bridgewater marriott durham research triangle park _ ( 1 ) on july 3 , 2018 , we purchased $ 56.3 million of mezzanine debt related to the pool e loan that was issued in conjunction with the june 13 , 2018 refinancing . the net floating interest rate after the purchase of the pool e loan is libor + 2.73 % . on june 26 , 2018 , ashford trust entered into the enhanced return funding program agreement and amendment no . 1 to the amended and restated advisory agreement ( the “ erfp agreement ” ) with ashford inc. and ashford llc . the erfp agreement amended our amended and restated advisory agreement , among other things , to name ashford inc. and its subsidiaries as the company 's sole and exclusive provider of asset management , project management and other services offered by ashford inc. or any of its subsidiaries and to revise the payment terms such that the base fee and reimbursable expenses will be paid monthly . the independent members of the board of directors of each of ashford inc. and us , with the assistance of separate and independent legal counsel , engaged to negotiate the erfp agreement on behalf of ashford inc. and us , respectively . the erfp agreement generally provides that ashford llc will provide funding to facilitate the acquisition of properties by ashford trust op that are recommended by ashford llc , in an aggregate amount of up to $ 50 million ( subject to increase to up to $ 100 million by mutual agreement ) . each funding will equal 10 % of the property acquisition price and will be made either at the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition , in exchange for furniture , fixture and equipment for use at the acquired property or any other property owned by ashford trust op . the initial term of the erfp agreement is two years ( the “ initial term ” ) , unless earlier terminated pursuant to the terms of the erfp agreement . at the end of the initial term , the erfp agreement shall automatically renew for successive one-year 47 periods ( each such period a “ renewal term ” ) unless either ashford inc. or ashford trust provides written notice to the other at least sixty days in advance of the expiration of the initial term or renewal term , as applicable , that such notifying party intends not to renew the erfp agreement . on june 29 , 2018 , the company acquired a 100 % interest in the 252 -room hilton alexandria old town in alexandria , virginia for $ 111.0 million before acquisition costs . in connection with our acquisition ashford llc was obligated to provide us with approximately $ 11.1 million in exchange for ff & e at our hotel properties . as of december 31 , 2018 , ashford trust had received $ 11.1 million of cash in exchange for ff & e that was subsequently leased back to ashford trust rent-free under the erfp agreement . on july 3 , 2018 , we purchased $ 56.3 million of mezzanine debt related to the pool e loan that was issued in conjunction with the june 13 , 2018 refinancing . the net floating interest rate after the purchase of the pool e loan is libor + 2.73 % . on august 8 , 2018 , in connection with ashford inc. 's acquisition of premier from remington lodging , we : ( i ) amended and restated our mutual exclusivity agreement and hotel master management agreement with remington lodging , in each case to apply only with respect to property management ( and not project management ) services ; and ( ii ) entered into a mutual exclusivity agreement and master project management with premier , in each case to apply with respect to project management services . story_separator_special_tag unrealized gain ( loss ) on derivatives . unrealized loss on derivatives de creased $ 624,000 or 22.3 % , to $ 2.2 million during 2018 compared to 2017 . in 2018 , we recognized unrealized losses of $ 2.7 million from interest rate caps and $ 488,000 from interest rate floors , partially offset by unrealized gains of $ 988,000 from cmbx tranches . in 2017 , we recognized unrealized losses of $ 4.2 million , $ 2.4 million and $ 758,000 associated with the remaining cmbx tranches , interest rate floors , and interest rate caps , respectively , partially offset by unrealized gains of $ 4.2 million associated with the reclassification to other income ( expense ) for the recognition of realized losses from cmbx tranche terminations and $ 427,000 associated with the reclassification to other income ( expense ) for maturities of options on futures contracts . the fair value of interest rate floors and interest rate derivatives are primarily based on movements in the libor forward curve and the passage of time . the fair value of options on futures contracts is determined based on the last reported settlement price as of the measurement date . the fair value of credit default swaps is based on the change in value of cmbx indices . income tax ( expense ) benefit . income tax ( expense ) benefit changed $ 5.0 million , from an income tax benefit of $ 2.2 million in 2017 to income tax expense of $ 2.8 million in 2018 . the change in income tax ( expense ) benefit is primarily due to an increase in taxable income recognized by our trs entities , which was partially due to the renewal of a significant portion of the company 's trs leases in january 2018 and is also partially due to having utilized all of our available trs net operating losses . ( income ) loss from consolidated entities attributable to noncontrolling interests . our noncontrolling interest partner in consolidated entities was allocated losses of $ 30,000 and $ 110,000 during 2018 and 2017 , respectively . net ( income ) loss attributable to redeemable noncontrolling interests in operating partnership . noncontrolling interests in our operating partnership were allocated their proportionate share of net loss of $ 29.3 million and $ 21.6 million in 2018 and 2017 , respectively . redeemable noncontrolling interests represented ownership interests of 14.64 % and 15.52 % in the operating partnership at december 31 , 2018 and 2017 , respectively . 52 comparison of year ended december 31 , 2017 with year ended december 31 , 2016 all hotel properties owned during the years ended december 31 , 2017 and 2016 have been included in our results of operations during the respective periods in which they were owned . based on when a hotel property was acquired or disposed , operating results for certain hotel properties are not comparable for the years ended december 31 , 2017 and 2016 . the hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties . the following acquisitions and dispositions affect reporting comparability related to our consolidated financial statements : replace_table_token_12_th ( 1 ) collectively referred to as “ hotel dispositions ” the following table illustrates the key performance indicators of the hotel properties and worldquest included in our results of operations : replace_table_token_13_th the following table illustrates the key performance indicators of the 120 hotel properties and worldquest that were included for the full years ended december 31 , 2017 and 2016 , respectively : replace_table_token_14_th net income ( loss ) attributable to the company . net loss attributable to the company increased $ 20.7 million , from $ 46.3 million for the year ended december 31 , 2016 ( “ 2016 ” ) to $ 67.0 million for the year ended december 31 , 2017 ( “ 2017 ” ) as a result of the factors discussed below . revenue . rooms revenue from our hotel properties and worldquest decreased $ 37.1 million , or 3.1 % , to $ 1.1 billion during 2017 compared to 2016. this decrease is primarily attributable to lower rooms revenue of $ 54.3 million related to our hotel dispositions , partially offset by higher rooms revenue of $ 17.3 million from our comparable hotel properties and worldquest , which experienced a 1.4 % increase in room rates and a 32 basis point increase in occupancy . food and beverage revenue decreased $ 18.4 million , or 7.3 % , to $ 234.8 million during 2017 compared to 2016. this decrease is attributable to lower food and beverage revenue of $ 9.4 million from our hotel dispositions and $ 9.0 million from our comparable hotel properties and worldquest . the decrease in our comparable hotel properties and worldquest is primarily attributable to approximately $ 1.6 million associated with the renovation of the dfw airport marriott in irving , texas and unfavorable year over year changes in the july 4th holiday calendar moving from the weekend to midweek . other hotel revenue , which consists mainly of internet access , parking , and spa , increased $ 1.3 million , or 2.3 % , to $ 58.2 million during 2017 compared to 2016. this increase is primarily attributable to higher other revenue of $ 3.0 million from our 53 comparable hotel properties and worldquest , partially offset by lower other revenue of $ 1.6 million from our hotel dispositions . other non-hotel revenue increased $ 1.4 million , or 81.1 % , to $ 3.2 million in 2017. hotel operating expenses . hotel operating expenses decreased $ 31.1 million , or 3.3 % , to $ 907.3 million during 2017 compared to 2016. hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees . direct expenses decreased $
| sources and uses of cash our principal sources of funds to meet our cash requirements include : cash on hand , positive cash flow from operations , capital market activities , property refinancing proceeds and asset sales . additionally , our principal uses of funds are expected to include possible operating shortfalls , owner-funded capital expenditures , dividends , new investments , and debt interest and principal payments . items that impacted our cash flow and liquidity during the periods indicated are summarized as follows : net cash flows provided by ( used in ) operating activities . net cash flows provided by operating activities , pursuant to our consolidated statements of cash flows , which includes changes in balance sheet items , were $ 181.6 million , $ 207.4 million and $ 179.7 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . cash flows from operations were impacted by changes in hotel operations , the operating results of our 2018 , 2017 and 2016 hotel acquisitions and dispositions as well as the timing of collecting receivables from hotel guests , paying vendors , settling with related parties and settling with hotel managers . net cash flows provided by ( used in ) investing activities .
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from zinc and 7 % from various other products , including gold , sulfuric acid and other materials . copper : 2017 is starting with the copper market showing the first signs of a structural supply deficit created by the lack of investments in the last few years . for 2017 , we expect demand to grow between 2.0 % to 2.5 % , driven by china 's metal consumption recovery , and a strong economy in the united states and europe , where the auto industry demand is a driver of basic metal consumption . on the supply side , after five years of copper price reductions , we see supply underperforming the market needs . we expect a weak growth , in the range of 0.5 % to 1.0 % in 2017. this lack of growth results from the above noted decline in investments as well as technical problems , labor unrest , excess government taxation and other difficulties . all of these factors will contribute to the market deficit in 2017 , thereby giving good support to current copper prices . annual copper production in 2016 was 899,955 tons , a new company record . this increase of 21.1 % from the 742,993 tons produced in 2015 results from the higher production from our buenavista mine expansion . the additional copper units produced have lower cost per pound , improving the overall company cash cost and competitiveness . silver : we believe that silver prices will have support due to its industrial uses as well as being perceived as a value shelter in times of economic uncertainty . silver represented 5.5 % of our sales in 2016. molybdenum : this metal represented 5.0 % of company sales in 2016. during the fourth quarter of 2016 , the molybdenum price maintained its level when compared to the third quarter of 2016 due to production cuts from major producers . the molybdenum market is still affected by existing excess inventories and weak demand coming from steel special alloys and the oil drilling industry . molybdenum is mainly used for the production of special alloys of stainless steel that require significant hardness , corrosion and heat resistance . a new use for this metal is in lubricants and sulfur filtering of heavy oils and shale gas production . zinc : zinc has very good long term fundamentals due to its significant industrial consumption and the expected mine production shutdowns . in the last 12 months zinc inventories have consistently decreased , improving this market 's fundamentals . we are expecting an increasing price scenario for zinc during 2017. zinc represented 4.4 % of our sales in 2016. production : for 2017 , we expect to maintain our current production level of about 900,000 tons of copper . for 2018 , we will initiate production at the new toquepala concentrator and expect to be able to produce 972,300 tons of copper , continuing our aggressive organic growth program . we also expect to produce 16.6 million ounces of silver , about 2.5 % higher than the 2016 production of 16.2 million ounces due to higher buenavista and immsa production . for zinc production , in 2017 , we expect to produce 80,800 tons from our mines , up from 2016 's production , of 73,984 tons , mainly due to higher production from our charcas , santa barbara and santa eulalia mines , which will increase their milling amd forecast higher grades as well in 2017. additionally , we expect to produce 19,700 tons of molybdenum , lower by 9.4 % from last year 's production of 21,736 tons . 71 cost : our operating costs and expenses for the three-years ended december 2016 have increased in total in each of the years . our comparison of costs for the three year period is as follows : replace_table_token_33_th operating costs and expenses in 2016 increased $ 184.1 million , compared to 2015 , principally due to higher costs of sales at our mexican operations resulting from the 18.3 % increase in copper sales volume , higher depreciation , amortization and depletion on the new assets added to our operations at buenavista . this was partially offset by lower environmental remediation and exploration expenses . operating costs and expenses in 2015 increased $ 76.5 million , compared to 2014 , principally due to higher production , which led to higher costs of sales and due to higher depreciation , amortization and depletion at our operations ; partially offset by lower environmental remediation and exploration expense . capital investments : capital investments were $ 1,118.5 million for 2016. this is 2.7 % lower than in 2015 , and represented 144 % of net income . our growth program to develop the full production potential of our company is underway . in addition , the buenavista expansion program is largely completed . for 2017 , the board of directors approved a capital investment program of $ 1,105.2 million . the year 2017 will be the starting point of a new strategic plan : we will grow copper production capacity to exceed the one million ton milestone by mid-2018 , and by 2023 we expect to reach 1.5 million copper tons . key matters we discuss below several matters that we believe are important to understand our results of operations and financial condition . these matters include ( i ) earnings , ( ii ) production , ( iii ) `` operating cash costs `` as a measure of our performance , ( iv ) metal prices , ( v ) business segments , ( vi ) the effect of inflation and other local currency issues and ( vii ) our capital investment and exploration program . story_separator_special_tag the purpose is to streamline the concentrator flotation process and improve water recovery efficiency , increasing the tailings solids content from 54 % to 61 % , thereby reducing fresh water consumption and replacing it with recovered water . as of december 31 , 2016 , we have almost completed the engineering and procurement process and have started the excavation and civil works . we have invested $ 14.4 million in this project out of the approved capital budget of $ 30 million . the project has reached 62 % progress and we expect it to be completed by the second quarter of 2017. tailings disposal at quebrada hondamoquegua : this project increases the height of the existing quebrada honda dam to impound future tailings from the toquepala and cuajone mills and will extend the expected life of this tailings facility by 25 years . the first stage and construction of the drainage system for the lateral dam is finished . we finished the engineering and procurement is in progress . in order to improve and increase the dam 's embankment , we have assigned a construction contractor to install a new cyclone battery station that will allow us to place more slurry at the dams . the project has a total budgeted cost of $ 116.0 million . we have invested $ 71.7 million through december 31 , 2016 and expect the project to be completed by the second quarter of 2018. potential projects we have a number of other projects that we may develop in the future . we continuously evaluate new projects on the basis of our long-term corporate objectives , strategic and operating fit , expected return on investment , required investment , estimated production , estimated cash-flow profile , social and environmental considerations , among other factors . all capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy or market conditions . the year 2017 will be the starting point of a new strategic plan : we will grow copper production capacity to exceed the one 78 million ton milestone by mid-2018 , and by 2023 we expect to reach 1.5 million copper tons . this strategic plan includes the following projects : buenavista- zinc project : this zinc open pit mine located in our buenavista complex in sonora , mexico will produce 87,800 tons of zinc and 27,500 tons of copper content in concentrates per year with a capital budget of $ 360 million . currently , we are reviewing the block model and the mine plan which are expected to be completed in march 2017. also , we are preparing the basic engineering and will request authorization to begin the detail engineering . as of december 31 , 2016 we have invested $ 14.6 million and expect the project to be completed in 2018. pilares : this brownfield project located in sonora , mexico will produce 35,000 tons of copper per year with an initial capital budget of $ 200 million which we believe is still subject to further optimization . pilares is an open-pit mine , located 6 kilometers away from our la caridad complex , thus , leveraging on la caridad infrastructure . we are working to define the mineral flow and on a trade-off analysis for a potential expansion of the la caridad concentrator . in addition , we are analyzing mineral blending alternatives between pilares and la caridad in order to improve the copper grade of concentrates . as of december 31 , 2016 we have invested $ 39.9 million and expect the project to be completed in 2018. tia maria : we have completed all engineering and have successfully obtained the approval of the environmental impact assessment for the project . we are currently working to obtain the construction license for this 120,000 tons of sx-ew copper per year project with a total capital investment of $ 1,400 million . in 2017 , we expect to continue with our social development programs with the neighboring communities . this greenfield project , located in arequipa peru , will use state of the art sx-ew technology with the highest international environmental standards . sx-ew facilities are the most environmentally friendly in the industry due to their technical process and consequently no emissions into the atmosphere are released . the project will use seawater , transporting it more than 25 kilometers and at 1,000 meters above sea level . the construction of the desalinization plant requires an investment of approximately $ 95 million . we expect the project to generate 3,500 jobs during the construction phase . when in operation , tia maria will directly employ 600 workers and indirectly another 2,000. through its expected twenty-year life , the project related services will create significant business opportunities in the arequipa region . tia maria has complied with all existing requirements and regulations and therefore the company trusts that it will soon receive from government authorities the construction licenses and permits required in order to begin construction of this project . el arco : this is a world class copper deposit located in the central part of the baja california peninsula , with ore reserves over 2.7 billion tons with an ore grade of 0.399 % and 0.11 grams of gold per ton . this project , includes an open-pit mine combining concentrator and sx-ew operations with an estimated production of 190,000 tons of copper and 105,000 ounces of gold annually . between july 2015 and february 2016 , we conducted a drilling program of 20,170 meters in order to further define the deposit at lower depths of between 300 and 600 meters . through december 31 , 2016 we have invested $ 77 million on studies , exploration and land acquisition for the project . further exploration work is still required to better define the geometry of the deposit towards its west end and at the depths worked . in 2017 , we
| sources and uses of cash our principal sources of funds to meet our cash requirements include : cash on hand , positive cash flow from operations , capital market activities , property refinancing proceeds and asset sales . additionally , our principal uses of funds are expected to include possible operating shortfalls , owner-funded capital expenditures , dividends , new investments , and debt interest and principal payments . items that impacted our cash flow and liquidity during the periods indicated are summarized as follows : net cash flows provided by ( used in ) operating activities . net cash flows provided by operating activities , pursuant to our consolidated statements of cash flows , which includes changes in balance sheet items , were $ 181.6 million , $ 207.4 million and $ 179.7 million for the years ended december 31 , 2018 , 2017 and 2016 , respectively . cash flows from operations were impacted by changes in hotel operations , the operating results of our 2018 , 2017 and 2016 hotel acquisitions and dispositions as well as the timing of collecting receivables from hotel guests , paying vendors , settling with related parties and settling with hotel managers . net cash flows provided by ( used in ) investing activities .
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from zinc and 7 % from various other products , including gold , sulfuric acid and other materials . copper : 2017 is starting with the copper market showing the first signs of a structural supply deficit created by the lack of investments in the last few years . for 2017 , we expect demand to grow between 2.0 % to 2.5 % , driven by china 's metal consumption recovery , and a strong economy in the united states and europe , where the auto industry demand is a driver of basic metal consumption . on the supply side , after five years of copper price reductions , we see supply underperforming the market needs . we expect a weak growth , in the range of 0.5 % to 1.0 % in 2017. this lack of growth results from the above noted decline in investments as well as technical problems , labor unrest , excess government taxation and other difficulties . all of these factors will contribute to the market deficit in 2017 , thereby giving good support to current copper prices . annual copper production in 2016 was 899,955 tons , a new company record . this increase of 21.1 % from the 742,993 tons produced in 2015 results from the higher production from our buenavista mine expansion . the additional copper units produced have lower cost per pound , improving the overall company cash cost and competitiveness . silver : we believe that silver prices will have support due to its industrial uses as well as being perceived as a value shelter in times of economic uncertainty . silver represented 5.5 % of our sales in 2016. molybdenum : this metal represented 5.0 % of company sales in 2016. during the fourth quarter of 2016 , the molybdenum price maintained its level when compared to the third quarter of 2016 due to production cuts from major producers . the molybdenum market is still affected by existing excess inventories and weak demand coming from steel special alloys and the oil drilling industry . molybdenum is mainly used for the production of special alloys of stainless steel that require significant hardness , corrosion and heat resistance . a new use for this metal is in lubricants and sulfur filtering of heavy oils and shale gas production . zinc : zinc has very good long term fundamentals due to its significant industrial consumption and the expected mine production shutdowns . in the last 12 months zinc inventories have consistently decreased , improving this market 's fundamentals . we are expecting an increasing price scenario for zinc during 2017. zinc represented 4.4 % of our sales in 2016. production : for 2017 , we expect to maintain our current production level of about 900,000 tons of copper . for 2018 , we will initiate production at the new toquepala concentrator and expect to be able to produce 972,300 tons of copper , continuing our aggressive organic growth program . we also expect to produce 16.6 million ounces of silver , about 2.5 % higher than the 2016 production of 16.2 million ounces due to higher buenavista and immsa production . for zinc production , in 2017 , we expect to produce 80,800 tons from our mines , up from 2016 's production , of 73,984 tons , mainly due to higher production from our charcas , santa barbara and santa eulalia mines , which will increase their milling amd forecast higher grades as well in 2017. additionally , we expect to produce 19,700 tons of molybdenum , lower by 9.4 % from last year 's production of 21,736 tons . 71 cost : our operating costs and expenses for the three-years ended december 2016 have increased in total in each of the years . our comparison of costs for the three year period is as follows : replace_table_token_33_th operating costs and expenses in 2016 increased $ 184.1 million , compared to 2015 , principally due to higher costs of sales at our mexican operations resulting from the 18.3 % increase in copper sales volume , higher depreciation , amortization and depletion on the new assets added to our operations at buenavista . this was partially offset by lower environmental remediation and exploration expenses . operating costs and expenses in 2015 increased $ 76.5 million , compared to 2014 , principally due to higher production , which led to higher costs of sales and due to higher depreciation , amortization and depletion at our operations ; partially offset by lower environmental remediation and exploration expense . capital investments : capital investments were $ 1,118.5 million for 2016. this is 2.7 % lower than in 2015 , and represented 144 % of net income . our growth program to develop the full production potential of our company is underway . in addition , the buenavista expansion program is largely completed . for 2017 , the board of directors approved a capital investment program of $ 1,105.2 million . the year 2017 will be the starting point of a new strategic plan : we will grow copper production capacity to exceed the one million ton milestone by mid-2018 , and by 2023 we expect to reach 1.5 million copper tons . key matters we discuss below several matters that we believe are important to understand our results of operations and financial condition . these matters include ( i ) earnings , ( ii ) production , ( iii ) `` operating cash costs `` as a measure of our performance , ( iv ) metal prices , ( v ) business segments , ( vi ) the effect of inflation and other local currency issues and ( vii ) our capital investment and exploration program . story_separator_special_tag the purpose is to streamline the concentrator flotation process and improve water recovery efficiency , increasing the tailings solids content from 54 % to 61 % , thereby reducing fresh water consumption and replacing it with recovered water . as of december 31 , 2016 , we have almost completed the engineering and procurement process and have started the excavation and civil works . we have invested $ 14.4 million in this project out of the approved capital budget of $ 30 million . the project has reached 62 % progress and we expect it to be completed by the second quarter of 2017. tailings disposal at quebrada hondamoquegua : this project increases the height of the existing quebrada honda dam to impound future tailings from the toquepala and cuajone mills and will extend the expected life of this tailings facility by 25 years . the first stage and construction of the drainage system for the lateral dam is finished . we finished the engineering and procurement is in progress . in order to improve and increase the dam 's embankment , we have assigned a construction contractor to install a new cyclone battery station that will allow us to place more slurry at the dams . the project has a total budgeted cost of $ 116.0 million . we have invested $ 71.7 million through december 31 , 2016 and expect the project to be completed by the second quarter of 2018. potential projects we have a number of other projects that we may develop in the future . we continuously evaluate new projects on the basis of our long-term corporate objectives , strategic and operating fit , expected return on investment , required investment , estimated production , estimated cash-flow profile , social and environmental considerations , among other factors . all capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy or market conditions . the year 2017 will be the starting point of a new strategic plan : we will grow copper production capacity to exceed the one 78 million ton milestone by mid-2018 , and by 2023 we expect to reach 1.5 million copper tons . this strategic plan includes the following projects : buenavista- zinc project : this zinc open pit mine located in our buenavista complex in sonora , mexico will produce 87,800 tons of zinc and 27,500 tons of copper content in concentrates per year with a capital budget of $ 360 million . currently , we are reviewing the block model and the mine plan which are expected to be completed in march 2017. also , we are preparing the basic engineering and will request authorization to begin the detail engineering . as of december 31 , 2016 we have invested $ 14.6 million and expect the project to be completed in 2018. pilares : this brownfield project located in sonora , mexico will produce 35,000 tons of copper per year with an initial capital budget of $ 200 million which we believe is still subject to further optimization . pilares is an open-pit mine , located 6 kilometers away from our la caridad complex , thus , leveraging on la caridad infrastructure . we are working to define the mineral flow and on a trade-off analysis for a potential expansion of the la caridad concentrator . in addition , we are analyzing mineral blending alternatives between pilares and la caridad in order to improve the copper grade of concentrates . as of december 31 , 2016 we have invested $ 39.9 million and expect the project to be completed in 2018. tia maria : we have completed all engineering and have successfully obtained the approval of the environmental impact assessment for the project . we are currently working to obtain the construction license for this 120,000 tons of sx-ew copper per year project with a total capital investment of $ 1,400 million . in 2017 , we expect to continue with our social development programs with the neighboring communities . this greenfield project , located in arequipa peru , will use state of the art sx-ew technology with the highest international environmental standards . sx-ew facilities are the most environmentally friendly in the industry due to their technical process and consequently no emissions into the atmosphere are released . the project will use seawater , transporting it more than 25 kilometers and at 1,000 meters above sea level . the construction of the desalinization plant requires an investment of approximately $ 95 million . we expect the project to generate 3,500 jobs during the construction phase . when in operation , tia maria will directly employ 600 workers and indirectly another 2,000. through its expected twenty-year life , the project related services will create significant business opportunities in the arequipa region . tia maria has complied with all existing requirements and regulations and therefore the company trusts that it will soon receive from government authorities the construction licenses and permits required in order to begin construction of this project . el arco : this is a world class copper deposit located in the central part of the baja california peninsula , with ore reserves over 2.7 billion tons with an ore grade of 0.399 % and 0.11 grams of gold per ton . this project , includes an open-pit mine combining concentrator and sx-ew operations with an estimated production of 190,000 tons of copper and 105,000 ounces of gold annually . between july 2015 and february 2016 , we conducted a drilling program of 20,170 meters in order to further define the deposit at lower depths of between 300 and 600 meters . through december 31 , 2016 we have invested $ 77 million on studies , exploration and land acquisition for the project . further exploration work is still required to better define the geometry of the deposit towards its west end and at the depths worked . in 2017 , we
| net cash provided by operating activities : the 2016 , 2015 and 2014 change in net cash from operating activities include ( in millions ) : replace_table_token_56_th significant items added to ( deducted from ) net income to arrive at operating cash flow include depreciation , amortization and depletion , deferred tax amounts and changes in operating assets and liabilities . 2016 : net income was $ 778.8 million , approximately 84 % of the net operating cash flow . an increase in operating assets and liabilities reduced operating cash flow by $ 393.8 million and included : $ ( 143.3 ) million increase in accounts receivable . $ ( 207.9 ) million increase in inventory which includes $ ( 122.3 ) million of higher leachable material inventory and $ ( 43.1 ) million of metals in process , $ ( 26.3 ) million of higher finished goods and $ ( 16.2 ) million of higher supplies inventory . $ ( 42.6 ) million of net changes in accounts payable , accrued liabilities and other operating assets . 2015 : net income was $ 741.1 million , approximately 84 % of the net operating cash flow . an increase in operating assets and liabilities reduced operating cash flow by $ 209.8 million and included : $ 91 . 6 million decrease in accounts receivable . $ ( 260.3 ) million increase in inventory which includes $ ( 239.6 ) million of higher long-term leachable material inventory , principally at our buenavista mine .
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we implemented a restructuring plan in each of the first , third and fourth quarters of fiscal year 2018 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives ( the `` q1 2018 plan `` , `` q3 2018 plan `` and `` q4 2018 plan `` , respectively ) . we implemented a restructuring plan in each of the fourth and third quarters of fiscal year 2017 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives ( the `` q4 2017 plan and `` q3 2017 plan `` , respectively ) . we implemented a restructuring plan in the first quarter of fiscal year 2017 consisting of workforce reductions and the closure of excess facility space principally intended to focus resources on higher growth end markets ( the `` q1 2017 plan `` ) . we implemented a restructuring plan in the third quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth product lines ( the `` q3 2016 plan `` ) . we implemented a restructuring plan in the second quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth end markets ( the `` q2 2016 plan `` ) . all other previous restructuring plans were workforce reductions or the closure of excess facility space principally intended to integrate our businesses in order to realign 27 operations , reduce costs , achieve operational efficiencies and shift resources into geographic regions and end markets that are more consistent with our growth strategy ( the `` previous plans `` ) . the following table summarizes the number of employees reduced , the initial restructuring or contract termination charges by operating segment , and the dates by which payments were substantially completed , or the expected dates by which payments will be substantially completed , for restructuring actions implemented during fiscal years 2018 , 2017 and 2016 in continuing operations : replace_table_token_5_th we expect to make payments under the previous plans for remaining residual lease obligations , with terms varying in length , through fiscal year 2022 . we also have terminated various contractual commitments in connection with certain disposal activities and have recorded charges , to the extent applicable , for the costs of terminating these contracts before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to us . we recorded additional pre-tax charges of $ 5.0 million , $ 3.6 million and $ 0.1 million in the discovery & analytical solutions segment during fiscal years 2018 , 2017 and 2016 , respectively , and $ 0.5 million during fiscal year 2017 in the diagnostics segment as a result of these contract terminations . 28 at december 30 , 2018 , we had $ 6.2 million recorded for accrued restructuring and contract termination charges , of which $ 4.8 million was recorded in short-term accrued restructuring and $ 1.4 million was recorded in long-term liabilities . at december 31 , 2017 , we had $ 14.0 million recorded for accrued restructuring and contract termination charges , of which $ 8.8 million was recorded in short-term accrued restructuring , $ 2.3 million was recorded in long-term liabilities and $ 2.9 million was recorded in other reserves . the following table summarizes our restructuring accrual balances and related activity by restructuring plan , as well as contract termination accrual balances and related activity , during fiscal years 2018 , 2017 and 2016 in continuing operations : replace_table_token_6_th ( 1 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 0.2 million each in the discovery & analytical solutions and diagnostics segments , related to lower than expected costs associated with workforce reductions for the q4 2017 plan . ( 2 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 0.8 million in the discovery & analytical solutions segment and $ 0.4 million in the diagnostics segment , related to lower than expected costs associated with workforce reductions for the q3 2017 plan . ( 3 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 1.0 million in the discovery & analytical solutions segment , related to lower than expected costs associated with workforce reductions for the q1 2017 plan . 29 interest and other expense , net interest and other expense , net , consisted of the following : replace_table_token_7_th 2018 compared to 2017 . interest and other expense , net , for fiscal year 2018 was an expense of $ 66.2 million , as compared to income of $ 1.1 million for fiscal year 2017 , an increase of $ 67.3 million . the increase in interest and other expense , net , in fiscal year 2018 as compared to fiscal year 2017 was largely due to an increase in other expense , net of $ 56.0 million resulting from a one-time non-recurring net foreign exchange gain of $ 36.5 million in fiscal year 2017 related to remeasurement and settlement of euroimmun pre-acquisition hedges , combined with an increase in pension-related expenses of $ 20.7 million in fiscal year 2018 as compared to fiscal year 2017. interest expense increased by $ 23.0 million in fiscal year 2018 as compared to fiscal year 2017 primarily due to a higher outstanding total debt balance , beginning in the fourth quarter of fiscal year 2017 , related to financing for the euroimmun acquisition . story_separator_special_tag when the discontinued operations represented a strategic shift that will have a major effect on our operations and financial statements , we accounted for these businesses as discontinued operations and accordingly , have presented the results of operations and related cash flows as discontinued operations . any business deemed to be a discontinued operation prior to the adoption of accounting standards update 2014-08 , reporting discontinued operations and disclosures of disposals of components of an entity , continues to be reported as a discontinued operation , and the results of operations and related cash flows are presented as discontinued operations for all periods presented . any remaining assets and liabilities of these businesses have been presented separately , and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of december 30 , 2018 and december 31 , 2017 . 31 we recorded the following pre-tax gains and losses , which have been reported as a net gain or loss on disposition of discontinued operations during the three fiscal years included below : replace_table_token_9_th on may 1 , 2017 ( the `` closing date `` ) , we completed the sale of our medical imaging business to varex imaging corporation ( `` varex `` ) pursuant to the terms of the master purchase and sale agreement , dated december 21 , 2016 ( the “ agreement ” ) , by and between us and varian medical systems , inc. ( `` varian `` ) and the subsequent assignment and assumption agreement , dated january 27 , 2017 , between varian and varex , pursuant to which varian assigned its rights under the agreement to varex . on the closing date , we received consideration of approximately $ 277.4 million for the sale of the medical imaging business . during fiscal year 2017 , we paid varex $ 4.2 million to settle a post-closing working capital adjustment . during fiscal year 2017 , we recorded a pre-tax gain of $ 179.6 million and income tax expense of $ 43.1 million related to the sale of the medical imaging business in discontinued operations and dispositions . the corresponding tax liability was recorded within the other tax liabilities in the consolidated balance sheet , and we expect to utilize tax attributes to minimize the tax liability . following the closing , we provided certain customary transitional services during a period of up to 12 months . commercial transactions between the parties following the closing of the transaction were not significant . during the third quarter of fiscal year 2018 , we completed the sale of substantially all of the assets and liabilities related to our multispectral imaging business for aggregate consideration of $ 37.3 million , recognizing a pre-tax gain of $ 13.0 million . the pre-tax gain is included in interest and other expense , net in the consolidated statement of operations . the multispectral imaging business was a component of our discovery & analytical solutions segment . the divestiture of the multispectral imaging business has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . during fiscal year 2017 , we sold suzhou perkinelmer medical laboratory co. , ltd. for aggregate consideration of $ 2.3 million , recognizing a pre-tax loss of $ 1.1 million . the pre-tax loss recognized in fiscal year 2017 is included in interest and other expense , net in the consolidated statement of operations . suzhou perkinelmer medical laboratory co. , ltd. was a component of our diagnostics segment . the divestiture of suzhou perkinelmer medical laboratory co. , ltd. has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . during fiscal year 2016 , we sold perkinelmer labs , inc. for cash consideration of $ 20.0 million , recognizing a pre-tax gain of $ 7.1 million . the sale generated a capital loss for tax purposes of $ 7.3 million , which resulted in an income tax benefit of $ 2.5 million that was recognized as a discrete benefit during the second quarter of 2016. during fiscal year 2017 , we recognized an additional pre-tax gain of $ 1.1 million relating to the earn-out consideration received from the buyer . perkinelmer labs , inc. was a component of our diagnostics segment . the pre-tax gain recognized in fiscal years 2017 and 2016 is included in interest and other expense , net in the consolidated statements of operations . the divestiture of perkinelmer labs , inc. has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . in august 1999 , we sold the assets of our technical service business . we recorded a pre-tax gain of $ 1.8 million in fiscal year 2016 for a contingency related to this business . this was recognized as a gain on disposition of discontinued operations before income taxes . the summary pre-tax operating results of the discontinued operations were as follows during the three fiscal years ended : 32 replace_table_token_10_th we recorded a ( benefit from ) provision for income taxes of $ ( 1.3 ) million , $ 44.5 million and $ 4.3 million on discontinued operations and dispositions in fiscal years 2018 , 2017 and 2016 . business combinations acquisitions in fiscal year 2018 during fiscal year 2018 , we completed the acquisition of four businesses for aggregate consideration of $ 106.0 million . the excess of the purchase price over the fair value of the acquired businesses ' net assets represents cost and revenue synergies specific to us , as well as non-capitalizable intangible assets , such as the
| net cash provided by operating activities : the 2016 , 2015 and 2014 change in net cash from operating activities include ( in millions ) : replace_table_token_56_th significant items added to ( deducted from ) net income to arrive at operating cash flow include depreciation , amortization and depletion , deferred tax amounts and changes in operating assets and liabilities . 2016 : net income was $ 778.8 million , approximately 84 % of the net operating cash flow . an increase in operating assets and liabilities reduced operating cash flow by $ 393.8 million and included : $ ( 143.3 ) million increase in accounts receivable . $ ( 207.9 ) million increase in inventory which includes $ ( 122.3 ) million of higher leachable material inventory and $ ( 43.1 ) million of metals in process , $ ( 26.3 ) million of higher finished goods and $ ( 16.2 ) million of higher supplies inventory . $ ( 42.6 ) million of net changes in accounts payable , accrued liabilities and other operating assets . 2015 : net income was $ 741.1 million , approximately 84 % of the net operating cash flow . an increase in operating assets and liabilities reduced operating cash flow by $ 209.8 million and included : $ 91 . 6 million decrease in accounts receivable . $ ( 260.3 ) million increase in inventory which includes $ ( 239.6 ) million of higher long-term leachable material inventory , principally at our buenavista mine .
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we implemented a restructuring plan in each of the first , third and fourth quarters of fiscal year 2018 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives ( the `` q1 2018 plan `` , `` q3 2018 plan `` and `` q4 2018 plan `` , respectively ) . we implemented a restructuring plan in each of the fourth and third quarters of fiscal year 2017 consisting of workforce reductions principally intended to realign resources to emphasize growth initiatives ( the `` q4 2017 plan and `` q3 2017 plan `` , respectively ) . we implemented a restructuring plan in the first quarter of fiscal year 2017 consisting of workforce reductions and the closure of excess facility space principally intended to focus resources on higher growth end markets ( the `` q1 2017 plan `` ) . we implemented a restructuring plan in the third quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth product lines ( the `` q3 2016 plan `` ) . we implemented a restructuring plan in the second quarter of fiscal year 2016 consisting of workforce reductions principally intended to focus resources on higher growth end markets ( the `` q2 2016 plan `` ) . all other previous restructuring plans were workforce reductions or the closure of excess facility space principally intended to integrate our businesses in order to realign 27 operations , reduce costs , achieve operational efficiencies and shift resources into geographic regions and end markets that are more consistent with our growth strategy ( the `` previous plans `` ) . the following table summarizes the number of employees reduced , the initial restructuring or contract termination charges by operating segment , and the dates by which payments were substantially completed , or the expected dates by which payments will be substantially completed , for restructuring actions implemented during fiscal years 2018 , 2017 and 2016 in continuing operations : replace_table_token_5_th we expect to make payments under the previous plans for remaining residual lease obligations , with terms varying in length , through fiscal year 2022 . we also have terminated various contractual commitments in connection with certain disposal activities and have recorded charges , to the extent applicable , for the costs of terminating these contracts before the end of their terms and the costs that will continue to be incurred for the remaining terms without economic benefit to us . we recorded additional pre-tax charges of $ 5.0 million , $ 3.6 million and $ 0.1 million in the discovery & analytical solutions segment during fiscal years 2018 , 2017 and 2016 , respectively , and $ 0.5 million during fiscal year 2017 in the diagnostics segment as a result of these contract terminations . 28 at december 30 , 2018 , we had $ 6.2 million recorded for accrued restructuring and contract termination charges , of which $ 4.8 million was recorded in short-term accrued restructuring and $ 1.4 million was recorded in long-term liabilities . at december 31 , 2017 , we had $ 14.0 million recorded for accrued restructuring and contract termination charges , of which $ 8.8 million was recorded in short-term accrued restructuring , $ 2.3 million was recorded in long-term liabilities and $ 2.9 million was recorded in other reserves . the following table summarizes our restructuring accrual balances and related activity by restructuring plan , as well as contract termination accrual balances and related activity , during fiscal years 2018 , 2017 and 2016 in continuing operations : replace_table_token_6_th ( 1 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 0.2 million each in the discovery & analytical solutions and diagnostics segments , related to lower than expected costs associated with workforce reductions for the q4 2017 plan . ( 2 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 0.8 million in the discovery & analytical solutions segment and $ 0.4 million in the diagnostics segment , related to lower than expected costs associated with workforce reductions for the q3 2017 plan . ( 3 ) during fiscal year 2018 , we recognized pre-tax restructuring reversals of $ 1.0 million in the discovery & analytical solutions segment , related to lower than expected costs associated with workforce reductions for the q1 2017 plan . 29 interest and other expense , net interest and other expense , net , consisted of the following : replace_table_token_7_th 2018 compared to 2017 . interest and other expense , net , for fiscal year 2018 was an expense of $ 66.2 million , as compared to income of $ 1.1 million for fiscal year 2017 , an increase of $ 67.3 million . the increase in interest and other expense , net , in fiscal year 2018 as compared to fiscal year 2017 was largely due to an increase in other expense , net of $ 56.0 million resulting from a one-time non-recurring net foreign exchange gain of $ 36.5 million in fiscal year 2017 related to remeasurement and settlement of euroimmun pre-acquisition hedges , combined with an increase in pension-related expenses of $ 20.7 million in fiscal year 2018 as compared to fiscal year 2017. interest expense increased by $ 23.0 million in fiscal year 2018 as compared to fiscal year 2017 primarily due to a higher outstanding total debt balance , beginning in the fourth quarter of fiscal year 2017 , related to financing for the euroimmun acquisition . story_separator_special_tag when the discontinued operations represented a strategic shift that will have a major effect on our operations and financial statements , we accounted for these businesses as discontinued operations and accordingly , have presented the results of operations and related cash flows as discontinued operations . any business deemed to be a discontinued operation prior to the adoption of accounting standards update 2014-08 , reporting discontinued operations and disclosures of disposals of components of an entity , continues to be reported as a discontinued operation , and the results of operations and related cash flows are presented as discontinued operations for all periods presented . any remaining assets and liabilities of these businesses have been presented separately , and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of december 30 , 2018 and december 31 , 2017 . 31 we recorded the following pre-tax gains and losses , which have been reported as a net gain or loss on disposition of discontinued operations during the three fiscal years included below : replace_table_token_9_th on may 1 , 2017 ( the `` closing date `` ) , we completed the sale of our medical imaging business to varex imaging corporation ( `` varex `` ) pursuant to the terms of the master purchase and sale agreement , dated december 21 , 2016 ( the “ agreement ” ) , by and between us and varian medical systems , inc. ( `` varian `` ) and the subsequent assignment and assumption agreement , dated january 27 , 2017 , between varian and varex , pursuant to which varian assigned its rights under the agreement to varex . on the closing date , we received consideration of approximately $ 277.4 million for the sale of the medical imaging business . during fiscal year 2017 , we paid varex $ 4.2 million to settle a post-closing working capital adjustment . during fiscal year 2017 , we recorded a pre-tax gain of $ 179.6 million and income tax expense of $ 43.1 million related to the sale of the medical imaging business in discontinued operations and dispositions . the corresponding tax liability was recorded within the other tax liabilities in the consolidated balance sheet , and we expect to utilize tax attributes to minimize the tax liability . following the closing , we provided certain customary transitional services during a period of up to 12 months . commercial transactions between the parties following the closing of the transaction were not significant . during the third quarter of fiscal year 2018 , we completed the sale of substantially all of the assets and liabilities related to our multispectral imaging business for aggregate consideration of $ 37.3 million , recognizing a pre-tax gain of $ 13.0 million . the pre-tax gain is included in interest and other expense , net in the consolidated statement of operations . the multispectral imaging business was a component of our discovery & analytical solutions segment . the divestiture of the multispectral imaging business has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . during fiscal year 2017 , we sold suzhou perkinelmer medical laboratory co. , ltd. for aggregate consideration of $ 2.3 million , recognizing a pre-tax loss of $ 1.1 million . the pre-tax loss recognized in fiscal year 2017 is included in interest and other expense , net in the consolidated statement of operations . suzhou perkinelmer medical laboratory co. , ltd. was a component of our diagnostics segment . the divestiture of suzhou perkinelmer medical laboratory co. , ltd. has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . during fiscal year 2016 , we sold perkinelmer labs , inc. for cash consideration of $ 20.0 million , recognizing a pre-tax gain of $ 7.1 million . the sale generated a capital loss for tax purposes of $ 7.3 million , which resulted in an income tax benefit of $ 2.5 million that was recognized as a discrete benefit during the second quarter of 2016. during fiscal year 2017 , we recognized an additional pre-tax gain of $ 1.1 million relating to the earn-out consideration received from the buyer . perkinelmer labs , inc. was a component of our diagnostics segment . the pre-tax gain recognized in fiscal years 2017 and 2016 is included in interest and other expense , net in the consolidated statements of operations . the divestiture of perkinelmer labs , inc. has not been classified as a discontinued operation in this form 10-k because the disposition does not represent a strategic shift that will have a major effect on our operations and financial statements . in august 1999 , we sold the assets of our technical service business . we recorded a pre-tax gain of $ 1.8 million in fiscal year 2016 for a contingency related to this business . this was recognized as a gain on disposition of discontinued operations before income taxes . the summary pre-tax operating results of the discontinued operations were as follows during the three fiscal years ended : 32 replace_table_token_10_th we recorded a ( benefit from ) provision for income taxes of $ ( 1.3 ) million , $ 44.5 million and $ 4.3 million on discontinued operations and dispositions in fiscal years 2018 , 2017 and 2016 . business combinations acquisitions in fiscal year 2018 during fiscal year 2018 , we completed the acquisition of four businesses for aggregate consideration of $ 106.0 million . the excess of the purchase price over the fair value of the acquired businesses ' net assets represents cost and revenue synergies specific to us , as well as non-capitalizable intangible assets , such as the
| net cash provided by continuing operations was $ 311.2 million for fiscal year 2018 , as compared to net cash provided by continuing operations of $ 292.2 million for fiscal year 2017 , an increase of $ 19.1 million . the cash provided by operating activities for fiscal year 2018 was principally a result of income from continuing operations of $ 237.5 37 million , and non-cash charges , including depreciation and amortization of $ 180.6 million , stock based compensation expense of $ 28.8 million , change in fair value of contingent consideration of $ 14.6 million , a non-cash expense of $ 11.9 million related to our postretirement benefit plans , including the mark-to-market adjustment in the fourth quarter of fiscal year 2018 , restructuring and contract termination charges , net , of $ 11.1 million , and amortization of deferred debt issuance costs and accretion of discounts of $ 3.3 million . these amounts were partially offset by a net increase in working capital of $ 115.8 million , deferred tax benefit of $ 51.1 million , a net increase of $ 3.7 million in accrued expenses , other assets and liabilities and other items , a gain from disposition of businesses and assets , net of $ 12.8 million , and a gain on sale of investments , net of $ 0.6 million . the change in accrued expenses , other assets and liabilities and other items increase d cash provided by operating activities by $ 3.7 million for fiscal year 2018 , primarily related to the timing of payments for pension , taxes , restructuring , royalties and salary and benefits .
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in particular , our presence in the lte smartphone markets continue to grow as our customers targeting those markets are gaining market share at the expense of the incumbents . during 2017 , we reported 311 million lte chipsets shipped , up from 226 million in 2016. the royalty we derive from smartphones is higher on average than that of feature phones , so we may benefit if and when lte handset markets around the world transition and shift away from feature phones to smartphones , particularly in emerging economies . furthermore , we believe that we may benefit from the base station chip ramp up in coming years , as a large customer of ours is forecasted to start ramping up production in the second half of 2018. our specialization and competitive edge in signal processing platforms for next generation long and short range wireless such as 5g , nb-iot , 802.11ac and 802.11ax wi-fi technologies , and the inherent low cost , power and performance balance of our designs , put us in a strong position to simultaneously capitalize on mass market adoption of such technologies and address multiple markets and product sectors , including handsets , fixed wireless access , macro base stations , remote radio heads , cellular backhaul , small cells , wi-fi routers and a variety of machine type communications such as connected cars , smart cities and industrial markets . together with our presence in the handset baseband market , our bluetooth and wi-fi ips allow us to expand further into iot applications and substantially increase our overall addressable market . our addressable market size is expected to be 35 billion devices by 2020 , per data from abi research . already , shipments of products incorporating our bluetooth ip are sizeable , with more than 200 million ceva-powered bluetooth chips shipped in 2017 , up 45 % from 138 million units in 2016. the growing market potential for voice assisted devices , as voice is becoming the primary user interface for iot applications , including mobile , automotive and consumer devices , offers an additional growth segment for the company in voice enabled devices such as smartphones , headsets , earbuds , smart speakers , smart home and automotive . to better address this market , we recently introduced clearvox , a new voice input software and algorithm , that is offered in conjunction with our audio/voice dsps . clearvox , plus our proven track record in audio/voice processing , with more than 6 billion audio chips shipped to date , puts us in a strong position to power audio and voice roadmaps across this new range of addressable end markets . our ceva-xm4 and ceva-xm6 imaging and vision platforms for deep learning provide highly compelling offerings for any camera-enabled device such as smartphones , tablets , automotive safety ( adas ) , autonomous driving ( ad ) , drones , robotics , security and surveillance , augmented reality ( ar ) and virtual reality ( vr ) , drones , and signage . per abi research , camera shipments are expected to exceed 2.7 billion units by 2018. we have already signed more than 50 licensing agreements for our imaging and vision dsps across those markets , where our customers can add camera-related enhancements such as smarter autofocus , better picture using super resolution algorithms , and better image capture in low-light environments . other customers can add video analytics support to enable new services like augmented reality , gesture recognition and advanced safety capabilities in cars . this transformation in vision processing and neural net software and hardware needs is an opportunity for us to expand our footprint and content in smartphones , tablets , drones , surveillance , automotive adas and industrial iot applications . beyond vision , neural networks are increasingly being deployed for a wide range of markets in order to make devices smarter ' . these markets include iot , smartphones , surveillance , automotive , robotics , medical and industrial . to address this significant and lucrative opportunity , we recently announced neupro - a family of ai processors for deep learning at the edge . these self-contained ai processors are the first non-dsp processors ever developed by ceva and bring the power of deep learning to the device , without relying on connectivity to the cloud . we believe this market opportunity for ai at the edge is on top of our existing product lines and represents a new licensing and royalty driver for the company in the coming years . 33 as a result of our diversification strategy beyond baseband for handsets and our progress in addressing those new markets under the iot umbrella , we expect significant growth in royalty revenues derived from non-handset baseband applications over the next few years , due to a combination of higher unit shipments of bluetooth products that bear lower asps , along with higher asps driven by base station and vision products . notwithstanding the various growth opportunities we have outlined above , our business operates in a highly competitive and cyclical environment . the maintenance of our competitive position and our future growth are dependent on our ability to adapt to ever-changing technologies , short product life cycles , evolving industry standards , changing customer needs and the trend towards internet-of-things , handset baseband , connectivity , and voice , audio and video convergence in the markets that we operate . also , our business relies significantly on revenues derived from a limited number of customers . the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues . moreover , competition has historically increased pricing pressures for our products and decreased our average selling prices . story_separator_special_tag in addition , historically , excess tax benefits or deficiencies from our equity awards were recorded as additional paid-in capital in our consolidated balance sheets and were classified as a financing activity in our consolidated statements of cash flows . as a result of adoption , we prospectively record any excess tax benefits or deficiencies from our equity awards as part of our provision for income taxes in our consolidated statements of operations during the reporting periods during which equity vesting occurs . excess tax benefits for share-based payments are presented as an operating activity in the statements of cash flows rather than financing activity . we elected to apply the cash flow classification requirements related to excess tax benefits prospectively in accordance with asu 2016-09 and prior periods have not been adjusted . we estimate the fair value of options and stock appreciation right ( sar ) awards on the date of grant using an option-pricing model . the value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service period in our consolidated statement of income . we recognize compensation expenses for the value of our options and sars , which have graded vesting based on the accelerated attribution method over the requisite service period of each of the awards . prior to january 1 , 2017 , we recognized compensation expenses for the value of our options and sars , net of estimated forfeitures . estimated forfeitures were based on actual historical pre-vesting forfeitures and the rate was adjusted to reflect changes in facts and circumstances , if any . we recognize compensation expenses for the value of our restricted stock unit ( rsu ) awards , based on the straight-line method over the requisite service period of each of the awards . the fair value of each rsu is the market value as determined by the closing price of the common stock on the day of grant . we use the monte-carlo simulation model for options and sars granted . expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the grant date , equal to the expected option and sar term . we have historically not paid dividends and have no foreseeable plans to pay dividends . the risk-free interest rate is based on the yield from u.s. treasury zero-coupon bonds with an equivalent term . the monte-carlo model also considers the suboptimal exercise multiple which is based on the average exercise behavior of our employees over the past years , the contractual term of the options and sars , and the probability of termination or retirement of the holder of the options and sars in computing the value of the options and sars . although our management believes that their estimates and judgments about equity-based compensation expense are reasonable , actual results and future changes in estimates may differ substantially from our current estimates . impairment of marketable securities marketable securities consist mainly of corporate bonds . we determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such designation at each balance sheet date . in accordance with fasb asc no . 320 , investment debt and equity securities , we classify marketable securities as available-for-sale . available-for-sale securities are stated at fair value , with unrealized gains and losses 38 reported in accumulated other comprehensive income ( loss ) , a separate component of stockholders ' equity , net of taxes . realized gains and losses on sales of marketable securities , as determined on a specific identification basis , are included in financial income , net . the amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity , both of which , together with interest , are included in financial income , net . we have classified all marketable securities as short-term , even though the stated maturity date may be one year or more beyond the current balance sheet date , because it is probable that we will sell these securities prior to maturity to meet liquidity needs or as part of risk versus reward objectives . we recognize an impairment charge when a decline in the fair value of our investments in debt securities below the cost basis of such securities is judged to be other-than-temporary . the determination of credit losses requires significant judgment and actual results may be materially different from our estimates . factors considered in making such a determination include the duration and severity of the impairment , the reason for the decline in value , the ability of the issuer to meet payment obligations and the potential recovery period . for securities that are deemed other-than-temporarily impaired , the amount of impairment is recognized in the statement of income and is limited to the amount related to credit losses , while impairment related to other factors is recognized in other comprehensive income ( loss ) . during the years ended december 31 , 2015 , 2016 and 2017 , no other-than temporary impairment were recorded related to our marketable securities . recently issued accounting pronouncement ( a ) revenue recognition in may 2014 , the fasb issued new guidance related to revenue recognition , which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance . the new guidance requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services . it defines a five-step approach for recognizing revenue , which may require a company to use more judgment and make more estimates than under the current guidance . we adopted the new guidance during the first quarter of 2018 and apply the standard using modified retrospective approach , with the cumulative effect of applying the
| net cash provided by continuing operations was $ 311.2 million for fiscal year 2018 , as compared to net cash provided by continuing operations of $ 292.2 million for fiscal year 2017 , an increase of $ 19.1 million . the cash provided by operating activities for fiscal year 2018 was principally a result of income from continuing operations of $ 237.5 37 million , and non-cash charges , including depreciation and amortization of $ 180.6 million , stock based compensation expense of $ 28.8 million , change in fair value of contingent consideration of $ 14.6 million , a non-cash expense of $ 11.9 million related to our postretirement benefit plans , including the mark-to-market adjustment in the fourth quarter of fiscal year 2018 , restructuring and contract termination charges , net , of $ 11.1 million , and amortization of deferred debt issuance costs and accretion of discounts of $ 3.3 million . these amounts were partially offset by a net increase in working capital of $ 115.8 million , deferred tax benefit of $ 51.1 million , a net increase of $ 3.7 million in accrued expenses , other assets and liabilities and other items , a gain from disposition of businesses and assets , net of $ 12.8 million , and a gain on sale of investments , net of $ 0.6 million . the change in accrued expenses , other assets and liabilities and other items increase d cash provided by operating activities by $ 3.7 million for fiscal year 2018 , primarily related to the timing of payments for pension , taxes , restructuring , royalties and salary and benefits .
| 0 |
in particular , our presence in the lte smartphone markets continue to grow as our customers targeting those markets are gaining market share at the expense of the incumbents . during 2017 , we reported 311 million lte chipsets shipped , up from 226 million in 2016. the royalty we derive from smartphones is higher on average than that of feature phones , so we may benefit if and when lte handset markets around the world transition and shift away from feature phones to smartphones , particularly in emerging economies . furthermore , we believe that we may benefit from the base station chip ramp up in coming years , as a large customer of ours is forecasted to start ramping up production in the second half of 2018. our specialization and competitive edge in signal processing platforms for next generation long and short range wireless such as 5g , nb-iot , 802.11ac and 802.11ax wi-fi technologies , and the inherent low cost , power and performance balance of our designs , put us in a strong position to simultaneously capitalize on mass market adoption of such technologies and address multiple markets and product sectors , including handsets , fixed wireless access , macro base stations , remote radio heads , cellular backhaul , small cells , wi-fi routers and a variety of machine type communications such as connected cars , smart cities and industrial markets . together with our presence in the handset baseband market , our bluetooth and wi-fi ips allow us to expand further into iot applications and substantially increase our overall addressable market . our addressable market size is expected to be 35 billion devices by 2020 , per data from abi research . already , shipments of products incorporating our bluetooth ip are sizeable , with more than 200 million ceva-powered bluetooth chips shipped in 2017 , up 45 % from 138 million units in 2016. the growing market potential for voice assisted devices , as voice is becoming the primary user interface for iot applications , including mobile , automotive and consumer devices , offers an additional growth segment for the company in voice enabled devices such as smartphones , headsets , earbuds , smart speakers , smart home and automotive . to better address this market , we recently introduced clearvox , a new voice input software and algorithm , that is offered in conjunction with our audio/voice dsps . clearvox , plus our proven track record in audio/voice processing , with more than 6 billion audio chips shipped to date , puts us in a strong position to power audio and voice roadmaps across this new range of addressable end markets . our ceva-xm4 and ceva-xm6 imaging and vision platforms for deep learning provide highly compelling offerings for any camera-enabled device such as smartphones , tablets , automotive safety ( adas ) , autonomous driving ( ad ) , drones , robotics , security and surveillance , augmented reality ( ar ) and virtual reality ( vr ) , drones , and signage . per abi research , camera shipments are expected to exceed 2.7 billion units by 2018. we have already signed more than 50 licensing agreements for our imaging and vision dsps across those markets , where our customers can add camera-related enhancements such as smarter autofocus , better picture using super resolution algorithms , and better image capture in low-light environments . other customers can add video analytics support to enable new services like augmented reality , gesture recognition and advanced safety capabilities in cars . this transformation in vision processing and neural net software and hardware needs is an opportunity for us to expand our footprint and content in smartphones , tablets , drones , surveillance , automotive adas and industrial iot applications . beyond vision , neural networks are increasingly being deployed for a wide range of markets in order to make devices smarter ' . these markets include iot , smartphones , surveillance , automotive , robotics , medical and industrial . to address this significant and lucrative opportunity , we recently announced neupro - a family of ai processors for deep learning at the edge . these self-contained ai processors are the first non-dsp processors ever developed by ceva and bring the power of deep learning to the device , without relying on connectivity to the cloud . we believe this market opportunity for ai at the edge is on top of our existing product lines and represents a new licensing and royalty driver for the company in the coming years . 33 as a result of our diversification strategy beyond baseband for handsets and our progress in addressing those new markets under the iot umbrella , we expect significant growth in royalty revenues derived from non-handset baseband applications over the next few years , due to a combination of higher unit shipments of bluetooth products that bear lower asps , along with higher asps driven by base station and vision products . notwithstanding the various growth opportunities we have outlined above , our business operates in a highly competitive and cyclical environment . the maintenance of our competitive position and our future growth are dependent on our ability to adapt to ever-changing technologies , short product life cycles , evolving industry standards , changing customer needs and the trend towards internet-of-things , handset baseband , connectivity , and voice , audio and video convergence in the markets that we operate . also , our business relies significantly on revenues derived from a limited number of customers . the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues . moreover , competition has historically increased pricing pressures for our products and decreased our average selling prices . story_separator_special_tag in addition , historically , excess tax benefits or deficiencies from our equity awards were recorded as additional paid-in capital in our consolidated balance sheets and were classified as a financing activity in our consolidated statements of cash flows . as a result of adoption , we prospectively record any excess tax benefits or deficiencies from our equity awards as part of our provision for income taxes in our consolidated statements of operations during the reporting periods during which equity vesting occurs . excess tax benefits for share-based payments are presented as an operating activity in the statements of cash flows rather than financing activity . we elected to apply the cash flow classification requirements related to excess tax benefits prospectively in accordance with asu 2016-09 and prior periods have not been adjusted . we estimate the fair value of options and stock appreciation right ( sar ) awards on the date of grant using an option-pricing model . the value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service period in our consolidated statement of income . we recognize compensation expenses for the value of our options and sars , which have graded vesting based on the accelerated attribution method over the requisite service period of each of the awards . prior to january 1 , 2017 , we recognized compensation expenses for the value of our options and sars , net of estimated forfeitures . estimated forfeitures were based on actual historical pre-vesting forfeitures and the rate was adjusted to reflect changes in facts and circumstances , if any . we recognize compensation expenses for the value of our restricted stock unit ( rsu ) awards , based on the straight-line method over the requisite service period of each of the awards . the fair value of each rsu is the market value as determined by the closing price of the common stock on the day of grant . we use the monte-carlo simulation model for options and sars granted . expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the grant date , equal to the expected option and sar term . we have historically not paid dividends and have no foreseeable plans to pay dividends . the risk-free interest rate is based on the yield from u.s. treasury zero-coupon bonds with an equivalent term . the monte-carlo model also considers the suboptimal exercise multiple which is based on the average exercise behavior of our employees over the past years , the contractual term of the options and sars , and the probability of termination or retirement of the holder of the options and sars in computing the value of the options and sars . although our management believes that their estimates and judgments about equity-based compensation expense are reasonable , actual results and future changes in estimates may differ substantially from our current estimates . impairment of marketable securities marketable securities consist mainly of corporate bonds . we determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such designation at each balance sheet date . in accordance with fasb asc no . 320 , investment debt and equity securities , we classify marketable securities as available-for-sale . available-for-sale securities are stated at fair value , with unrealized gains and losses 38 reported in accumulated other comprehensive income ( loss ) , a separate component of stockholders ' equity , net of taxes . realized gains and losses on sales of marketable securities , as determined on a specific identification basis , are included in financial income , net . the amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity , both of which , together with interest , are included in financial income , net . we have classified all marketable securities as short-term , even though the stated maturity date may be one year or more beyond the current balance sheet date , because it is probable that we will sell these securities prior to maturity to meet liquidity needs or as part of risk versus reward objectives . we recognize an impairment charge when a decline in the fair value of our investments in debt securities below the cost basis of such securities is judged to be other-than-temporary . the determination of credit losses requires significant judgment and actual results may be materially different from our estimates . factors considered in making such a determination include the duration and severity of the impairment , the reason for the decline in value , the ability of the issuer to meet payment obligations and the potential recovery period . for securities that are deemed other-than-temporarily impaired , the amount of impairment is recognized in the statement of income and is limited to the amount related to credit losses , while impairment related to other factors is recognized in other comprehensive income ( loss ) . during the years ended december 31 , 2015 , 2016 and 2017 , no other-than temporary impairment were recorded related to our marketable securities . recently issued accounting pronouncement ( a ) revenue recognition in may 2014 , the fasb issued new guidance related to revenue recognition , which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance . the new guidance requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services . it defines a five-step approach for recognizing revenue , which may require a company to use more judgment and make more estimates than under the current guidance . we adopted the new guidance during the first quarter of 2018 and apply the standard using modified retrospective approach , with the cumulative effect of applying the
| liquidity and capital resources as of december 31 , 2017 , we had approximately $ 21.7 million in cash and cash equivalents , $ 34.4 million in short term bank deposits , $ 82.7 million in marketable securities , and $ 44.5 million in long term bank deposits , totaling $ 183.3 million , as compared to $ 156.5 million at december 31 , 2016. the increase in 2017 as compared to 2016 principally reflected cash provided by operating activities and cash proceeds from exercise of stock-based awards , offset by the purchase of computers and platform tools , mainly for our research and development activities . out of total cash , cash equivalents , bank deposits and marketable securities of $ 183.3 million at year end 2017 , $ 138.7 million was held by our foreign subsidiaries . our intent is to permanently reinvest earnings of our foreign subsidiaries and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our u.s. operations . however , if these funds were needed for our operations in the united states , we would be required to accrue and pay taxes to repatriate these funds . the determination of the amount of additional taxes related to the repatriation of these earnings is not practicable , as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated . during 2017 , we invested $ 101.9 million of cash in bank deposits and marketable securities with maturities up to 57 months from the balance sheet date . in addition , during the same period , bank deposits and marketable securities were sold or redeemed for cash amounting to $ 77.3 million . during 2016 , we invested $ 85.0 million of cash in bank deposits and marketable securities with maturities up to 59 months from the balance sheet date . in addition , during the same period , bank deposits and marketable securities were sold or redeemed for cash amounting to $ 66.4 million .
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management considers a variety of factors in establishing allowance for loan losses such as current economic conditions , diversification of the loan portfolio , delinquency statistics , results of internal loan reviews , financial and managerial strength of borrowers , adequacy of collateral , ( if collateral dependent , or present value of future cash flows ) and other relevant factors . there is also the potential for adjustment to the allowance for loan losses as a result of regulatory examinations . foreclosed real estate is initially recorded at fair value minus estimated costs to sell at the date of foreclosure , establishing a new cost basis . appraisals are generally used to determine fair value . after foreclosure , management reviews valuations at least quarterly and adjusts the asset to the lower of cost or fair value minus estimated costs to sell . estimates related to the value of collateral can have a significant impact on whether or not management continues to accrue income on delinquent and impaired loans and on the amounts at which foreclosed real estate is recorded on the statement of financial condition . the corporation records its available-for-sale securities portfolio at fair value . fair values for these securities are determined based on methodologies in accordance with fasb accounting standards codification ( asc ) topic 820. fair values for debt securities are volatile and may be influenced by any number of factors , including market interest rates , prepayment speeds , discount rates , credit ratings and yield curves . fair values for debt securities are based on quoted market prices , where available . if quoted market prices are not available , fair values are based on the quoted prices of similar instruments or an estimate of fair value by using a range of fair value estimates in the market place as a result of the illiquid market specific to the type of security . when the fair value of a debt security is below its amortized cost and depending on the length of time the condition exists and the extent the fair value is below amortized cost , additional analysis is performed to determine whether an other-than-temporary impairment condition exists . debt securities are analyzed quarterly for possible other-than-temporary impairment . the analysis considers whether the corporation has the intent to sell its debt securities prior to market recovery or maturity and whether it is more likely than not that the corporation will be required to sell its debt securities prior to market recovery or maturity . often , information available to conduct these assessments is limited and rapidly changing , making estimates of fair value subject to judgment . if actual information or conditions are different than estimated , the extent of the impairment of the debt security may be different than previously estimated , which could have a material effect on the corporation 's results of operations and financial condition . management discussed the development and selection of critical accounting estimates and related management discussion and analysis disclosures with the audit committee . there were no material changes made to the critical accounting estimates during the periods presented within this report . additional information is contained in management 's discussion and analysis regarding critical accounting estimates , including the provision and allowance for loan losses located on pages 37 and 55 of this report . 30 financial highlights executive summary the corporation 's net income available to common shareholders ( earnings ) was $ 12,004,000 for the full year 2017 , compared to $ 13,086,000 of earnings in 2016 , a decrease of $ 1,082,000 or 8 percent . the decrease in net income and earnings per share for the year was primarily the result of a $ 2,755,000 reduction in the net deferred tax asset value due to the new corporate tax rate of 21 percent enacted as part of the tax cuts and jobs act . ● net interest income for 2017 increased $ 5,966,000 or 11 percent when compared to 2016 , primarily due to an increase in the volume of commercial loans . ● net interest margin ( tax-equivalent basis ) for 2017 was 3.84 percent , compared to 3.89 percent for 2016. the corporation continues to have success in growing lower cost core deposits , while maintaining reasonable yields on new loan growth in a highly competitive environment . the average yield on earning assets increased to 4.53 percent in 2017 as compared to 4.51 percent in 2016 and the cost of interest-bearing liabilities increased to 0.86 percent in 2017 , as compared to 0.76 percent in 2016 . ● the loan loss provision for 2017 increased $ 1,175,000 compared to 2016 , primary due to growth in commercial loans and an increase in net charge-offs in 2017 as compared to the prior year . ● noninterest income , excluding gains on sales of investment securities , for the year ended december 31 , 2017 , totaled $ 11,443,000 representing an increase of $ 1,607,000 or 16 percent compared to noninterest income of $ 9,836,000 for 2016. specific noninterest income increases included trust fees , service charges on deposits , income from bank owned life insurance and gains on sales of loans held for sale . gains on sales of investment securities for 2017 decreased $ 115,000 when compared to 2016 . ● noninterest expense for the year ended december 31 , 2017 , totaled $ 44,986,000 representing an increase of $ 3,363,000 or 8 percent compared to $ 41,623,000 for 2016. higher costs associated with : personnel , external data processing , charitable contributions and other expenses , accounted for the majority of the increase . the primary driver of the aforementioned increase in noninterest expense was the expansion of our business and consumer banking in and support services for our maryland and pennsylvania markets . story_separator_special_tag provision for loan losses the provision for loan losses is an expense charged to earnings to cover estimated losses attributable to uncollectable loans . the provision reflects management 's judgment of an appropriate level for the allowance for loan losses . the risk management section of this report , including table 10 – nonperforming assets , table 11 – analysis of allowance for loan losses , and table 12 – allocation of allowance for loan losses , provides detailed information about the allowance for loan losses , the loan loss provision , and credit risk . for the year 2017 , the provision for loan losses was $ 4,175,000 , which was $ 1,175,000 or 39 percent higher , compared to a provision of $ 3,000,000 in 2016. the increased provision for loan losses was impacted by an increase in net charge-offs in 2017 of $ 1,766,000. one loan in the construction and land development portfolio was primary the contributor to the increase in net charge-offs . the provision for both periods supported adequate allowance for loan loss coverage , including the corporation 's substantial growth in commercial loans , and the corporation 's analysis of the adequacy of the allowance based upon the size , composition , and risks to the loan portfolio , the level of specific reserves , and realized net charge-offs . 37 noninterest income the following table presents the components of total noninterest income for each of the past three years . replace_table_token_7_th for the year 2017 , the overall $ 1,492,000 or 15 percent increase in total noninterest income , compared to the year 2016 , was primarily the result of increases in trust fees , service charges on deposit , income from bank owned life insurance , and gains on sales of loans held for sale . the discussion that follows addresses changes in selected categories of noninterest income . trust and investment services fees —the upward trend in trust and investment services fee income over the three year period presented was due to growth in trust assets under management from both new accounts , and appreciation in the market value of managed accounts , upon which some fees are based . income from mutual fund , annuity and insurance sales — income from mutual fund , annuity and insurance sales declined during the current year due to the implementation of a new regulatory rule resulting in reduced commissions . despite the reduced fees in the current year , assets under management have shown a steady increase over the last three year period . the non-deposit investment products are sold by peoplesbank 's subsidiaries codorus valley financial advisors , inc. d/b/a peopleswealth advisors . service charges on deposit accounts —for the year 2017 , the $ 468,000 or 13 percent increase in service charge income compared to the year 2016 was due to an increase in the volume of demand deposit accounts subject to fees and debit card transactions . for the year 2016 , service charge income increased $ 290,000 or 9 percent as compared to the year 2015. income from bank owned life insurance ( boli ) —for the year 2017 , the $ 167,000 or 19 percent increase in income from boli compared to 2016 was primarily due to additional investments totaling $ 4,007,000 during 2017. for the year 2016 , the $ 167,000 or 24 percent increase in income from boli compared to 2015 was primarily due to additional investments totaling $ 6,987,000 during 2016. net gain on sales of loans held for sale —the upward trend in net gains from the sale of loans held for sale is primarily due to a favorable trend in sales of fixed-rate residential mortgage loans and selling the guaranteed portion of secondary-market qualified loans originated through programs with the small business administration . 38 net gain on sales of securities —for the year 2017 , the corporation realized $ 79,000 in gains on sales of securities compared to $ 194,000 and $ 492,000 for the full years 2016 and 2015 , respectively . securities sold included those where market pricing for certain instruments provided a favorable total return upon the sales and reinvestment of proceeds , versus holding the respective securities to maturity . in addition , sales provided cash to meet short-term liquidity needs . noninterest expense the following table presents the components of total noninterest expense for each of the past three years . replace_table_token_8_th total noninterest expense for the year 2017 increased $ 3,363,000 or 8 percent above the year 2016 , reflecting the overall expansion of our business and consumer banking in and support services for our maryland and pennsylvania markets . the discussion that follows addresses changes in selected noninterest expenses . personnel— the upward trend in personnel expense was due largely to an increase in wage and benefit costs resulting from planned staff additions to support our expanded business and consumer banking services in maryland and pennsylvania . also contributing to the increase is a higher cost of health insurance . 39 occupancy of premises , net — occupancy of premises expense is comprised of rent , depreciation , maintenance , insurance , real estate taxes and utilities . the level of expense can vary annually based upon franchise expansion , repairs and maintenance , and normal business growth . furniture and equipment —the upward trend in furniture and equipment expense was in alignment with the increased personnel expense , as additional furniture , computer hardware and software ( and related depreciation and maintenance expenses ) were incurred to support staff growth . during 2017 , overall maintenance and repair expenses declined compared to 2016 offsetting some of the aforementioned increases in expenses . postage , stationary and supplies —the level of postage , stationary and supplies can vary based on growth in loan and deposit customers , franchise expansion , postage rate changes , and marketing promotions . professional and legal — the level of
| liquidity and capital resources as of december 31 , 2017 , we had approximately $ 21.7 million in cash and cash equivalents , $ 34.4 million in short term bank deposits , $ 82.7 million in marketable securities , and $ 44.5 million in long term bank deposits , totaling $ 183.3 million , as compared to $ 156.5 million at december 31 , 2016. the increase in 2017 as compared to 2016 principally reflected cash provided by operating activities and cash proceeds from exercise of stock-based awards , offset by the purchase of computers and platform tools , mainly for our research and development activities . out of total cash , cash equivalents , bank deposits and marketable securities of $ 183.3 million at year end 2017 , $ 138.7 million was held by our foreign subsidiaries . our intent is to permanently reinvest earnings of our foreign subsidiaries and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our u.s. operations . however , if these funds were needed for our operations in the united states , we would be required to accrue and pay taxes to repatriate these funds . the determination of the amount of additional taxes related to the repatriation of these earnings is not practicable , as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated . during 2017 , we invested $ 101.9 million of cash in bank deposits and marketable securities with maturities up to 57 months from the balance sheet date . in addition , during the same period , bank deposits and marketable securities were sold or redeemed for cash amounting to $ 77.3 million . during 2016 , we invested $ 85.0 million of cash in bank deposits and marketable securities with maturities up to 59 months from the balance sheet date . in addition , during the same period , bank deposits and marketable securities were sold or redeemed for cash amounting to $ 66.4 million .
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management considers a variety of factors in establishing allowance for loan losses such as current economic conditions , diversification of the loan portfolio , delinquency statistics , results of internal loan reviews , financial and managerial strength of borrowers , adequacy of collateral , ( if collateral dependent , or present value of future cash flows ) and other relevant factors . there is also the potential for adjustment to the allowance for loan losses as a result of regulatory examinations . foreclosed real estate is initially recorded at fair value minus estimated costs to sell at the date of foreclosure , establishing a new cost basis . appraisals are generally used to determine fair value . after foreclosure , management reviews valuations at least quarterly and adjusts the asset to the lower of cost or fair value minus estimated costs to sell . estimates related to the value of collateral can have a significant impact on whether or not management continues to accrue income on delinquent and impaired loans and on the amounts at which foreclosed real estate is recorded on the statement of financial condition . the corporation records its available-for-sale securities portfolio at fair value . fair values for these securities are determined based on methodologies in accordance with fasb accounting standards codification ( asc ) topic 820. fair values for debt securities are volatile and may be influenced by any number of factors , including market interest rates , prepayment speeds , discount rates , credit ratings and yield curves . fair values for debt securities are based on quoted market prices , where available . if quoted market prices are not available , fair values are based on the quoted prices of similar instruments or an estimate of fair value by using a range of fair value estimates in the market place as a result of the illiquid market specific to the type of security . when the fair value of a debt security is below its amortized cost and depending on the length of time the condition exists and the extent the fair value is below amortized cost , additional analysis is performed to determine whether an other-than-temporary impairment condition exists . debt securities are analyzed quarterly for possible other-than-temporary impairment . the analysis considers whether the corporation has the intent to sell its debt securities prior to market recovery or maturity and whether it is more likely than not that the corporation will be required to sell its debt securities prior to market recovery or maturity . often , information available to conduct these assessments is limited and rapidly changing , making estimates of fair value subject to judgment . if actual information or conditions are different than estimated , the extent of the impairment of the debt security may be different than previously estimated , which could have a material effect on the corporation 's results of operations and financial condition . management discussed the development and selection of critical accounting estimates and related management discussion and analysis disclosures with the audit committee . there were no material changes made to the critical accounting estimates during the periods presented within this report . additional information is contained in management 's discussion and analysis regarding critical accounting estimates , including the provision and allowance for loan losses located on pages 37 and 55 of this report . 30 financial highlights executive summary the corporation 's net income available to common shareholders ( earnings ) was $ 12,004,000 for the full year 2017 , compared to $ 13,086,000 of earnings in 2016 , a decrease of $ 1,082,000 or 8 percent . the decrease in net income and earnings per share for the year was primarily the result of a $ 2,755,000 reduction in the net deferred tax asset value due to the new corporate tax rate of 21 percent enacted as part of the tax cuts and jobs act . ● net interest income for 2017 increased $ 5,966,000 or 11 percent when compared to 2016 , primarily due to an increase in the volume of commercial loans . ● net interest margin ( tax-equivalent basis ) for 2017 was 3.84 percent , compared to 3.89 percent for 2016. the corporation continues to have success in growing lower cost core deposits , while maintaining reasonable yields on new loan growth in a highly competitive environment . the average yield on earning assets increased to 4.53 percent in 2017 as compared to 4.51 percent in 2016 and the cost of interest-bearing liabilities increased to 0.86 percent in 2017 , as compared to 0.76 percent in 2016 . ● the loan loss provision for 2017 increased $ 1,175,000 compared to 2016 , primary due to growth in commercial loans and an increase in net charge-offs in 2017 as compared to the prior year . ● noninterest income , excluding gains on sales of investment securities , for the year ended december 31 , 2017 , totaled $ 11,443,000 representing an increase of $ 1,607,000 or 16 percent compared to noninterest income of $ 9,836,000 for 2016. specific noninterest income increases included trust fees , service charges on deposits , income from bank owned life insurance and gains on sales of loans held for sale . gains on sales of investment securities for 2017 decreased $ 115,000 when compared to 2016 . ● noninterest expense for the year ended december 31 , 2017 , totaled $ 44,986,000 representing an increase of $ 3,363,000 or 8 percent compared to $ 41,623,000 for 2016. higher costs associated with : personnel , external data processing , charitable contributions and other expenses , accounted for the majority of the increase . the primary driver of the aforementioned increase in noninterest expense was the expansion of our business and consumer banking in and support services for our maryland and pennsylvania markets . story_separator_special_tag provision for loan losses the provision for loan losses is an expense charged to earnings to cover estimated losses attributable to uncollectable loans . the provision reflects management 's judgment of an appropriate level for the allowance for loan losses . the risk management section of this report , including table 10 – nonperforming assets , table 11 – analysis of allowance for loan losses , and table 12 – allocation of allowance for loan losses , provides detailed information about the allowance for loan losses , the loan loss provision , and credit risk . for the year 2017 , the provision for loan losses was $ 4,175,000 , which was $ 1,175,000 or 39 percent higher , compared to a provision of $ 3,000,000 in 2016. the increased provision for loan losses was impacted by an increase in net charge-offs in 2017 of $ 1,766,000. one loan in the construction and land development portfolio was primary the contributor to the increase in net charge-offs . the provision for both periods supported adequate allowance for loan loss coverage , including the corporation 's substantial growth in commercial loans , and the corporation 's analysis of the adequacy of the allowance based upon the size , composition , and risks to the loan portfolio , the level of specific reserves , and realized net charge-offs . 37 noninterest income the following table presents the components of total noninterest income for each of the past three years . replace_table_token_7_th for the year 2017 , the overall $ 1,492,000 or 15 percent increase in total noninterest income , compared to the year 2016 , was primarily the result of increases in trust fees , service charges on deposit , income from bank owned life insurance , and gains on sales of loans held for sale . the discussion that follows addresses changes in selected categories of noninterest income . trust and investment services fees —the upward trend in trust and investment services fee income over the three year period presented was due to growth in trust assets under management from both new accounts , and appreciation in the market value of managed accounts , upon which some fees are based . income from mutual fund , annuity and insurance sales — income from mutual fund , annuity and insurance sales declined during the current year due to the implementation of a new regulatory rule resulting in reduced commissions . despite the reduced fees in the current year , assets under management have shown a steady increase over the last three year period . the non-deposit investment products are sold by peoplesbank 's subsidiaries codorus valley financial advisors , inc. d/b/a peopleswealth advisors . service charges on deposit accounts —for the year 2017 , the $ 468,000 or 13 percent increase in service charge income compared to the year 2016 was due to an increase in the volume of demand deposit accounts subject to fees and debit card transactions . for the year 2016 , service charge income increased $ 290,000 or 9 percent as compared to the year 2015. income from bank owned life insurance ( boli ) —for the year 2017 , the $ 167,000 or 19 percent increase in income from boli compared to 2016 was primarily due to additional investments totaling $ 4,007,000 during 2017. for the year 2016 , the $ 167,000 or 24 percent increase in income from boli compared to 2015 was primarily due to additional investments totaling $ 6,987,000 during 2016. net gain on sales of loans held for sale —the upward trend in net gains from the sale of loans held for sale is primarily due to a favorable trend in sales of fixed-rate residential mortgage loans and selling the guaranteed portion of secondary-market qualified loans originated through programs with the small business administration . 38 net gain on sales of securities —for the year 2017 , the corporation realized $ 79,000 in gains on sales of securities compared to $ 194,000 and $ 492,000 for the full years 2016 and 2015 , respectively . securities sold included those where market pricing for certain instruments provided a favorable total return upon the sales and reinvestment of proceeds , versus holding the respective securities to maturity . in addition , sales provided cash to meet short-term liquidity needs . noninterest expense the following table presents the components of total noninterest expense for each of the past three years . replace_table_token_8_th total noninterest expense for the year 2017 increased $ 3,363,000 or 8 percent above the year 2016 , reflecting the overall expansion of our business and consumer banking in and support services for our maryland and pennsylvania markets . the discussion that follows addresses changes in selected noninterest expenses . personnel— the upward trend in personnel expense was due largely to an increase in wage and benefit costs resulting from planned staff additions to support our expanded business and consumer banking services in maryland and pennsylvania . also contributing to the increase is a higher cost of health insurance . 39 occupancy of premises , net — occupancy of premises expense is comprised of rent , depreciation , maintenance , insurance , real estate taxes and utilities . the level of expense can vary annually based upon franchise expansion , repairs and maintenance , and normal business growth . furniture and equipment —the upward trend in furniture and equipment expense was in alignment with the increased personnel expense , as additional furniture , computer hardware and software ( and related depreciation and maintenance expenses ) were incurred to support staff growth . during 2017 , overall maintenance and repair expenses declined compared to 2016 offsetting some of the aforementioned increases in expenses . postage , stationary and supplies —the level of postage , stationary and supplies can vary based on growth in loan and deposit customers , franchise expansion , postage rate changes , and marketing promotions . professional and legal — the level of
| liquidity maintaining adequate liquidity provides the corporation with the ability to meet financial obligations to depositors , loan clients , employees , and shareholders on a timely and cost effective basis in the normal course of business . additionally , it provides funds for growth and business opportunities as they arise . liquidity is generated from transactions relating to both the corporation 's assets and liabilities . the primary sources of asset liquidity are scheduled investment security maturities and cash inflows , funds received from client loan payments and , to a lesser degree , asset sales . the primary sources of liability liquidity are deposit growth , short-term borrowings and long-term debt . the consolidated statements of cash flows , included in this report , present the changes in cash from operating , investing and financing activities . at year-end 2017 , we believe our liquidity was adequate based upon the potential liquidation of unpledged available-for-sale securities with a fair value totaling approximately $ 52,988,000 and available credit from the federal home loan bank of pittsburgh totaling approximately $ 346,889,000. the corporation 's loan-to-deposit ratio was approximately 101 percent as of year-end 2017 and 2016. the ratio was flat as periodend deposit growth was in line with loan growth in 2017. off-balance sheet arrangements the corporation 's financial statements do not reflect various commitments that are made in the normal course of business , which may involve some liquidity risk .
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this was partially offset by improved gross margin in our organic business through disciplined pricing and management of our increasing minimum wage for labor , health benefits , and payroll taxes . selling , general and administrative ( `` sg & a `` ) expenses as a percentage of revenue decreased to 18.4 % for the year ended december 25 , 2015 from 19.6 % for the same period in 2014 , primarily due to seaton 's lower cost of doing business as a percent of sales . the acquired service lines offer workforce solutions as an integrated partner with our customers , which are delivered through highly centralized operations in chicago , illinois with support from on-site and virtual employee teams . we do not operate a branch network to service these customers and accordingly these services utilize a more flexible centralized support structure resulting in lower sg & a as a percent of sales . sg & a increased by $ 70.2 million to $ 496.0 million for the year ended december 25 , 2015 , compared to the same period in 2014 . the increase is primarily related to a full year of expenses related to the acquired operations of seaton of approximately $ 55.8 page - 17 million . we completed the acquisition of seaton on the first business day of our third quarter of 2014. the integration of seaton was completed during 2015. the remaining increase is primarily related to variable costs on organic revenue growth and other investments to enable continued growth . depreciation and amortization increased $ 12.4 million for the year ended december 25 , 2015 , due to a full year of amortization of intangible assets acquired in connection with the seaton acquisition compared to half a year of amortization expense in 2014. income from operations grew to $ 97.8 million for the year ended december 25 , 2015 , or an increase of 19.7 % compared to $ 81.7 million for the same period in 2014. the improved performance reflects solid revenue growth , disciplined pricing , and effective cost control partially offset by investments made in sales and recruiting resources as well as start-up costs for on-site customers and new recruitment process outsourcing customers . the benefit of those investments will be fully realized in 2016. net income increased to $ 71.2 million , or $ 1.71 per diluted share , for the year ended december 25 , 2015 , compared to $ 65.7 million , or $ 1.59 per diluted share , for the same period in 2014 . the increase was driven primarily by net income from acquired operations and organic growth . we believe we are in a strong financial position to fund working capital needs for growth opportunities . as of december 25 , 2015 , we had cash and cash equivalents of $ 29.8 million and $ 77.3 million available under the revolving credit facility . results of operations total company results the following table presents selected financial data ( in thousands , except percentages and per share amounts ) : replace_table_token_5_th our year-over-year trends are significantly impacted by the acquisition of seaton . seaton was acquired effective the first day of our fiscal third quarter in 2014 and , accordingly , is included in only twenty-six of the fifty-two weeks ended december 26 , 2014 , as compared to the entire year ended december 25 , 2015 . the seaton acquisition added new services and capabilities to better meet our objective of providing our customers with the talent and flexible workforce solutions they need to enhance their business performance . these service lines have dedicated customer on-site and virtual teams which leverage highly centralized support services for recruiting and delivering services to meet the specialized needs of each customer . since these service lines do not operate a branch network , they can function more flexibly . the performance of the seaton acquisition in the first year of operations has delivered on our expectations for revenue and income from operations and continues to deliver organic revenue growth . page - 18 effective december 1 , 2015 , we acquired simos , a leading provider of on-premise workforce management solutions . simos customers include fortune 500 companies in consumer goods , retail , online commerce , and food packaging and distribution . simos specializes in helping clients streamline warehouse/distribution operations to meet the growing demand for online commerce and supply chain solutions . they are also experts in providing scalable solutions for pick and pack and shipping requirements . their unique productivity model incorporates fixed price-per-unit solutions to drive client value . additionally , their continuous analysis and improvement of processes and incentive pay drives workforce efficiency and reduces costs , lowers risk of injury and damage , and improves productivity and service levels . simos broadens our on-premise staffing footprint with an additional 37 sites across 11 states . revenue from services revenue from services was as follows ( in thousands , except percentages ) : replace_table_token_6_th fiscal 2015 as compared to fiscal 2014 revenue grew to $ 2,695.7 million for fiscal 2015 , a 24.0 % increase compared to the same period in the prior year primarily due to the acquisitions of seaton in the prior year and simos in the current year . the year ended december 25 , 2015 included a full year of revenue for seaton of $ 810.8 million compared to $ 394.4 million from the date of acquisition through our year ended december 26 , 2014 , contributing 18.1 % of our revenue growth , or 15.8 % excluding organic revenue growth . the year ended december 25 , 2015 included one month of simos revenue of $ 22.2 million or 1.0 % of our revenue growth over the prior year . organic revenue growth for the year ended december 25 , 2015 was 7.2 % . story_separator_special_tag managed service provider solutions provide customers with improved quality and spend management of their contingent labor vendors . the complementary service lines are operating segments , which are aggregated and reported as managed services . revenue from services and income from operations associated with our segments were as follows ( in thousands , except percentages ) : replace_table_token_13_th page - 23 staffing services revenue grew to $ 2,591.2 million for fiscal 2015 , a 21.9 % increase compared to the same period in the prior year , primarily due to the acquisitions of seaton in the prior year and simos in the current year . the year ended december 25 , 2015 included a full year of revenue for seaton of $ 705.1 million compared to $ 346.3 million from the date of acquisition through our year ended december 26 , 2014 , or 15.9 % of our revenue growth . the year ended december 25 , 2015 included one month of simos revenue of $ 22.2 million or 1.0 % of our revenue growth over the prior year . organic revenue growth for the year ended december 25 , 2015 was 4.7 % . the organic revenue growth was driven by widespread improvement across most of our staffing service lines , geographies , and the industries we serve . the construction industry saw considerable growth driven by improving momentum in both residential and commercial construction as well as green energy projects . rapid growth in online commerce resulted in considerable growth in warehousing and distribution . demand by the transportation industry for our driver workforce solutions continues to see double digit growth.we saw improving trends with small to medium sized customers and continued growth with our national customers . the positive trends are partially offset by continued pressure on the manufacturing industry , which continues to face a challenging export market . income from operations as a percent of revenue decreased slightly to 6.4 % the year ended december 25 , 2015 , compared to 6.5 % for the same period in 2014 . the decrease is primarily related to investments made in start-up costs for on-site customers and other investments to enable continued growth.we expect the the benefit of those investments to be fully realized in 2016. for the fiscal year ended 2015 , one customer , amazon , represented 13.1 % and 13.7 % of total company and the staffing services reportable segment revenues , respectively . for the fiscal years ended 2014 and 2013 , no single customer represented more than 10 % of total company . for fiscal year ended 2014 , no single customer represented more than 10 % of total staffing services reportable segment revenues . managed services managed service revenue and income from operations for the year ended december 25 , 2015 , include a full year of results for seaton compared to partial year results from the acquisition date of june 30 , 2014 through december 26 , 2014. income from operations as a percent of revenue decreased slightly to 11.8 % for the year ended december 25 , 2015 , compared to 12.3 % for the same period in 2014 . the decrease is primarily related to investments made in start-up costs for new recruitment process outsourcing customers . for the fiscal year ended 2015 , two customers represented 10.6 % and 10.2 % of our managed services reportable segment revenues , respectively . for the fiscal year ended 2014 , no single customer represented more than 10 % of managed services reportable segment revenues . future outlook we have limited visibility into future demand for our services . however , we believe there is value in providing highlights of our expectations for the financial performance of our recent acquisitions as well as continued organic growth . producing strong organic revenue and gross profit growth to further leverage our cost structure and generate increasing operating income as a percentage of revenue continues to be our top priority . we expect revenue growth of approximately 16 % for fiscal 2016 as compared to fiscal 2015 , comprised of the following : effective december 1 , 2015 , we acquired simos , a leading provider of on-premise workforce management solutions . the acquired operations expand and complement our staff management | smx on-premise services . we expect simos to produce annual revenue of approximately $ 185 million , or 5.6 % of total revenue growth , and operating income of approximately $ 9 million for fiscal 2016. effective january 4 , 2016 , we acquired aon hewitt 's rpo business , a leading provider of recruitment process outsourcing services . the acquired operations expand and complement our peoplescout services and will be fully integrated with this service line in 2016. we expect the acquired rpo business of aon hewitt to produce annual revenue of approximately $ 65 million , or 2.4 % of total revenue growth , and operating income of approximately $ 10 million for fiscal 2016. we expect total organic revenue growth of approximately 8 % for fiscal 2016 as compared to the prior year . the organic revenue growth expectation of 8 % is comparable to that achieved in fiscal 2015 of 7.2 % . our expectations for fiscal 2016 are less than the peak revenue growth of approximately 14 % for the fourth quarter of 2015 as compared to the prior year . revenue growth slowed toward the end of the fourth quarter of 2015. this slowing , which was especially pronounced page - 24 for our national customer base and retail industry , continued into january of 2016. we remain optimistic for fiscal 2016 with continued demand for our specialized workforce solutions in an increasingly tight labor market . we also expect demand to fluctuate in choppy patterns , as it has since emerging from the recession in 2010. providing our customers with a scalable workforce is a key value proposition of our business model and we
| liquidity maintaining adequate liquidity provides the corporation with the ability to meet financial obligations to depositors , loan clients , employees , and shareholders on a timely and cost effective basis in the normal course of business . additionally , it provides funds for growth and business opportunities as they arise . liquidity is generated from transactions relating to both the corporation 's assets and liabilities . the primary sources of asset liquidity are scheduled investment security maturities and cash inflows , funds received from client loan payments and , to a lesser degree , asset sales . the primary sources of liability liquidity are deposit growth , short-term borrowings and long-term debt . the consolidated statements of cash flows , included in this report , present the changes in cash from operating , investing and financing activities . at year-end 2017 , we believe our liquidity was adequate based upon the potential liquidation of unpledged available-for-sale securities with a fair value totaling approximately $ 52,988,000 and available credit from the federal home loan bank of pittsburgh totaling approximately $ 346,889,000. the corporation 's loan-to-deposit ratio was approximately 101 percent as of year-end 2017 and 2016. the ratio was flat as periodend deposit growth was in line with loan growth in 2017. off-balance sheet arrangements the corporation 's financial statements do not reflect various commitments that are made in the normal course of business , which may involve some liquidity risk .
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this was partially offset by improved gross margin in our organic business through disciplined pricing and management of our increasing minimum wage for labor , health benefits , and payroll taxes . selling , general and administrative ( `` sg & a `` ) expenses as a percentage of revenue decreased to 18.4 % for the year ended december 25 , 2015 from 19.6 % for the same period in 2014 , primarily due to seaton 's lower cost of doing business as a percent of sales . the acquired service lines offer workforce solutions as an integrated partner with our customers , which are delivered through highly centralized operations in chicago , illinois with support from on-site and virtual employee teams . we do not operate a branch network to service these customers and accordingly these services utilize a more flexible centralized support structure resulting in lower sg & a as a percent of sales . sg & a increased by $ 70.2 million to $ 496.0 million for the year ended december 25 , 2015 , compared to the same period in 2014 . the increase is primarily related to a full year of expenses related to the acquired operations of seaton of approximately $ 55.8 page - 17 million . we completed the acquisition of seaton on the first business day of our third quarter of 2014. the integration of seaton was completed during 2015. the remaining increase is primarily related to variable costs on organic revenue growth and other investments to enable continued growth . depreciation and amortization increased $ 12.4 million for the year ended december 25 , 2015 , due to a full year of amortization of intangible assets acquired in connection with the seaton acquisition compared to half a year of amortization expense in 2014. income from operations grew to $ 97.8 million for the year ended december 25 , 2015 , or an increase of 19.7 % compared to $ 81.7 million for the same period in 2014. the improved performance reflects solid revenue growth , disciplined pricing , and effective cost control partially offset by investments made in sales and recruiting resources as well as start-up costs for on-site customers and new recruitment process outsourcing customers . the benefit of those investments will be fully realized in 2016. net income increased to $ 71.2 million , or $ 1.71 per diluted share , for the year ended december 25 , 2015 , compared to $ 65.7 million , or $ 1.59 per diluted share , for the same period in 2014 . the increase was driven primarily by net income from acquired operations and organic growth . we believe we are in a strong financial position to fund working capital needs for growth opportunities . as of december 25 , 2015 , we had cash and cash equivalents of $ 29.8 million and $ 77.3 million available under the revolving credit facility . results of operations total company results the following table presents selected financial data ( in thousands , except percentages and per share amounts ) : replace_table_token_5_th our year-over-year trends are significantly impacted by the acquisition of seaton . seaton was acquired effective the first day of our fiscal third quarter in 2014 and , accordingly , is included in only twenty-six of the fifty-two weeks ended december 26 , 2014 , as compared to the entire year ended december 25 , 2015 . the seaton acquisition added new services and capabilities to better meet our objective of providing our customers with the talent and flexible workforce solutions they need to enhance their business performance . these service lines have dedicated customer on-site and virtual teams which leverage highly centralized support services for recruiting and delivering services to meet the specialized needs of each customer . since these service lines do not operate a branch network , they can function more flexibly . the performance of the seaton acquisition in the first year of operations has delivered on our expectations for revenue and income from operations and continues to deliver organic revenue growth . page - 18 effective december 1 , 2015 , we acquired simos , a leading provider of on-premise workforce management solutions . simos customers include fortune 500 companies in consumer goods , retail , online commerce , and food packaging and distribution . simos specializes in helping clients streamline warehouse/distribution operations to meet the growing demand for online commerce and supply chain solutions . they are also experts in providing scalable solutions for pick and pack and shipping requirements . their unique productivity model incorporates fixed price-per-unit solutions to drive client value . additionally , their continuous analysis and improvement of processes and incentive pay drives workforce efficiency and reduces costs , lowers risk of injury and damage , and improves productivity and service levels . simos broadens our on-premise staffing footprint with an additional 37 sites across 11 states . revenue from services revenue from services was as follows ( in thousands , except percentages ) : replace_table_token_6_th fiscal 2015 as compared to fiscal 2014 revenue grew to $ 2,695.7 million for fiscal 2015 , a 24.0 % increase compared to the same period in the prior year primarily due to the acquisitions of seaton in the prior year and simos in the current year . the year ended december 25 , 2015 included a full year of revenue for seaton of $ 810.8 million compared to $ 394.4 million from the date of acquisition through our year ended december 26 , 2014 , contributing 18.1 % of our revenue growth , or 15.8 % excluding organic revenue growth . the year ended december 25 , 2015 included one month of simos revenue of $ 22.2 million or 1.0 % of our revenue growth over the prior year . organic revenue growth for the year ended december 25 , 2015 was 7.2 % . story_separator_special_tag managed service provider solutions provide customers with improved quality and spend management of their contingent labor vendors . the complementary service lines are operating segments , which are aggregated and reported as managed services . revenue from services and income from operations associated with our segments were as follows ( in thousands , except percentages ) : replace_table_token_13_th page - 23 staffing services revenue grew to $ 2,591.2 million for fiscal 2015 , a 21.9 % increase compared to the same period in the prior year , primarily due to the acquisitions of seaton in the prior year and simos in the current year . the year ended december 25 , 2015 included a full year of revenue for seaton of $ 705.1 million compared to $ 346.3 million from the date of acquisition through our year ended december 26 , 2014 , or 15.9 % of our revenue growth . the year ended december 25 , 2015 included one month of simos revenue of $ 22.2 million or 1.0 % of our revenue growth over the prior year . organic revenue growth for the year ended december 25 , 2015 was 4.7 % . the organic revenue growth was driven by widespread improvement across most of our staffing service lines , geographies , and the industries we serve . the construction industry saw considerable growth driven by improving momentum in both residential and commercial construction as well as green energy projects . rapid growth in online commerce resulted in considerable growth in warehousing and distribution . demand by the transportation industry for our driver workforce solutions continues to see double digit growth.we saw improving trends with small to medium sized customers and continued growth with our national customers . the positive trends are partially offset by continued pressure on the manufacturing industry , which continues to face a challenging export market . income from operations as a percent of revenue decreased slightly to 6.4 % the year ended december 25 , 2015 , compared to 6.5 % for the same period in 2014 . the decrease is primarily related to investments made in start-up costs for on-site customers and other investments to enable continued growth.we expect the the benefit of those investments to be fully realized in 2016. for the fiscal year ended 2015 , one customer , amazon , represented 13.1 % and 13.7 % of total company and the staffing services reportable segment revenues , respectively . for the fiscal years ended 2014 and 2013 , no single customer represented more than 10 % of total company . for fiscal year ended 2014 , no single customer represented more than 10 % of total staffing services reportable segment revenues . managed services managed service revenue and income from operations for the year ended december 25 , 2015 , include a full year of results for seaton compared to partial year results from the acquisition date of june 30 , 2014 through december 26 , 2014. income from operations as a percent of revenue decreased slightly to 11.8 % for the year ended december 25 , 2015 , compared to 12.3 % for the same period in 2014 . the decrease is primarily related to investments made in start-up costs for new recruitment process outsourcing customers . for the fiscal year ended 2015 , two customers represented 10.6 % and 10.2 % of our managed services reportable segment revenues , respectively . for the fiscal year ended 2014 , no single customer represented more than 10 % of managed services reportable segment revenues . future outlook we have limited visibility into future demand for our services . however , we believe there is value in providing highlights of our expectations for the financial performance of our recent acquisitions as well as continued organic growth . producing strong organic revenue and gross profit growth to further leverage our cost structure and generate increasing operating income as a percentage of revenue continues to be our top priority . we expect revenue growth of approximately 16 % for fiscal 2016 as compared to fiscal 2015 , comprised of the following : effective december 1 , 2015 , we acquired simos , a leading provider of on-premise workforce management solutions . the acquired operations expand and complement our staff management | smx on-premise services . we expect simos to produce annual revenue of approximately $ 185 million , or 5.6 % of total revenue growth , and operating income of approximately $ 9 million for fiscal 2016. effective january 4 , 2016 , we acquired aon hewitt 's rpo business , a leading provider of recruitment process outsourcing services . the acquired operations expand and complement our peoplescout services and will be fully integrated with this service line in 2016. we expect the acquired rpo business of aon hewitt to produce annual revenue of approximately $ 65 million , or 2.4 % of total revenue growth , and operating income of approximately $ 10 million for fiscal 2016. we expect total organic revenue growth of approximately 8 % for fiscal 2016 as compared to the prior year . the organic revenue growth expectation of 8 % is comparable to that achieved in fiscal 2015 of 7.2 % . our expectations for fiscal 2016 are less than the peak revenue growth of approximately 14 % for the fourth quarter of 2015 as compared to the prior year . revenue growth slowed toward the end of the fourth quarter of 2015. this slowing , which was especially pronounced page - 24 for our national customer base and retail industry , continued into january of 2016. we remain optimistic for fiscal 2016 with continued demand for our specialized workforce solutions in an increasingly tight labor market . we also expect demand to fluctuate in choppy patterns , as it has since emerging from the recession in 2010. providing our customers with a scalable workforce is a key value proposition of our business model and we
| net cash provided by operating activities decreased $ 38.5 million in 2014 as compared to 2013 , primarily due to : an increase in net income of $ 20.8 million , primarily due to the acquisition of seaton . an increase in accounts receivable of $ 73.4 million , primarily due to revenue growth related to the acquisition of seaton . demand for staff management on-premise services is significantly higher during the fourth quarter in connection with manufacturing and distributing for the holiday season . historically , legacy trueblue accounts receivable peaked in the third quarter and de-leveraged in the fourth quarter . an increase in deferred taxes of $ 16.5 million , primarily due to nondeductible intangibles acquired in connection with the acquisition of seaton . cash flows from investing activities our cash flows from investing activities were as follows ( in thousands ) : replace_table_token_15_th fiscal 2015 compared to fiscal 2014 net cash used in investing activities decreased $ 213.4 million in 2015 as compared to 2014 : cash used in investing activities of $ 67.5 million in 2015 was for the acquisition of simos . in the prior year , we acquired seaton for $ 305.9 million . restricted cash and investments consist primarily of collateral that has been provided or pledged to insurance carriers and state workers ' compensation programs . changes in restricted cash , cash equivalents , and investments increased to $ 20.6 million for the year ended december 25 , 2015 compared to $ 14.8 million for the same period in the prior year . this increase in cash used in investing activities was primarily due to an increase in collateral requirements paid to our workers ' compensation insurance providers due to both organic growth in operations and acquisitions . fiscal 2014 compared to fiscal 2013 net cash used in investing activities increased $ 193.2 million in 2014 as compared to 2013. page - 26 cash used in investing activities increased primarily due to the acquisition of seaton for $ 305.9 million .
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we completed patient enrollment in a phase 2 , randomized , double-blind , placebo-controlled clinical trial evaluating retaspimycin hcl in combination with docetaxel , a chemotherapy , compared to placebo and docetaxel in 226 patients with second- or third-line non-small cell lung cancer ( nsclc ) , who are naive to docetaxel treatment and have a history of heavy smoking . we stratified patients in our phase 2 trial by squamous cell carcinoma and adenocarcinoma based on results from our phase 1b trial in which we observed partial responses in patients with squamous cell carcinoma . in addition , we are prospectively evaluating a novel biomarker that we believe may be predictive of response . we expect to report topline overall survival data from this trial in the first half of 2013. we are also enrolling patients in a phase 1b/2 trial to explore the safety and efficacy of retaspimycin hcl in combination with everolimus , an inhibitor of the mammalian target of rapamycin ( mtor ) , pathway , in nsclc patients with a kras gene mutation . the objective of this phase 1b/2 trial is to determine the recommended dose for the combination treatment and to evaluate the safety and clinical activity of retaspimycin hcl in combination with everolimus . we expect to provide an update from this phase 1b/2 trial in the first half of 2013. in addition to our clinical stage programs , we have multiple innovative projects in earlier stages of development . through our internal discovery efforts , we also discovered ipi-940 , a novel , orally available inhibitor of faah . it is believed that inhibition of faah may enable the body to bolster its own analgesic and anti-inflammatory response , and may have applicability in a broad range of painful or inflammatory conditions . we are currently seeking potential partnering opportunities for our faah program . in june 2012 , we voluntarily stopped all company-sponsored clinical trials of saridegib , our lead hedgehog pathway inhibitor . strategic alliances millennium in july 2010 , we entered into a development and license agreement with intellikine , inc. , or intellikine , under which we obtained rights to discover , develop and commercialize pharmaceutical products targeting the delta and or gamma isoforms of pi3k , including ipi-145 . we paid intellikine a $ 13.5 million up-front license fee . the entirety of this fee was included as research and development expense in the year ended december 31 , 2010 , although $ 8.5 million of this fee was paid in january 2011. during the second half of 2011 , we paid intellikine $ 4.0 million in milestone payments associated with the initiation of two phase 1 studies of ipi-145 , which we recorded as research and development expense . in january 2012 , intellikine was acquired by takeda pharmaceutical company limited , or takeda , acting through its millennium business unit . we refer to our pi3k program licensor as millennium . in december 2012 , we amended and restated our development and license agreement with millennium . under the original agreement , we obtained worldwide development and commercialization rights to millennium 's portfolio of inhibitors of the delta and or gamma isoforms of pi3k for all indications , and we conducted a collaborative research program with millennium to identify compounds directed to pi3k-delta and or pi3k-gamma which meet certain selectivity criteria , with such research collaboration under the original agreement set to expire in july 2013. also under the original agreement , neither we nor millennium were permitted to research , develop or commercialize products directed pi3k-delta and or pi3k-gamma which meet certain selectivity criteria , other than the compounds subject to the collaboration , except that millennium was permitted to research , develop or commercialize such products that it was researching , developing or commercializing on its own or with a third party prior to its acquisition of intellikine . 45 under the terms of the amended and restated agreement , we retained our worldwide development and commercialization rights for products arising from the agreement for all therapeutic indications . we and millennium will no longer conduct the collaborative research program and the restrictions on each party 's ability to research , develop and commercialize products directed to the delta and or gamma isoforms of pi3k that meet certain selectivity criteria have terminated , subject , in the case of millennium , to the exclusive licenses granted to us under the amended and restated agreement . additionally , under the amended and restated agreement , millennium waived the option it had under the original agreement to convert , upon payment of an option fee , its royalty interest in u.s. sales of pi3k products and its right to receive certain milestone payments with respect to such products into the right to share in 50 % of profits and losses on u.s. development and commercialization of those pi3k products for which the first phase 2 clinical trial , as defined in the original agreement , was conducted in an oncology indication , and to participate in up to 30 % of the detailing effort for these products in the united states . in consideration of such waiver we have agreed to pay to millennium $ 15 million payable in installments . we have paid $ 1.7 million of the $ 15 million during the year ended december 31 , 2012. additionally , under the amended and restated agreement we have paid millennium a $ 5 million milestone payment associated with the initiation of our phase 2a clinical trial of ipi-145 in patients with mild , allergic asthma . under the terms of the original agreement , the initiation of the phase 2a trial in asthma would not have required a milestone payment . story_separator_special_tag financial overview revenue all of our revenue to date has been derived from license fees , the reimbursement of research and development costs , contract service revenue and milestone payments received from our collaboration partners . license fees were recognized as revenue ratably over the expected research and development period under our arrangement with mundipharma and purdue . because our agreements with mundipharma and purdue also provided for funding for our research and development efforts , we recognized this cost reimbursement as revenue in the period earned in proportion to our forecasted total expenses as compared to the total research funding budget for the year . in the future , we may generate revenue from a combination of product sales , research and development support services and milestone payments in connection with strategic relationships , and royalties resulting from the sales of products developed under licenses of our intellectual property . we expect that any potential future revenue we generate will fluctuate from year to year as a result of the timing and amount of license fees , research and development reimbursement , milestone and other payments earned under our collaborative or strategic relationships , and the amount and timing of payments that we earn upon the sale of our products , to the extent any are successfully commercialized . research and development expense we are a drug discovery and development company . our research and development expense primarily consists of the following : compensation of personnel associated with research activities ; clinical testing costs , including payments made to contract research organizations ; costs of purchasing laboratory supplies and materials ; costs of manufacturing product candidates for preclinical testing and clinical studies ; costs associated with the licensing of research and development programs ; preclinical testing costs , including costs of toxicology studies ; fees paid to external consultants ; fees paid to professional service providers for independent monitoring and analysis of our clinical trials ; costs for collaboration partners to perform research activities , including development milestones for which a payment is due when achieved ; depreciation of equipment ; and allocated costs of facilities . 50 general and administrative expense general and administrative expense primarily consists of compensation of personnel in executive , finance , accounting , legal , information technology infrastructure , corporate communications , corporate development , human resources and commercial functions . other costs include facilities costs not otherwise included in research and development expense , and professional fees for legal and accounting services . general and administrative expense also consists of the costs of maintaining our intellectual property portfolio . other income and expense interest and investment income typically consists of interest earned on cash , cash equivalents and available-for-sale securities , net of interest expense , and amortization of warrants . interest expense included amortization of the loan commitment asset from purdue entities , net , from april 2009 through november 2011 when we drew down the full $ 50 million loan available under the line of credit agreement . interest expense also included accrued interest on the long-term debt , including amortization of the debt discount , through september 7 , 2012 when the debt was extinguished . income from massachusetts tax incentive award represents the pro-rata amount earned for an award we received for headcount growth . critical accounting policies and significant judgments and estimates the following discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make judgments , estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . on an ongoing basis , we evaluate our estimates , including those related to revenue recognition , accrued expenses , and assumptions in the valuation of stock-based compensation . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results could differ from those estimates . differences between actual and estimated results have not been material and are adjusted in the period they become known . we believe that the following accounting policies and estimates are most critical to understanding and evaluating our reported financial results . please refer to note 2 to our consolidated financial statements for a description of our significant accounting policies . revenue recognition to date , all of our revenue has been generated under research collaboration agreements . the terms of these research collaboration agreements may include payment to us of non-refundable , up-front license fees , funding or reimbursement of research and development efforts , milestone payments if specified objectives are achieved , and or royalties on product sales . on january 1 , 2011 , we adopted on a prospective basis a newly issued accounting standard related to multiple-deliverable revenue arrangements . we apply this standard to new revenue arrangements or material modifications of existing revenue arrangements . this standard eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon our best estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item . under our strategic alliance with mundipharma and purdue , we recognized revenues from non-refundable , up-front license fees on a straight-line basis over the contracted or estimated period of performance , which was the research and development term . we regularly considered whether events warranted a change in the estimated period of performance under an agreement . such a change would have caused us to modify the period of time over which we recognized revenue from the up-front license fee on a prospective basis and would , in turn , result in changes in our quarterly and annual results . we recognized
| net cash provided by operating activities decreased $ 38.5 million in 2014 as compared to 2013 , primarily due to : an increase in net income of $ 20.8 million , primarily due to the acquisition of seaton . an increase in accounts receivable of $ 73.4 million , primarily due to revenue growth related to the acquisition of seaton . demand for staff management on-premise services is significantly higher during the fourth quarter in connection with manufacturing and distributing for the holiday season . historically , legacy trueblue accounts receivable peaked in the third quarter and de-leveraged in the fourth quarter . an increase in deferred taxes of $ 16.5 million , primarily due to nondeductible intangibles acquired in connection with the acquisition of seaton . cash flows from investing activities our cash flows from investing activities were as follows ( in thousands ) : replace_table_token_15_th fiscal 2015 compared to fiscal 2014 net cash used in investing activities decreased $ 213.4 million in 2015 as compared to 2014 : cash used in investing activities of $ 67.5 million in 2015 was for the acquisition of simos . in the prior year , we acquired seaton for $ 305.9 million . restricted cash and investments consist primarily of collateral that has been provided or pledged to insurance carriers and state workers ' compensation programs . changes in restricted cash , cash equivalents , and investments increased to $ 20.6 million for the year ended december 25 , 2015 compared to $ 14.8 million for the same period in the prior year . this increase in cash used in investing activities was primarily due to an increase in collateral requirements paid to our workers ' compensation insurance providers due to both organic growth in operations and acquisitions . fiscal 2014 compared to fiscal 2013 net cash used in investing activities increased $ 193.2 million in 2014 as compared to 2013. page - 26 cash used in investing activities increased primarily due to the acquisition of seaton for $ 305.9 million .
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we completed patient enrollment in a phase 2 , randomized , double-blind , placebo-controlled clinical trial evaluating retaspimycin hcl in combination with docetaxel , a chemotherapy , compared to placebo and docetaxel in 226 patients with second- or third-line non-small cell lung cancer ( nsclc ) , who are naive to docetaxel treatment and have a history of heavy smoking . we stratified patients in our phase 2 trial by squamous cell carcinoma and adenocarcinoma based on results from our phase 1b trial in which we observed partial responses in patients with squamous cell carcinoma . in addition , we are prospectively evaluating a novel biomarker that we believe may be predictive of response . we expect to report topline overall survival data from this trial in the first half of 2013. we are also enrolling patients in a phase 1b/2 trial to explore the safety and efficacy of retaspimycin hcl in combination with everolimus , an inhibitor of the mammalian target of rapamycin ( mtor ) , pathway , in nsclc patients with a kras gene mutation . the objective of this phase 1b/2 trial is to determine the recommended dose for the combination treatment and to evaluate the safety and clinical activity of retaspimycin hcl in combination with everolimus . we expect to provide an update from this phase 1b/2 trial in the first half of 2013. in addition to our clinical stage programs , we have multiple innovative projects in earlier stages of development . through our internal discovery efforts , we also discovered ipi-940 , a novel , orally available inhibitor of faah . it is believed that inhibition of faah may enable the body to bolster its own analgesic and anti-inflammatory response , and may have applicability in a broad range of painful or inflammatory conditions . we are currently seeking potential partnering opportunities for our faah program . in june 2012 , we voluntarily stopped all company-sponsored clinical trials of saridegib , our lead hedgehog pathway inhibitor . strategic alliances millennium in july 2010 , we entered into a development and license agreement with intellikine , inc. , or intellikine , under which we obtained rights to discover , develop and commercialize pharmaceutical products targeting the delta and or gamma isoforms of pi3k , including ipi-145 . we paid intellikine a $ 13.5 million up-front license fee . the entirety of this fee was included as research and development expense in the year ended december 31 , 2010 , although $ 8.5 million of this fee was paid in january 2011. during the second half of 2011 , we paid intellikine $ 4.0 million in milestone payments associated with the initiation of two phase 1 studies of ipi-145 , which we recorded as research and development expense . in january 2012 , intellikine was acquired by takeda pharmaceutical company limited , or takeda , acting through its millennium business unit . we refer to our pi3k program licensor as millennium . in december 2012 , we amended and restated our development and license agreement with millennium . under the original agreement , we obtained worldwide development and commercialization rights to millennium 's portfolio of inhibitors of the delta and or gamma isoforms of pi3k for all indications , and we conducted a collaborative research program with millennium to identify compounds directed to pi3k-delta and or pi3k-gamma which meet certain selectivity criteria , with such research collaboration under the original agreement set to expire in july 2013. also under the original agreement , neither we nor millennium were permitted to research , develop or commercialize products directed pi3k-delta and or pi3k-gamma which meet certain selectivity criteria , other than the compounds subject to the collaboration , except that millennium was permitted to research , develop or commercialize such products that it was researching , developing or commercializing on its own or with a third party prior to its acquisition of intellikine . 45 under the terms of the amended and restated agreement , we retained our worldwide development and commercialization rights for products arising from the agreement for all therapeutic indications . we and millennium will no longer conduct the collaborative research program and the restrictions on each party 's ability to research , develop and commercialize products directed to the delta and or gamma isoforms of pi3k that meet certain selectivity criteria have terminated , subject , in the case of millennium , to the exclusive licenses granted to us under the amended and restated agreement . additionally , under the amended and restated agreement , millennium waived the option it had under the original agreement to convert , upon payment of an option fee , its royalty interest in u.s. sales of pi3k products and its right to receive certain milestone payments with respect to such products into the right to share in 50 % of profits and losses on u.s. development and commercialization of those pi3k products for which the first phase 2 clinical trial , as defined in the original agreement , was conducted in an oncology indication , and to participate in up to 30 % of the detailing effort for these products in the united states . in consideration of such waiver we have agreed to pay to millennium $ 15 million payable in installments . we have paid $ 1.7 million of the $ 15 million during the year ended december 31 , 2012. additionally , under the amended and restated agreement we have paid millennium a $ 5 million milestone payment associated with the initiation of our phase 2a clinical trial of ipi-145 in patients with mild , allergic asthma . under the terms of the original agreement , the initiation of the phase 2a trial in asthma would not have required a milestone payment . story_separator_special_tag financial overview revenue all of our revenue to date has been derived from license fees , the reimbursement of research and development costs , contract service revenue and milestone payments received from our collaboration partners . license fees were recognized as revenue ratably over the expected research and development period under our arrangement with mundipharma and purdue . because our agreements with mundipharma and purdue also provided for funding for our research and development efforts , we recognized this cost reimbursement as revenue in the period earned in proportion to our forecasted total expenses as compared to the total research funding budget for the year . in the future , we may generate revenue from a combination of product sales , research and development support services and milestone payments in connection with strategic relationships , and royalties resulting from the sales of products developed under licenses of our intellectual property . we expect that any potential future revenue we generate will fluctuate from year to year as a result of the timing and amount of license fees , research and development reimbursement , milestone and other payments earned under our collaborative or strategic relationships , and the amount and timing of payments that we earn upon the sale of our products , to the extent any are successfully commercialized . research and development expense we are a drug discovery and development company . our research and development expense primarily consists of the following : compensation of personnel associated with research activities ; clinical testing costs , including payments made to contract research organizations ; costs of purchasing laboratory supplies and materials ; costs of manufacturing product candidates for preclinical testing and clinical studies ; costs associated with the licensing of research and development programs ; preclinical testing costs , including costs of toxicology studies ; fees paid to external consultants ; fees paid to professional service providers for independent monitoring and analysis of our clinical trials ; costs for collaboration partners to perform research activities , including development milestones for which a payment is due when achieved ; depreciation of equipment ; and allocated costs of facilities . 50 general and administrative expense general and administrative expense primarily consists of compensation of personnel in executive , finance , accounting , legal , information technology infrastructure , corporate communications , corporate development , human resources and commercial functions . other costs include facilities costs not otherwise included in research and development expense , and professional fees for legal and accounting services . general and administrative expense also consists of the costs of maintaining our intellectual property portfolio . other income and expense interest and investment income typically consists of interest earned on cash , cash equivalents and available-for-sale securities , net of interest expense , and amortization of warrants . interest expense included amortization of the loan commitment asset from purdue entities , net , from april 2009 through november 2011 when we drew down the full $ 50 million loan available under the line of credit agreement . interest expense also included accrued interest on the long-term debt , including amortization of the debt discount , through september 7 , 2012 when the debt was extinguished . income from massachusetts tax incentive award represents the pro-rata amount earned for an award we received for headcount growth . critical accounting policies and significant judgments and estimates the following discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make judgments , estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . on an ongoing basis , we evaluate our estimates , including those related to revenue recognition , accrued expenses , and assumptions in the valuation of stock-based compensation . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results could differ from those estimates . differences between actual and estimated results have not been material and are adjusted in the period they become known . we believe that the following accounting policies and estimates are most critical to understanding and evaluating our reported financial results . please refer to note 2 to our consolidated financial statements for a description of our significant accounting policies . revenue recognition to date , all of our revenue has been generated under research collaboration agreements . the terms of these research collaboration agreements may include payment to us of non-refundable , up-front license fees , funding or reimbursement of research and development efforts , milestone payments if specified objectives are achieved , and or royalties on product sales . on january 1 , 2011 , we adopted on a prospective basis a newly issued accounting standard related to multiple-deliverable revenue arrangements . we apply this standard to new revenue arrangements or material modifications of existing revenue arrangements . this standard eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon our best estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item . under our strategic alliance with mundipharma and purdue , we recognized revenues from non-refundable , up-front license fees on a straight-line basis over the contracted or estimated period of performance , which was the research and development term . we regularly considered whether events warranted a change in the estimated period of performance under an agreement . such a change would have caused us to modify the period of time over which we recognized revenue from the up-front license fee on a prospective basis and would , in turn , result in changes in our quarterly and annual results . we recognized
| liquidity and capital resources we have not generated any revenue from the sale of drugs to date , and we do not expect to generate any such revenue for the next several years , if at all . we have instead relied on the proceeds from sales of equity securities , interest on investments , up-front license fees , expense reimbursement , milestones and cost sharing under our collaborations and debt to fund our operations . our available-for-sale debt securities primarily trade in liquid markets , and the average days to maturity of our portfolio , as of december 31 , 2012 , is less than six months . because our product candidates are in various stages of clinical and preclinical development and the outcome of these efforts is uncertain , we can not estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether , or when , we may achieve profitability . 56 our significant capital resources are as follows : december 31 , 2012 december 31 , 2011 ( in thousands ) cash , cash equivalents and available-for-sale securities $ 326,635 $ 115,937 working capital 311,086 88,995 replace_table_token_6_th cash flows the principal use of cash in operating activities in all periods presented was related to our research and development programs . on july 17 , 2012 , we , mundipharma , and purdue mutually agreed to terminate our strategic alliance agreements , and as a result , mundipharma discontinued all research and development funding thereafter . during the years ended december 31 , 2012 , 2011 and 2010 , we received research and development funding from mundipharma and purdue totaling $ 55 million , $ 85 million and $ 65 million , respectively .
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as of the filing date , it is uncertain whether covid 19 will have a significant impact on production and distribution of company products . significant developments amendment of series b preferred stock on october 31 , 2016 , the company filed an amended and restated series b preferred stock certificate of designation ( which was originally filed with the secretary of state of nevada on april 19 , 2016 , and amended on august 12 , 2016 ) to designate 3,636,360 shares as series b preferred stock and to provide for supermajority 66 2/3 % voting rights for the series b preferred stock . the series b preferred stock will not bear dividends , will not be entitled to receive any distributions in the event of any liquidation , dissolution or winding up of the company , and will have no other preferences , rights , restrictions , or qualifications , except as otherwise provided by law or the articles of incorporation of the company . the holders of class b stock shall have the right , at such holder 's option , at any time to convert such shares into common stock , in a conversion ratio of one share of common stock for each share of class b stock . if the common stock trades or is quoted at a price per share in excess of $ 2.25 for any twenty consecutive day trading period , ( subject to appropriate adjustment for forward or reverse stock splits , recapitalizations , stock dividends and the like ) , the series b stock will automatically be convertible into the common stock in a conversion ratio of one share of common stock for each share of series b stock . the series b stock may not be sold , hypothecated , transferred , assigned or disposed without the prior written consent of the company and the holders of the outstanding series b preferred stock . 27 amendment of articles of incorporation we filed an amendment to our articles of incorporation with the secretary of state of the state of nevada increasing our authorized shares of common stock , from 140,000,000 shares to 350,000,000 shares , effective march 22 , 2017. we filed a second amendment to our articles of incorporation with the secretary of state of the state of nevada increasing our authorized shares of common stock , from 350,000,000 shares to 500,000,000 shares , effective october 28 , 2019. on february 13 , 2020 , stockholders holding shares that entitled them to exercise at least a majority of the voting power , voted in favor of increasing the number of authorized shares of common stock , from 500,000,000 shares to 1,000,000,000 shares . the vote marked the first step in the process to amend the articles again . craftsmen industries , inc. as a consequence of the first public demonstration of the mg 30 kilovolt amp ( “ kva ” ) system at the north america international auto show in detroit in january 2017 , the company entered into an agreement in principle , dated february 21 , 2017 , with craftsmen industries , inc. ( “ craftsmen ' ) , a company engaged in the design , engineering and production of mobile marketing vehicles , experiential marketing platforms and industrial mobile solutions . on april 25 , 2017 , we delivered to craftsmen industries , a class iii vehicle ( ford f-350 dually ) up-fitted with a production-ready mg 30 kva ( single phase/three phase ) system . subsequently , craftsmen invited the company to demonstrate its mobile generation technology and the potential benefits for craftsmen products at craftsmen 's 35 th anniversary party on april 27 , 2017. over 100 current and prospective craftsmen customers were in the audience for the demonstrations . on june 9 , 2017 , the company received a purchase order for 10 mg systems from craftsmen , each in the amount of $ 29,500 with 50 % paid as a down payment at the time of customer acceptance . furthermore , craftsmen has agreed to produce the mg systems for the company 's initial orders from jatropha and veracruz ( see below ) . since october 2018 we have been ordering components for the initial pilot production run which was completed in the first quarter of 2019 and showcased on march 27 , 2019. in parallel , purchase orders will be placed for components to support increased production in the months that follow . veteran technology group on may 26 , 2017 , the company entered into a five-year strategic alliance agreement with veteran technology group llc ( “ vet tech ” ) , a developer of artificial intelligence ( “ ai ” ) software for advanced troubleshooting of complex systems . the agreement automatically renews for successive one-year terms unless terminated by either party 30 days prior to its expiration . the agreement may be terminated earlier by either party upon 60 days prior notice . the parties agreed not to solicit the other parties ' employees or contractors for six months after the expiration or termination of the agreement . the agreement provides that the company market and provide its mg product and services to customers referred by vet tech and vet tech will market and provide gait software and other ai services for clients referred by the company . national union of jatropha producers in november 2017 , the company received a purchase commitment for 234 mg systems from the national union of producers of jatropha in mexico ( jatropha ) . jatropha has established a center for processing oil from jatropha seeds for biofuel production . through their union of producers , jatropha plans to introduce the mg and promote the product to their supplier network . 28 the purchase commitment stipulates that cooltech will furnish jatropha with an mg80 retro-fitted onto a ford f-350 truck within 60 business days . story_separator_special_tag varying combinations of energy sources such as solar , wind , biogas and mg systems both backup and supplement one another to provide consistent , uninterrupted primary power even during severe weather or other emergency situations . the synergies between the companies extend beyond water purification and power generation . verdewatts ' wind and gas turbines and generators which produce electric power can all be improved by cooltech 's thermal reduction technologies . new sales agent : in early december 2019 , the company entered into an agreement with gaia energy of gdansk , poland to act as an independent agent for the company by developing markets in eastern europe , the middle east and africa . the agreement describes the agent 's duties as “ generating revenue , and investment funding , for the company from various organizations including investment funds , end-users , channel partners , integrators , and oems . ” team members of gaia energy include executives with more than twenty-five years ' experience with panasonic , ford motor company , electronic data systems and the us air force in the fields of advanced technologies and an african diplomat with a thirty-year background working with and for diplomatic missions , non-governmental organizations and international disasters and aid management services . the diplomat introduced cooltech products at a recent african technical summit attended by representatives from 54 countries . request for collaboration sent to us government officials on december 11 , 2019 , letters signed by 13 government officials and congressmen in mexico were mailed to their counterparts in the us , specifically governor gavin newsom , secretary rick perry , secretary wilbur ross , senator mitch mcconnell and speaker of the house nancy pelosi . the letters were a request for collaborative support between the two countries to accelerate cooltech 's product deployment into mexico to help solve urgent rural power and water purification problems that are hurting rural communities . those problems include irregular and faulty power in rural areas which hinders crop irrigation and water pollution which affects crops farmed for sale to the us . 33 the letters also detail the mexican officials ' satisfaction with cooltech 's solutions and management team and that they have met with the company on several occasions for product demonstrations as well as strategic and technical advice . they highlight the benefits of cooltech products , how they could quickly and efficiently address the problems noted , and how they expect them to become a viable part of the country 's infrastructure . export import bank of the united states with the help of verdewatts and firmgreen , cooltech has initiated a relationship with the export-import bank of the united states ( exim ) , a u.s. government agency whose sole mission is to support u.s. exports . the bank fulfills its mission by offering very cost-effective financing for international customers and project developers to purchase u.s.-made services and purchase or lease u.s.-made goods . to that end , the two companies applied to finance the mexican projects referenced above . cooltech also sent product information for due diligence review by the technical team at exim bank . subsequently , cooltech has received a letter of interest from exim , however , there can not be any assurance that exim will provide any funding to the company . going concern as a result of our financial condition , we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended december 31 , 2019 and 2018 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern . as of december 31 , 2019 , we have not commenced full operations , raising substantial doubt about our ability to continue as a going concern . our ability to continue as a going concern is dependent on our ability to generate revenue , achieve profitable operations and repay our obligations when they come due . as of december 31,2019 , we have $ 15,306 in cash and we owe $ 314,2018 and $ 3,227,215 for convertible and promissory notes , respectively we are pursuing various financing alternatives to address the payment of outstanding debt and to support the sales , component acquisitionand assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan : to license its thermal technologies and applications , including submersible dry-pit applications . there can be no assurance , however , that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives . consequently , we may not be able to continue as an operating company . results of operations the following table sets forth , for the periods indicated , consolidated statements of operations data . the table and the discussion below should be read in conjunction with the accompanying consolidated financial statements and the notes thereto , appearing elsewhere in this report . replace_table_token_3_th 34 revenues during the years ended december 31 , 2019 and 2018 , and since inception , we have not generated any revenues . we generated our first mobile generation order during the quarter ended june 30 , 2014 and received a partial deposit in advance of completing the sale with companies controlled by the individual who is a 5 % owner of upt and a shareholder of our company . the order is in the production queue along with other existing orders . operating expenses operating expenses decreased during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , due to reductions in consulting costs , professional fees , research and development as well as general and administrative . during the year ended december 31 , 2019 , payroll and related expenses increased by $ 65,320 due to bonuses awarded for new company patents . the decrease in
| liquidity and capital resources we have not generated any revenue from the sale of drugs to date , and we do not expect to generate any such revenue for the next several years , if at all . we have instead relied on the proceeds from sales of equity securities , interest on investments , up-front license fees , expense reimbursement , milestones and cost sharing under our collaborations and debt to fund our operations . our available-for-sale debt securities primarily trade in liquid markets , and the average days to maturity of our portfolio , as of december 31 , 2012 , is less than six months . because our product candidates are in various stages of clinical and preclinical development and the outcome of these efforts is uncertain , we can not estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether , or when , we may achieve profitability . 56 our significant capital resources are as follows : december 31 , 2012 december 31 , 2011 ( in thousands ) cash , cash equivalents and available-for-sale securities $ 326,635 $ 115,937 working capital 311,086 88,995 replace_table_token_6_th cash flows the principal use of cash in operating activities in all periods presented was related to our research and development programs . on july 17 , 2012 , we , mundipharma , and purdue mutually agreed to terminate our strategic alliance agreements , and as a result , mundipharma discontinued all research and development funding thereafter . during the years ended december 31 , 2012 , 2011 and 2010 , we received research and development funding from mundipharma and purdue totaling $ 55 million , $ 85 million and $ 65 million , respectively .
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as of the filing date , it is uncertain whether covid 19 will have a significant impact on production and distribution of company products . significant developments amendment of series b preferred stock on october 31 , 2016 , the company filed an amended and restated series b preferred stock certificate of designation ( which was originally filed with the secretary of state of nevada on april 19 , 2016 , and amended on august 12 , 2016 ) to designate 3,636,360 shares as series b preferred stock and to provide for supermajority 66 2/3 % voting rights for the series b preferred stock . the series b preferred stock will not bear dividends , will not be entitled to receive any distributions in the event of any liquidation , dissolution or winding up of the company , and will have no other preferences , rights , restrictions , or qualifications , except as otherwise provided by law or the articles of incorporation of the company . the holders of class b stock shall have the right , at such holder 's option , at any time to convert such shares into common stock , in a conversion ratio of one share of common stock for each share of class b stock . if the common stock trades or is quoted at a price per share in excess of $ 2.25 for any twenty consecutive day trading period , ( subject to appropriate adjustment for forward or reverse stock splits , recapitalizations , stock dividends and the like ) , the series b stock will automatically be convertible into the common stock in a conversion ratio of one share of common stock for each share of series b stock . the series b stock may not be sold , hypothecated , transferred , assigned or disposed without the prior written consent of the company and the holders of the outstanding series b preferred stock . 27 amendment of articles of incorporation we filed an amendment to our articles of incorporation with the secretary of state of the state of nevada increasing our authorized shares of common stock , from 140,000,000 shares to 350,000,000 shares , effective march 22 , 2017. we filed a second amendment to our articles of incorporation with the secretary of state of the state of nevada increasing our authorized shares of common stock , from 350,000,000 shares to 500,000,000 shares , effective october 28 , 2019. on february 13 , 2020 , stockholders holding shares that entitled them to exercise at least a majority of the voting power , voted in favor of increasing the number of authorized shares of common stock , from 500,000,000 shares to 1,000,000,000 shares . the vote marked the first step in the process to amend the articles again . craftsmen industries , inc. as a consequence of the first public demonstration of the mg 30 kilovolt amp ( “ kva ” ) system at the north america international auto show in detroit in january 2017 , the company entered into an agreement in principle , dated february 21 , 2017 , with craftsmen industries , inc. ( “ craftsmen ' ) , a company engaged in the design , engineering and production of mobile marketing vehicles , experiential marketing platforms and industrial mobile solutions . on april 25 , 2017 , we delivered to craftsmen industries , a class iii vehicle ( ford f-350 dually ) up-fitted with a production-ready mg 30 kva ( single phase/three phase ) system . subsequently , craftsmen invited the company to demonstrate its mobile generation technology and the potential benefits for craftsmen products at craftsmen 's 35 th anniversary party on april 27 , 2017. over 100 current and prospective craftsmen customers were in the audience for the demonstrations . on june 9 , 2017 , the company received a purchase order for 10 mg systems from craftsmen , each in the amount of $ 29,500 with 50 % paid as a down payment at the time of customer acceptance . furthermore , craftsmen has agreed to produce the mg systems for the company 's initial orders from jatropha and veracruz ( see below ) . since october 2018 we have been ordering components for the initial pilot production run which was completed in the first quarter of 2019 and showcased on march 27 , 2019. in parallel , purchase orders will be placed for components to support increased production in the months that follow . veteran technology group on may 26 , 2017 , the company entered into a five-year strategic alliance agreement with veteran technology group llc ( “ vet tech ” ) , a developer of artificial intelligence ( “ ai ” ) software for advanced troubleshooting of complex systems . the agreement automatically renews for successive one-year terms unless terminated by either party 30 days prior to its expiration . the agreement may be terminated earlier by either party upon 60 days prior notice . the parties agreed not to solicit the other parties ' employees or contractors for six months after the expiration or termination of the agreement . the agreement provides that the company market and provide its mg product and services to customers referred by vet tech and vet tech will market and provide gait software and other ai services for clients referred by the company . national union of jatropha producers in november 2017 , the company received a purchase commitment for 234 mg systems from the national union of producers of jatropha in mexico ( jatropha ) . jatropha has established a center for processing oil from jatropha seeds for biofuel production . through their union of producers , jatropha plans to introduce the mg and promote the product to their supplier network . 28 the purchase commitment stipulates that cooltech will furnish jatropha with an mg80 retro-fitted onto a ford f-350 truck within 60 business days . story_separator_special_tag varying combinations of energy sources such as solar , wind , biogas and mg systems both backup and supplement one another to provide consistent , uninterrupted primary power even during severe weather or other emergency situations . the synergies between the companies extend beyond water purification and power generation . verdewatts ' wind and gas turbines and generators which produce electric power can all be improved by cooltech 's thermal reduction technologies . new sales agent : in early december 2019 , the company entered into an agreement with gaia energy of gdansk , poland to act as an independent agent for the company by developing markets in eastern europe , the middle east and africa . the agreement describes the agent 's duties as “ generating revenue , and investment funding , for the company from various organizations including investment funds , end-users , channel partners , integrators , and oems . ” team members of gaia energy include executives with more than twenty-five years ' experience with panasonic , ford motor company , electronic data systems and the us air force in the fields of advanced technologies and an african diplomat with a thirty-year background working with and for diplomatic missions , non-governmental organizations and international disasters and aid management services . the diplomat introduced cooltech products at a recent african technical summit attended by representatives from 54 countries . request for collaboration sent to us government officials on december 11 , 2019 , letters signed by 13 government officials and congressmen in mexico were mailed to their counterparts in the us , specifically governor gavin newsom , secretary rick perry , secretary wilbur ross , senator mitch mcconnell and speaker of the house nancy pelosi . the letters were a request for collaborative support between the two countries to accelerate cooltech 's product deployment into mexico to help solve urgent rural power and water purification problems that are hurting rural communities . those problems include irregular and faulty power in rural areas which hinders crop irrigation and water pollution which affects crops farmed for sale to the us . 33 the letters also detail the mexican officials ' satisfaction with cooltech 's solutions and management team and that they have met with the company on several occasions for product demonstrations as well as strategic and technical advice . they highlight the benefits of cooltech products , how they could quickly and efficiently address the problems noted , and how they expect them to become a viable part of the country 's infrastructure . export import bank of the united states with the help of verdewatts and firmgreen , cooltech has initiated a relationship with the export-import bank of the united states ( exim ) , a u.s. government agency whose sole mission is to support u.s. exports . the bank fulfills its mission by offering very cost-effective financing for international customers and project developers to purchase u.s.-made services and purchase or lease u.s.-made goods . to that end , the two companies applied to finance the mexican projects referenced above . cooltech also sent product information for due diligence review by the technical team at exim bank . subsequently , cooltech has received a letter of interest from exim , however , there can not be any assurance that exim will provide any funding to the company . going concern as a result of our financial condition , we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended december 31 , 2019 and 2018 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern . as of december 31 , 2019 , we have not commenced full operations , raising substantial doubt about our ability to continue as a going concern . our ability to continue as a going concern is dependent on our ability to generate revenue , achieve profitable operations and repay our obligations when they come due . as of december 31,2019 , we have $ 15,306 in cash and we owe $ 314,2018 and $ 3,227,215 for convertible and promissory notes , respectively we are pursuing various financing alternatives to address the payment of outstanding debt and to support the sales , component acquisitionand assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan : to license its thermal technologies and applications , including submersible dry-pit applications . there can be no assurance , however , that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives . consequently , we may not be able to continue as an operating company . results of operations the following table sets forth , for the periods indicated , consolidated statements of operations data . the table and the discussion below should be read in conjunction with the accompanying consolidated financial statements and the notes thereto , appearing elsewhere in this report . replace_table_token_3_th 34 revenues during the years ended december 31 , 2019 and 2018 , and since inception , we have not generated any revenues . we generated our first mobile generation order during the quarter ended june 30 , 2014 and received a partial deposit in advance of completing the sale with companies controlled by the individual who is a 5 % owner of upt and a shareholder of our company . the order is in the production queue along with other existing orders . operating expenses operating expenses decreased during the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , due to reductions in consulting costs , professional fees , research and development as well as general and administrative . during the year ended december 31 , 2019 , payroll and related expenses increased by $ 65,320 due to bonuses awarded for new company patents . the decrease in
| liquidity and capital resources we have historically met our liquidity requirements primarily through the public sale and private placement of equity securities , debt financing , and exchanging common stock warrants and options for professional and consulting services . at december 31 , 2019 , we had cash and cash equivalents of $ 15,306. working capital is the amount by which current assets exceed current liabilities . we had negative working capital of $ 6,821,643 and $ 4,643,956 at december 31 , 2019 and 2018 , respectively . the decrease in working capital was due to large increases in accounts payable , accrued liabilities – related party , current debt and derivative liability.to that end , we owe approximately $ 449,968 for convertible notes that mature in the next six months and we owe another $ 2,400,000 in notes payable . based on its current forecast and budget , management believes that its cash resources will not be sufficient to fund its operations through the end of the second quarter . unless the company can generate sufficient revenue from the execution of the company 's business plan , it will need to obtain additional capital to continue to fund the company 's operations . there is no assurance that capital in any form would be available to us , and if available , on terms and conditions that are acceptable . if we are unable to obtain sufficient funds , we may be forced to curtail and or cease operations . 35 august 2016 convertible note – in august 2016 , the company entered into a senior convertible note agreement with khic . we received $ 400,0000 , bearing interest at 3 % , with principal and interest payable on august 24 , 2018. the note may be converted at any time into shares of the common stock at the conversion price pursuant to the terms of the note . we determined that the conversion feature meets the requirements for derivative treatment and have recorded a derivative liability and a corresponding debt discount on the condensed consolidated balance sheet .
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these costs relate primarily to third-party advisory and consulting services , retention payments to certain employees , incremental stock-based compensation and other costs directly related to the separation . costs related to employees for retention or stock-based compensation are classified on a basis consistent with their regular compensation charges and included within cost of net revenues , sales and marketing , product development or general and administrative in our consolidated statement of income as applicable . costs other than those paid to employees are included within general and administrative in our consolidated statement of income . during 2014 , we incurred approximately $ 35 million related to separation costs . we expect to continue to incur additional separation costs in 2015 until we complete the separation of our paypal business . we currently estimate that such additional separation costs will exceed $ 250 million , although that estimate is subject to a number of assumptions and uncertainties . in 2014 , net revenues increased 12 % to $ 17.9 billion compared to $ 16.0 billion in 2013 , driven primarily by increases in net revenues from each of our business segments . we achieved an operating margin of 20 % in 2014 compared to 21 % in 2013 . our diluted earnings per share decreased to $ 0.04 in 2014 , a $ 2.14 decrease per share compared to 2013 , driven primarily by the accrual of deferred taxes on $ 9.0 billion of undistributed foreign earnings for 2013 and prior years , partially offset by growth in net revenues and a lower share count . we generated cash flow from operations of approximately $ 5.7 billion in 2014 compared to $ 5.0 billion in 2013 . 48 our marketplaces segment total net revenues increased $ 533 million , or 6 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in gross merchandise volume ( gmv ) ( as defined below ) of 9 % , which was due to continued growth internationally and in the u.s. and a favorable impact from foreign currency movements relative to the u.s. dollar . we believe that during 2014 , gmv was negatively impacted by declines in volume caused by lower organic traffic and our second quarter cyberattack described below . our marketplaces segment operating margin decreased 2.7 percentage points in 2014 compared to 2013 due primarily to continued investments in our marketing programs , site operations and business initiatives . as previously disclosed , during the second quarter of 2014 , our marketplaces segment experienced a cyberattack that compromised an authentication database containing user names , encrypted passwords and other non-financial data of our customers . the attack resulted from a small number of employee log-in credentials that were compromised . the database included ebay marketplaces customers ' name , encrypted password , e-mail address , physical address , phone number and date of birth . the database did not contain any financial information or other confidential personal information . as a result of this attack we generally required marketplaces users to reset their passwords in order to access their accounts on our core marketplaces platform and its localized counterparts . this attack was isolated to our ebay platform and we have seen no evidence of unauthorized access or compromises to personal or financial information of our paypal users , as that data is stored separately on a secure network . during 2014 , we recorded cyberattack-related expenses and customer credits of approximately $ 46 million , of which approximately $ 41 million have been reported within our marketplaces segment . expenses include costs to investigate and remediate the attack , provide additional customer support and temporarily enhance customer protection as well as additional marketing program costs . customer credits were voluntarily offered as refunds to sellers during the password reset period and were recorded as a reduction of revenue . many of these measures were undertaken to preserve our customers ' trust in our marketplaces businesses . the disruption arising from this cyberattack adversely affected our 2014 marketplaces segment results ; however , it is not possible to precisely measure the amount of lost revenue directly attributable to the cyberattack . we are unable to predict the full impact of the cyberattack on marketplaces users ' behavior in the future , including whether a change in our customers ' trust could negatively impact our marketplaces segment 's results of operations on an ongoing basis or require us to increase promotional efforts to regain such trust . accordingly , we are not able to precisely forecast any possible future impact to our revenues or expenses attributable to the cyberattack . our payments segment total net revenues increased $ 1.3 billion , or 19 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in net total payment volume ( tpv ) ( as defined below ) of 27 % . our payments segment operating margin decreased 0.7 percentage points in 2014 compared to 2013 , due primarily to increased investment in our marketing programs and product development partially offset by a favorable transaction expense rate . our enterprise segment total net revenues increased $ 72 million , or 6 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in gross merchandise sales ( as defined below ) of 13 % in 2014 compared to 2013 . our enterprise segment operating margin was relatively consistent for 2014 compared to 2013 , increasing 0.5 percentage points . in 2013 , net revenues increased 14 % to $ 16.0 billion compared to $ 14.1 billion in 2012 , driven primarily by increases in net revenues from each of our business segments . story_separator_special_tag payments payments cost of net revenues increased $ 437 million , or 16 % , in 2014 compared to 2013 due primarily to the impact of growth in net tpv offset in part by favorable transaction expense rates . payments cost of net revenues as a percentage of payments net revenues decreased by 1.0 percentage points during 2014 compared to 2013 due to favorable transaction expense rates . payments cost of net revenues increased $ 466 million , or 21 % , in 2013 compared to 2012 due primarily to the impact of growth in net tpv and growth in costs related to our customer support initiatives . payments cost of net revenues as a percentage of payments net revenues increased by 0.8 percentage points during 2013 compared to 2012 due primarily to these same factors . enterprise enterprise cost of net revenues increased $ 89 million , or 11 % , during 2014 compared to 2013 due primarily to the impact of growth in gross merchandise sales . enterprise cost of net revenues as a percentage of enterprise net revenues increased by 3.1 percentage points during 2014 compared to 2013 due primarily to a lower take rate . enterprise cost of net revenues increased $ 126 million , or 18 % , during 2013 compared to 2012 due primarily to the impact of growth in gross merchandise sales as well as amortization expense driven by the initial roll out of the new suite of commerce technologies . enterprise cost of net revenues as a percentage of enterprise net revenues increased by 8.3 percentage points during 2013 compared to 2012 due primarily to these same factors . summary of operating expenses , non-operating items and provision for income taxes the following table summarizes changes in operating expenses , non-operating items and provision for income taxes for the periods presented : replace_table_token_10_th 55 the following table summarizes operating expenses , non-operating items and provision for income taxes as a percentage of net revenues for the periods presented : replace_table_token_11_th sales and marketing sales and marketing expenses consist primarily of advertising costs and marketing programs ( both online and offline ) , employee compensation , contractor costs , facilities costs and depreciation on equipment . online marketing expenses represent traffic acquisition costs in various channels such as paid search , affiliates marketing and display advertising . offline advertising includes brand campaigns , buyer/seller communications and general public relations expenses . sales and marketing expense increased by $ 527 million , or 17 % , in 2014 compared to 2013 . the increase in sales and marketing expense was due primarily to an increase in marketing program costs ( both online and offline programs ) , ebay 's and paypal 's brand campaigns and higher employee-related expenses ( including consultant costs ) . sales and marketing expense as a percentage of net revenues were 20 % and 19 % in 2014 and 2013 , respectively . sales and marketing expense increased by $ 147 million , or 5 % , in 2013 compared to 2012. the increase in sales and marketing expense was due primarily to higher employee-related expenses ( including consultant costs , facility costs and equipment-related costs ) , partially offset by a decrease in professional services fees and marketing program efficiencies . the decrease in marketing program costs was due primarily to a shift in focus from customer acquisition to customer retention ( for which certain associated expenses are recorded as a reduction in revenue instead of sales and marketing expense ) . sales and marketing expense as a percentage of net revenues were 19 % and 21 % in 2013 and 2012 , respectively . product development product development expenses consist primarily of employee compensation , contractor costs , facilities costs and depreciation on equipment . product development expenses are net of required capitalization of major site and other product development efforts , including the development of our next generation platform architecture , migration of certain platforms , seller tools and payments services projects . our top technology priorities include mobile , user experience , search , platform and products . capitalized internal use and website development costs were $ 395 million and $ 375 million in 2014 and 2013 , respectively , and are primarily reflected as a cost of net revenues when amortized in future periods . product development expenses increased by $ 232 million , or 13 % , in 2014 compared to 2013 . the increase was due primarily to higher employee-related costs ( including consultant costs ) driven by increased investment in platform and mobile . product development expenses as a net percentage of revenues were 11 % in both 2014 and 2013 . product development expenses increased by $ 195 million , or 12 % , in 2013 compared to 2012. the increase was due primarily to higher employee-related costs ( including consultant costs , facility costs and equipment-related costs ) driven by increased investment in platform , search , mobile and offline , as well as an increase in professional service fees . product development expenses as a net percentage of revenues were 11 % in both 2013 and 2012 . 56 general and administrative general and administrative expenses consist primarily of employee compensation , contractor costs , facilities costs , depreciation of equipment , employer payroll taxes on employee stock-based compensation , legal expenses , restructuring , insurance premiums and professional fees . our legal expenses , including those related to various ongoing legal proceedings , may fluctuate substantially from period to period . general and administrative expenses increased $ 140 million , or 8 % , in 2014 compared to 2013 . the increase was due primarily to higher employee-related costs and costs related to our planned separation of our paypal business . general and administrative expenses as a percentage of net revenues were 10 % in 2014 and 11 % in 2013 . general and administrative expenses increased $
| liquidity and capital resources we have historically met our liquidity requirements primarily through the public sale and private placement of equity securities , debt financing , and exchanging common stock warrants and options for professional and consulting services . at december 31 , 2019 , we had cash and cash equivalents of $ 15,306. working capital is the amount by which current assets exceed current liabilities . we had negative working capital of $ 6,821,643 and $ 4,643,956 at december 31 , 2019 and 2018 , respectively . the decrease in working capital was due to large increases in accounts payable , accrued liabilities – related party , current debt and derivative liability.to that end , we owe approximately $ 449,968 for convertible notes that mature in the next six months and we owe another $ 2,400,000 in notes payable . based on its current forecast and budget , management believes that its cash resources will not be sufficient to fund its operations through the end of the second quarter . unless the company can generate sufficient revenue from the execution of the company 's business plan , it will need to obtain additional capital to continue to fund the company 's operations . there is no assurance that capital in any form would be available to us , and if available , on terms and conditions that are acceptable . if we are unable to obtain sufficient funds , we may be forced to curtail and or cease operations . 35 august 2016 convertible note – in august 2016 , the company entered into a senior convertible note agreement with khic . we received $ 400,0000 , bearing interest at 3 % , with principal and interest payable on august 24 , 2018. the note may be converted at any time into shares of the common stock at the conversion price pursuant to the terms of the note . we determined that the conversion feature meets the requirements for derivative treatment and have recorded a derivative liability and a corresponding debt discount on the condensed consolidated balance sheet .
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these costs relate primarily to third-party advisory and consulting services , retention payments to certain employees , incremental stock-based compensation and other costs directly related to the separation . costs related to employees for retention or stock-based compensation are classified on a basis consistent with their regular compensation charges and included within cost of net revenues , sales and marketing , product development or general and administrative in our consolidated statement of income as applicable . costs other than those paid to employees are included within general and administrative in our consolidated statement of income . during 2014 , we incurred approximately $ 35 million related to separation costs . we expect to continue to incur additional separation costs in 2015 until we complete the separation of our paypal business . we currently estimate that such additional separation costs will exceed $ 250 million , although that estimate is subject to a number of assumptions and uncertainties . in 2014 , net revenues increased 12 % to $ 17.9 billion compared to $ 16.0 billion in 2013 , driven primarily by increases in net revenues from each of our business segments . we achieved an operating margin of 20 % in 2014 compared to 21 % in 2013 . our diluted earnings per share decreased to $ 0.04 in 2014 , a $ 2.14 decrease per share compared to 2013 , driven primarily by the accrual of deferred taxes on $ 9.0 billion of undistributed foreign earnings for 2013 and prior years , partially offset by growth in net revenues and a lower share count . we generated cash flow from operations of approximately $ 5.7 billion in 2014 compared to $ 5.0 billion in 2013 . 48 our marketplaces segment total net revenues increased $ 533 million , or 6 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in gross merchandise volume ( gmv ) ( as defined below ) of 9 % , which was due to continued growth internationally and in the u.s. and a favorable impact from foreign currency movements relative to the u.s. dollar . we believe that during 2014 , gmv was negatively impacted by declines in volume caused by lower organic traffic and our second quarter cyberattack described below . our marketplaces segment operating margin decreased 2.7 percentage points in 2014 compared to 2013 due primarily to continued investments in our marketing programs , site operations and business initiatives . as previously disclosed , during the second quarter of 2014 , our marketplaces segment experienced a cyberattack that compromised an authentication database containing user names , encrypted passwords and other non-financial data of our customers . the attack resulted from a small number of employee log-in credentials that were compromised . the database included ebay marketplaces customers ' name , encrypted password , e-mail address , physical address , phone number and date of birth . the database did not contain any financial information or other confidential personal information . as a result of this attack we generally required marketplaces users to reset their passwords in order to access their accounts on our core marketplaces platform and its localized counterparts . this attack was isolated to our ebay platform and we have seen no evidence of unauthorized access or compromises to personal or financial information of our paypal users , as that data is stored separately on a secure network . during 2014 , we recorded cyberattack-related expenses and customer credits of approximately $ 46 million , of which approximately $ 41 million have been reported within our marketplaces segment . expenses include costs to investigate and remediate the attack , provide additional customer support and temporarily enhance customer protection as well as additional marketing program costs . customer credits were voluntarily offered as refunds to sellers during the password reset period and were recorded as a reduction of revenue . many of these measures were undertaken to preserve our customers ' trust in our marketplaces businesses . the disruption arising from this cyberattack adversely affected our 2014 marketplaces segment results ; however , it is not possible to precisely measure the amount of lost revenue directly attributable to the cyberattack . we are unable to predict the full impact of the cyberattack on marketplaces users ' behavior in the future , including whether a change in our customers ' trust could negatively impact our marketplaces segment 's results of operations on an ongoing basis or require us to increase promotional efforts to regain such trust . accordingly , we are not able to precisely forecast any possible future impact to our revenues or expenses attributable to the cyberattack . our payments segment total net revenues increased $ 1.3 billion , or 19 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in net total payment volume ( tpv ) ( as defined below ) of 27 % . our payments segment operating margin decreased 0.7 percentage points in 2014 compared to 2013 , due primarily to increased investment in our marketing programs and product development partially offset by a favorable transaction expense rate . our enterprise segment total net revenues increased $ 72 million , or 6 % , in 2014 compared to 2013 . the increase in total net revenues was driven primarily by an increase in gross merchandise sales ( as defined below ) of 13 % in 2014 compared to 2013 . our enterprise segment operating margin was relatively consistent for 2014 compared to 2013 , increasing 0.5 percentage points . in 2013 , net revenues increased 14 % to $ 16.0 billion compared to $ 14.1 billion in 2012 , driven primarily by increases in net revenues from each of our business segments . story_separator_special_tag payments payments cost of net revenues increased $ 437 million , or 16 % , in 2014 compared to 2013 due primarily to the impact of growth in net tpv offset in part by favorable transaction expense rates . payments cost of net revenues as a percentage of payments net revenues decreased by 1.0 percentage points during 2014 compared to 2013 due to favorable transaction expense rates . payments cost of net revenues increased $ 466 million , or 21 % , in 2013 compared to 2012 due primarily to the impact of growth in net tpv and growth in costs related to our customer support initiatives . payments cost of net revenues as a percentage of payments net revenues increased by 0.8 percentage points during 2013 compared to 2012 due primarily to these same factors . enterprise enterprise cost of net revenues increased $ 89 million , or 11 % , during 2014 compared to 2013 due primarily to the impact of growth in gross merchandise sales . enterprise cost of net revenues as a percentage of enterprise net revenues increased by 3.1 percentage points during 2014 compared to 2013 due primarily to a lower take rate . enterprise cost of net revenues increased $ 126 million , or 18 % , during 2013 compared to 2012 due primarily to the impact of growth in gross merchandise sales as well as amortization expense driven by the initial roll out of the new suite of commerce technologies . enterprise cost of net revenues as a percentage of enterprise net revenues increased by 8.3 percentage points during 2013 compared to 2012 due primarily to these same factors . summary of operating expenses , non-operating items and provision for income taxes the following table summarizes changes in operating expenses , non-operating items and provision for income taxes for the periods presented : replace_table_token_10_th 55 the following table summarizes operating expenses , non-operating items and provision for income taxes as a percentage of net revenues for the periods presented : replace_table_token_11_th sales and marketing sales and marketing expenses consist primarily of advertising costs and marketing programs ( both online and offline ) , employee compensation , contractor costs , facilities costs and depreciation on equipment . online marketing expenses represent traffic acquisition costs in various channels such as paid search , affiliates marketing and display advertising . offline advertising includes brand campaigns , buyer/seller communications and general public relations expenses . sales and marketing expense increased by $ 527 million , or 17 % , in 2014 compared to 2013 . the increase in sales and marketing expense was due primarily to an increase in marketing program costs ( both online and offline programs ) , ebay 's and paypal 's brand campaigns and higher employee-related expenses ( including consultant costs ) . sales and marketing expense as a percentage of net revenues were 20 % and 19 % in 2014 and 2013 , respectively . sales and marketing expense increased by $ 147 million , or 5 % , in 2013 compared to 2012. the increase in sales and marketing expense was due primarily to higher employee-related expenses ( including consultant costs , facility costs and equipment-related costs ) , partially offset by a decrease in professional services fees and marketing program efficiencies . the decrease in marketing program costs was due primarily to a shift in focus from customer acquisition to customer retention ( for which certain associated expenses are recorded as a reduction in revenue instead of sales and marketing expense ) . sales and marketing expense as a percentage of net revenues were 19 % and 21 % in 2013 and 2012 , respectively . product development product development expenses consist primarily of employee compensation , contractor costs , facilities costs and depreciation on equipment . product development expenses are net of required capitalization of major site and other product development efforts , including the development of our next generation platform architecture , migration of certain platforms , seller tools and payments services projects . our top technology priorities include mobile , user experience , search , platform and products . capitalized internal use and website development costs were $ 395 million and $ 375 million in 2014 and 2013 , respectively , and are primarily reflected as a cost of net revenues when amortized in future periods . product development expenses increased by $ 232 million , or 13 % , in 2014 compared to 2013 . the increase was due primarily to higher employee-related costs ( including consultant costs ) driven by increased investment in platform and mobile . product development expenses as a net percentage of revenues were 11 % in both 2014 and 2013 . product development expenses increased by $ 195 million , or 12 % , in 2013 compared to 2012. the increase was due primarily to higher employee-related costs ( including consultant costs , facility costs and equipment-related costs ) driven by increased investment in platform , search , mobile and offline , as well as an increase in professional service fees . product development expenses as a net percentage of revenues were 11 % in both 2013 and 2012 . 56 general and administrative general and administrative expenses consist primarily of employee compensation , contractor costs , facilities costs , depreciation of equipment , employer payroll taxes on employee stock-based compensation , legal expenses , restructuring , insurance premiums and professional fees . our legal expenses , including those related to various ongoing legal proceedings , may fluctuate substantially from period to period . general and administrative expenses increased $ 140 million , or 8 % , in 2014 compared to 2013 . the increase was due primarily to higher employee-related costs and costs related to our planned separation of our paypal business . general and administrative expenses as a percentage of net revenues were 10 % in 2014 and 11 % in 2013 . general and administrative expenses increased $
| cash flows replace_table_token_12_th 59 operating activities we generated cash from operating activities of $ 5.7 billion , $ 5.0 billion and $ 3.8 billion in 2014 , 2013 and 2012 , respectively . the net cash provided by operating activities of $ 5.7 billion in 2014 was due primarily to net income of $ 46 million with adjustments of $ 2.8 billion in deferred income taxes , $ 1.5 billion in depreciation and amortization , $ 958 million in provision for transaction and loan losses and $ 675 million in stock-based compensation expense and a decrease of $ 185 million in changes in assets and liabilities , net of acquisition effects . the net cash provided by operating activities of $ 5.0 billion in 2013 was due primarily to net income of $ 2.9 billion with adjustments of $ 1.4 billion in depreciation and amortization , $ 791 million in provision for transaction and loan losses , $ 609 million in stock-based compensation expense and a decrease of $ 354 million in changes in assets and liabilities , net of acquisition effects and a $ 75 million gain on the sale of equity investments and $ 31 million in deferred income taxes . the net cash provided by operating activities of $ 3.8 billion in 2012 was due primarily to net income of $ 2.6 billion with adjustments of $ 1.2 billion in depreciation and amortization , $ 580 million in provision for transaction and loan losses , $ 488 million in stock-based compensation expense and a decrease of $ 756 million in changes in assets and liabilities and $ 35 million in deferred income taxes . cash paid for income taxes in 2014 , 2013 and 2012 was $ 343 million , $ 466 million and $ 789 million , respectively .
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research and development expenses increased $ 255,000 , or 80.3 % , to $ 573,000 in fiscal 2013 from $ 318,000 in fiscal 2012. page 17 net loss was $ 540,000 , or $ 0.18 per fully diluted share , for the year ended may 31 , 2013 as compared to net income of $ 77,000 , or $ 0.03 per fully diluted share , for the year ended may 31 , 2012. critical accounting policies revenue recognition the company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection , passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations , pursuant to the guidance provided by accounting standards codification topic 605. for sales to all customers , including manufacturer representatives , distributors or their third-party customers , these criteria are met at the time product is shipped . when other significant obligations remain after products are delivered , revenue is recognized only after such obligations are fulfilled . in addition , judgments are required in evaluating the credit worthiness of our customers . credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured . allowance for doubtful accounts the company maintains credit limits for all customers based upon several factors , including but not limited to financial condition and stability , payment history , published credit reports and use of credit references . 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 . if these analyses lead management to the conclusion that potential significant accounts are uncollectible , a reserve is provided . inventories inventory is valued at the lower of cost or market with cost determined on the average cost basis . costs included in inventories consist of materials , labor and manufacturing overhead , which are related to the purchase or production of inventories . write-downs , when required , are made to reduce excess inventories to their net realizable values . such estimates are based on assumptions regarding future demand and market conditions . if actual conditions become less favorable than the assumptions used , an additional inventory write-down may be required . 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 intangible and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset 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 . page 18 recently issued accounting pronouncements refer to note 1 of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements . discussion of operating results replace_table_token_4_th sales sales in the balancer segment decreased $ 1.6 million , or 16.7 % , to $ 7.7 million for fiscal 2013 compared to $ 9.3 million for fiscal 2012. this decrease is primarily due to lower volumes of shipments into asia , particularly china , and also to a lesser extent to north america . north american sales decreased $ 311,000 , or 6.7 % , in fiscal 2013 compared to fiscal 2012. sales into asia decreased $ 1.2 million , or 34.7 % , in fiscal 2013 compared to the prior year . sales into europe increased $ 34,000 , or 3.8 % , in fiscal 2013 compared to fiscal 2012. sales in other regions of the world decreased $ 75,000 , or 24.9 % , during fiscal 2013 as compared to the prior year . the decreases in asia and north america are due to a reduction in orders as economic growth in china has slowed and the uncertainty regarding the u.s. economy continues to have a negative impact on manufacturing in the markets we serve . 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 . story_separator_special_tag sales in the measurement segment decreased $ 434,000 , or 8.4 % , to $ 4.7 million in fiscal 2013 compared to $ 5.2 million in fiscal 2012. sales of laser-based distance measurement and dimensional-sizing products decreased $ 380,000 , or 10.9 % , primarily due to a large sale during the fourth quarter of fiscal 2012 that was not repeated in the fourth quarter of fiscal 2013. sales of remote tank monitoring products increased $ 296,000 to $ 877,000 during fiscal 2013 due to the higher volume of shipments and the developing monitoring revenues associated with unit sales . sales of laser-based surface measurement products decreased $ 361,000 , or 40.8 % , primarily due to slowing demand for these products . 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 $ 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 page 19 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. 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 . gross margin gross margin in fiscal 2013 increased to 48.9 % compared to 43.9 % in fiscal 2012. this increase is primarily due to the impact of lower sales volumes through the asian distribution channels , which typically have higher discounts and lower margins , and as a result of the company 's efforts to reduce the material costs from certain key suppliers and a shift in the product sales mix towards higher margin products . gross margin in fiscal 2012 decreased to 43.9 % compared to 48.8 % in fiscal 2011. this decrease is 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 . operating expenses operating expenses increased $ 372,000 , or 5.9 % , to $ 6.7 million for fiscal 2013 compared to $ 6.3 million in fiscal 2012. general , administrative and sales expenses increased $ 116,000 , or 1.9 % , to $ 6.1 million in fiscal 2013 compared to $ 6.0 million in the prior year . this increase is due primarily to higher expenses associated with an international trade show that occurs every two years . research and development expenses increased $ 255,000 , or 80.3 % , to $ 573,000 in fiscal 2013 compared to $ 318,000 in fiscal 2012. the increase in research and development expense is primarily due to new product development and product enhancements related to existing product lines . 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 . other income other income consists of interest income , foreign currency exchange gain ( loss ) and other income ( expense ) . interest income was $ 1,000 , $ 2,000 and $ 4,000 in fiscal 2013 , 2012 and 2011 , respectively . interest income has decreased due to lower average cash and investment balances and lower interest rates . foreign currency exchange gain was $ 13,000 and $ 18,000 in fiscal 2013 and 2012 , respectively . foreign currency exchange loss was $
| cash flows replace_table_token_12_th 59 operating activities we generated cash from operating activities of $ 5.7 billion , $ 5.0 billion and $ 3.8 billion in 2014 , 2013 and 2012 , respectively . the net cash provided by operating activities of $ 5.7 billion in 2014 was due primarily to net income of $ 46 million with adjustments of $ 2.8 billion in deferred income taxes , $ 1.5 billion in depreciation and amortization , $ 958 million in provision for transaction and loan losses and $ 675 million in stock-based compensation expense and a decrease of $ 185 million in changes in assets and liabilities , net of acquisition effects . the net cash provided by operating activities of $ 5.0 billion in 2013 was due primarily to net income of $ 2.9 billion with adjustments of $ 1.4 billion in depreciation and amortization , $ 791 million in provision for transaction and loan losses , $ 609 million in stock-based compensation expense and a decrease of $ 354 million in changes in assets and liabilities , net of acquisition effects and a $ 75 million gain on the sale of equity investments and $ 31 million in deferred income taxes . the net cash provided by operating activities of $ 3.8 billion in 2012 was due primarily to net income of $ 2.6 billion with adjustments of $ 1.2 billion in depreciation and amortization , $ 580 million in provision for transaction and loan losses , $ 488 million in stock-based compensation expense and a decrease of $ 756 million in changes in assets and liabilities and $ 35 million in deferred income taxes . cash paid for income taxes in 2014 , 2013 and 2012 was $ 343 million , $ 466 million and $ 789 million , respectively .
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research and development expenses increased $ 255,000 , or 80.3 % , to $ 573,000 in fiscal 2013 from $ 318,000 in fiscal 2012. page 17 net loss was $ 540,000 , or $ 0.18 per fully diluted share , for the year ended may 31 , 2013 as compared to net income of $ 77,000 , or $ 0.03 per fully diluted share , for the year ended may 31 , 2012. critical accounting policies revenue recognition the company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection , passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations , pursuant to the guidance provided by accounting standards codification topic 605. for sales to all customers , including manufacturer representatives , distributors or their third-party customers , these criteria are met at the time product is shipped . when other significant obligations remain after products are delivered , revenue is recognized only after such obligations are fulfilled . in addition , judgments are required in evaluating the credit worthiness of our customers . credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured . allowance for doubtful accounts the company maintains credit limits for all customers based upon several factors , including but not limited to financial condition and stability , payment history , published credit reports and use of credit references . 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 . if these analyses lead management to the conclusion that potential significant accounts are uncollectible , a reserve is provided . inventories inventory is valued at the lower of cost or market with cost determined on the average cost basis . costs included in inventories consist of materials , labor and manufacturing overhead , which are related to the purchase or production of inventories . write-downs , when required , are made to reduce excess inventories to their net realizable values . such estimates are based on assumptions regarding future demand and market conditions . if actual conditions become less favorable than the assumptions used , an additional inventory write-down may be required . 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 intangible and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset 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 . page 18 recently issued accounting pronouncements refer to note 1 of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements . discussion of operating results replace_table_token_4_th sales sales in the balancer segment decreased $ 1.6 million , or 16.7 % , to $ 7.7 million for fiscal 2013 compared to $ 9.3 million for fiscal 2012. this decrease is primarily due to lower volumes of shipments into asia , particularly china , and also to a lesser extent to north america . north american sales decreased $ 311,000 , or 6.7 % , in fiscal 2013 compared to fiscal 2012. sales into asia decreased $ 1.2 million , or 34.7 % , in fiscal 2013 compared to the prior year . sales into europe increased $ 34,000 , or 3.8 % , in fiscal 2013 compared to fiscal 2012. sales in other regions of the world decreased $ 75,000 , or 24.9 % , during fiscal 2013 as compared to the prior year . the decreases in asia and north america are due to a reduction in orders as economic growth in china has slowed and the uncertainty regarding the u.s. economy continues to have a negative impact on manufacturing in the markets we serve . 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 . story_separator_special_tag sales in the measurement segment decreased $ 434,000 , or 8.4 % , to $ 4.7 million in fiscal 2013 compared to $ 5.2 million in fiscal 2012. sales of laser-based distance measurement and dimensional-sizing products decreased $ 380,000 , or 10.9 % , primarily due to a large sale during the fourth quarter of fiscal 2012 that was not repeated in the fourth quarter of fiscal 2013. sales of remote tank monitoring products increased $ 296,000 to $ 877,000 during fiscal 2013 due to the higher volume of shipments and the developing monitoring revenues associated with unit sales . sales of laser-based surface measurement products decreased $ 361,000 , or 40.8 % , primarily due to slowing demand for these products . 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 $ 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 page 19 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. 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 . gross margin gross margin in fiscal 2013 increased to 48.9 % compared to 43.9 % in fiscal 2012. this increase is primarily due to the impact of lower sales volumes through the asian distribution channels , which typically have higher discounts and lower margins , and as a result of the company 's efforts to reduce the material costs from certain key suppliers and a shift in the product sales mix towards higher margin products . gross margin in fiscal 2012 decreased to 43.9 % compared to 48.8 % in fiscal 2011. this decrease is 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 . operating expenses operating expenses increased $ 372,000 , or 5.9 % , to $ 6.7 million for fiscal 2013 compared to $ 6.3 million in fiscal 2012. general , administrative and sales expenses increased $ 116,000 , or 1.9 % , to $ 6.1 million in fiscal 2013 compared to $ 6.0 million in the prior year . this increase is due primarily to higher expenses associated with an international trade show that occurs every two years . research and development expenses increased $ 255,000 , or 80.3 % , to $ 573,000 in fiscal 2013 compared to $ 318,000 in fiscal 2012. the increase in research and development expense is primarily due to new product development and product enhancements related to existing product lines . 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 . other income other income consists of interest income , foreign currency exchange gain ( loss ) and other income ( expense ) . interest income was $ 1,000 , $ 2,000 and $ 4,000 in fiscal 2013 , 2012 and 2011 , respectively . interest income has decreased due to lower average cash and investment balances and lower interest rates . foreign currency exchange gain was $ 13,000 and $ 18,000 in fiscal 2013 and 2012 , respectively . foreign currency exchange loss was $
| liquidity and capital resources the company 's working capital decreased $ 304,000 to $ 7.6 million as of may 31 , 2013 compared to $ 7.9 million as of may 31 , 2012. cash and cash equivalents decreased $ 868,000 from may 31 , 2012 to $ 1.9 million as of may 31 , 2013. cash used in operating activities was $ 679,000 in fiscal 2013 as compared to cash provided by operations of $ 163,000 in fiscal 2012. the increase in the amount of cash used for operating activities is primarily due to the impact of the fiscal 2013 net loss and the increase in inventory , offset by the decrease in accounts receivable . at may 31 , 2013 , accounts receivable decreased $ 513,000 to $ 2.0 million compared to $ 2.5 million as of may 31 , 2012. the decrease in accounts receivable is due to the decrease in sales during fiscal 2013. inventories increased $ 1.1 million to $ 5.1 million as of may 31 , 2013 compared to $ 4.0 million at may 31 , 2012 due to the decreases in sales activity coupled with an increase in inventories in our xact product line .
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the reporting currency of the company is the u.s. dollar . the company 's consolidated canadian dollar financial position is translated to u.s. dollars by applying the foreign currency exchange rate in effect at the consolidated balance sheet date . the company 's consolidated canadian dollar results of operations and cash flows are translated to u.s. dollars by applying the average foreign currency exchange rate in effect during the reporting period . the resulting translation adjustments are included in other comprehensive income or loss . gains and losses from foreign currency transactions are included in earnings for the period . operating results revenues in 2019 increased 9.5 % to $ 5.389 billion from $ 4.923 billion in 2018 , due partly to acquisitions closed during , or subsequent to , the prior year , net of divestitures , which accounted for $ 292.0 million in incremental revenues in 2019 , with the remainder due primarily to internal growth in solid waste and higher e & p waste activity . solid waste internal growth was 4.3 % , due to price increases and fuel , materials and environmental surcharges , which were partially offset by lower volumes and recycled commodity values . pricing growth was 5.2 % , with core pricing up 5.1 % and fuel , materials and environmental surcharges adding another 0.1 % . volumes decreased by 0.2 % on increases in landfill and hauling volumes , more than offset by purposeful shedding of poor quality volumes at certain progressive waste operations . decreases in recycled commodity prices resulted in another 0.7 % decrease to internal solid waste growth . e & p waste revenues increased to $ 256.0 million from $ 244.6 million in 2018 , due primarily to increased activity at existing facilities . in 2019 , adjusted earnings before interest , taxes , depreciation and amortization , or adjusted ebitda , a non-gaap financial measure ( refer to page 68 of this annual report on form 10-k for a definition and reconciliation to net income attributable to waste connections ) , increased 6.8 % to $ 1.674 billion , from $ 1.566 billion in 2018. as a percentage of revenue , adjusted ebitda decreased from 31.8 % in 2018 , to 31.1 % in 2019. this 0.7 percentage point decrease was primarily due to lower recycled commodity values and renewable energy credits derived from the sale of landfill gas . adjusted net income attributable to waste connections , a non-gaap financial measure ( refer to page 69 of this annual report on form 10-k for a definition and reconciliation to net income attributable to waste connections ) , in 2019 increased 7.8 % to $ 719.6 million from $ 667.3 million in 2018. adjusted free cash flow net cash provided by operating activities increased 9.2 % to $ 1.541 billion in 2019 , from $ 1.411 billion in 2018 , and capital expenditures for property and equipment increased from $ 546.1 million in 2018 to $ 634.4 million in 2019 , an increase of $ 88.3 million , or 16.2 % . the increase in capital expenditures was primarily due to acquisitions closed during , or subsequent to , the prior year , as well as new municipal contracts awarded during the year . adjusted free cash flow , a non-gaap financial measure ( refer to page 67 of this annual report on form 10-k for a definition and reconciliation to net cash provided by operating activities ) , increased by $ 36.9 million to $ 916.8 million in 2019 , from $ 879.9 million in 2018. adjusted free cash flow as a percentage of revenues was 17.0 % in 2019 , as compared to 17.9 % in 2018. return of capital to shareholders in 2019 , we returned $ 175.1 million to shareholders through cash dividends declared by our board of directors , which also increased the quarterly cash dividend by 15.6 % , from $ 0.16 to $ 0.185 per common share in october 2019. cash dividends increased $ 22.5 million , or 14.8 % , from $ 152.6 million in 2018 , due to a 14.3 % increase in the quarterly cash dividend declared by our board of directors in october 2018 , followed by the additional increase in october 2019. our board of directors intends to review the quarterly dividend during the fourth quarter of each year , with a long-term objective of increasing the amount of the dividend . in 2019 , we did not repurchase any common shares due to expectations regarding the size and timing of acquisitions . we expect the amount of capital we return to shareholders through share repurchases to vary depending on our financial condition and results of operations , capital structure , the amount of cash we deploy on acquisitions , expectations regarding the timing and size of acquisitions , the market price of 44 our common shares , and overall market conditions . we can not assure you as to the amounts or timing of future share repurchases or dividends . we have the ability under our credit agreement and master note purchase agreements to repurchase our common shares and pay dividends provided that we maintain specified financial ratios . capital position we target a leverage ratio , as defined in our credit agreement , of approximately 2.5x – 3.0x total debt to ebitda . the percentage increase in ebitda in 2019 more than offset the percentage increase in debt in 2019 ; therefore , our leverage ratio decreased to 2.41x at december 31 , 2019 , from 2.45x at december 31 , 2018. critical accounting estimates and assumptions the preparation of financial statements in conformity with u.s. generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements . story_separator_special_tag the impairment test involved measuring the recoverability of goodwill by comparing the e & p segment 's carrying amount , including goodwill , to the fair value of the reporting unit . the fair value was estimated using an income approach employing a dcf model . the dcf model incorporated projected cash flows over a forecast period based on the remaining estimated lives of the operating locations comprising the e & p segment . this was based on a number of key assumptions , including , but not limited to , a discount rate of 11.7 % , annual revenue projections based on e & p waste resulting from projected levels of oil and natural gas exploration and production activity during the forecast period , gross margins based on estimated operating expense requirements during the forecast period and estimated capital expenditures over the forecast period , all of which were classified as level 3 in the fair value hierarchy . the impairment test showed the carrying value of the e & p segment exceeded its fair value by an amount in excess of the carrying amount of goodwill , or $ 77.3 million . therefore , we recorded an impairment charge of $ 77.3 million , consisting of the carrying amount of goodwill at our e & p segment at january 1 , 2017 , to impairments and other operating charges in the consolidated statements of net income during the year ended december 31 , 2017. additionally , we evaluated the recoverability of the e & p segment 's indefinite-lived intangible assets ( other than goodwill ) by comparing the estimated fair value of each indefinite-lived intangible asset to its carrying value . we estimated the fair value of the indefinite-lived intangible assets using an excess earnings approach . based on the result of the recoverability test during the years ended december 31 , 2019 , 2018 and 2017 , we did not record an impairment charge . 48 business combination accounting . we recognize , separately from goodwill , the identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values . we measure and recognize goodwill as of the acquisition date as the excess of : ( a ) the aggregate of the fair value of consideration transferred , the fair value of any noncontrolling interest in the acquiree ( if any ) and the acquisition date fair value of our previously held equity interest in the acquiree ( if any ) , over ( b ) the fair value of net assets acquired and liabilities assumed . at the acquisition date , we measure the fair values of all assets acquired and liabilities assumed that arise from contractual contingencies . we measure the fair values of all noncontractual contingencies if , as of the acquisition date , it is more likely than not that the contingency will give rise to an asset or liability . general our revenues consist mainly of fees we charge customers for collection , transfer , recycling and disposal of non-hazardous solid waste and treatment , recovery and disposal of non-hazardous e & p waste . our solid waste collection business involves the collection of waste from residential , commercial and industrial customers for transport to transfer stations , or directly to landfills or recycling centers . solid waste collection services include both recurring and temporary customer relationships . the services are performed under service agreements , municipal contracts or franchise agreements with governmental entities . our existing franchise agreements and most of our existing municipal contracts give us the exclusive right to provide specified waste services in the specified territory during the contract term . these exclusive arrangements are awarded , at least initially , on a competitive bid basis and subsequently on a bid or negotiated basis . the standard customer service agreements generally range from one to three years in duration , although some exclusive franchises are for significantly longer periods . residential collection services are also provided on a subscription basis with individual households . the fees received for collection services are based primarily on the market , collection frequency and level of service , route density , type and volume , or weight of the waste collected , type of equipment and containers furnished , the distance to the disposal or processing facility , the cost of disposal or processing , and prices charged by competitors for similar services . the terms of our contracts sometimes limit our ability to pass on price increases . long-term solid waste collection contracts often contain a formula , generally based on a published price index , that automatically adjusts fees to cover increases in some , but not all , operating costs , or that limit increases to less than 100 % of the increase in the applicable price index . revenue at landfills is primarily generated by charging tipping fees on a per ton and or per yard basis to third parties based on the volume disposed and the nature of the waste . revenue at transfer stations is primarily generated by charging tipping or disposal fees on a per ton and or per yard basis . the fees charged to third parties are based primarily on the market , type and volume or weight of the waste accepted , the distance to the disposal facility and the cost of disposal . many of our landfill and transfer station customers have entered into one to ten year disposal contracts with us , most of which provide for annual indexed price increases . our revenues from e & p waste services are primarily generated through the treatment , recovery and disposal of non-hazardous exploration and production waste from vertical and horizontal drilling , hydraulic fracturing , production and clean-up activity , as well as other services including closed loop collection systems , the transportation of waste to the disposal facility in certain markets and the sale of recovered products
| liquidity and capital resources the company 's working capital decreased $ 304,000 to $ 7.6 million as of may 31 , 2013 compared to $ 7.9 million as of may 31 , 2012. cash and cash equivalents decreased $ 868,000 from may 31 , 2012 to $ 1.9 million as of may 31 , 2013. cash used in operating activities was $ 679,000 in fiscal 2013 as compared to cash provided by operations of $ 163,000 in fiscal 2012. the increase in the amount of cash used for operating activities is primarily due to the impact of the fiscal 2013 net loss and the increase in inventory , offset by the decrease in accounts receivable . at may 31 , 2013 , accounts receivable decreased $ 513,000 to $ 2.0 million compared to $ 2.5 million as of may 31 , 2012. the decrease in accounts receivable is due to the decrease in sales during fiscal 2013. inventories increased $ 1.1 million to $ 5.1 million as of may 31 , 2013 compared to $ 4.0 million at may 31 , 2012 due to the decreases in sales activity coupled with an increase in inventories in our xact product line .
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the reporting currency of the company is the u.s. dollar . the company 's consolidated canadian dollar financial position is translated to u.s. dollars by applying the foreign currency exchange rate in effect at the consolidated balance sheet date . the company 's consolidated canadian dollar results of operations and cash flows are translated to u.s. dollars by applying the average foreign currency exchange rate in effect during the reporting period . the resulting translation adjustments are included in other comprehensive income or loss . gains and losses from foreign currency transactions are included in earnings for the period . operating results revenues in 2019 increased 9.5 % to $ 5.389 billion from $ 4.923 billion in 2018 , due partly to acquisitions closed during , or subsequent to , the prior year , net of divestitures , which accounted for $ 292.0 million in incremental revenues in 2019 , with the remainder due primarily to internal growth in solid waste and higher e & p waste activity . solid waste internal growth was 4.3 % , due to price increases and fuel , materials and environmental surcharges , which were partially offset by lower volumes and recycled commodity values . pricing growth was 5.2 % , with core pricing up 5.1 % and fuel , materials and environmental surcharges adding another 0.1 % . volumes decreased by 0.2 % on increases in landfill and hauling volumes , more than offset by purposeful shedding of poor quality volumes at certain progressive waste operations . decreases in recycled commodity prices resulted in another 0.7 % decrease to internal solid waste growth . e & p waste revenues increased to $ 256.0 million from $ 244.6 million in 2018 , due primarily to increased activity at existing facilities . in 2019 , adjusted earnings before interest , taxes , depreciation and amortization , or adjusted ebitda , a non-gaap financial measure ( refer to page 68 of this annual report on form 10-k for a definition and reconciliation to net income attributable to waste connections ) , increased 6.8 % to $ 1.674 billion , from $ 1.566 billion in 2018. as a percentage of revenue , adjusted ebitda decreased from 31.8 % in 2018 , to 31.1 % in 2019. this 0.7 percentage point decrease was primarily due to lower recycled commodity values and renewable energy credits derived from the sale of landfill gas . adjusted net income attributable to waste connections , a non-gaap financial measure ( refer to page 69 of this annual report on form 10-k for a definition and reconciliation to net income attributable to waste connections ) , in 2019 increased 7.8 % to $ 719.6 million from $ 667.3 million in 2018. adjusted free cash flow net cash provided by operating activities increased 9.2 % to $ 1.541 billion in 2019 , from $ 1.411 billion in 2018 , and capital expenditures for property and equipment increased from $ 546.1 million in 2018 to $ 634.4 million in 2019 , an increase of $ 88.3 million , or 16.2 % . the increase in capital expenditures was primarily due to acquisitions closed during , or subsequent to , the prior year , as well as new municipal contracts awarded during the year . adjusted free cash flow , a non-gaap financial measure ( refer to page 67 of this annual report on form 10-k for a definition and reconciliation to net cash provided by operating activities ) , increased by $ 36.9 million to $ 916.8 million in 2019 , from $ 879.9 million in 2018. adjusted free cash flow as a percentage of revenues was 17.0 % in 2019 , as compared to 17.9 % in 2018. return of capital to shareholders in 2019 , we returned $ 175.1 million to shareholders through cash dividends declared by our board of directors , which also increased the quarterly cash dividend by 15.6 % , from $ 0.16 to $ 0.185 per common share in october 2019. cash dividends increased $ 22.5 million , or 14.8 % , from $ 152.6 million in 2018 , due to a 14.3 % increase in the quarterly cash dividend declared by our board of directors in october 2018 , followed by the additional increase in october 2019. our board of directors intends to review the quarterly dividend during the fourth quarter of each year , with a long-term objective of increasing the amount of the dividend . in 2019 , we did not repurchase any common shares due to expectations regarding the size and timing of acquisitions . we expect the amount of capital we return to shareholders through share repurchases to vary depending on our financial condition and results of operations , capital structure , the amount of cash we deploy on acquisitions , expectations regarding the timing and size of acquisitions , the market price of 44 our common shares , and overall market conditions . we can not assure you as to the amounts or timing of future share repurchases or dividends . we have the ability under our credit agreement and master note purchase agreements to repurchase our common shares and pay dividends provided that we maintain specified financial ratios . capital position we target a leverage ratio , as defined in our credit agreement , of approximately 2.5x – 3.0x total debt to ebitda . the percentage increase in ebitda in 2019 more than offset the percentage increase in debt in 2019 ; therefore , our leverage ratio decreased to 2.41x at december 31 , 2019 , from 2.45x at december 31 , 2018. critical accounting estimates and assumptions the preparation of financial statements in conformity with u.s. generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements . story_separator_special_tag the impairment test involved measuring the recoverability of goodwill by comparing the e & p segment 's carrying amount , including goodwill , to the fair value of the reporting unit . the fair value was estimated using an income approach employing a dcf model . the dcf model incorporated projected cash flows over a forecast period based on the remaining estimated lives of the operating locations comprising the e & p segment . this was based on a number of key assumptions , including , but not limited to , a discount rate of 11.7 % , annual revenue projections based on e & p waste resulting from projected levels of oil and natural gas exploration and production activity during the forecast period , gross margins based on estimated operating expense requirements during the forecast period and estimated capital expenditures over the forecast period , all of which were classified as level 3 in the fair value hierarchy . the impairment test showed the carrying value of the e & p segment exceeded its fair value by an amount in excess of the carrying amount of goodwill , or $ 77.3 million . therefore , we recorded an impairment charge of $ 77.3 million , consisting of the carrying amount of goodwill at our e & p segment at january 1 , 2017 , to impairments and other operating charges in the consolidated statements of net income during the year ended december 31 , 2017. additionally , we evaluated the recoverability of the e & p segment 's indefinite-lived intangible assets ( other than goodwill ) by comparing the estimated fair value of each indefinite-lived intangible asset to its carrying value . we estimated the fair value of the indefinite-lived intangible assets using an excess earnings approach . based on the result of the recoverability test during the years ended december 31 , 2019 , 2018 and 2017 , we did not record an impairment charge . 48 business combination accounting . we recognize , separately from goodwill , the identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values . we measure and recognize goodwill as of the acquisition date as the excess of : ( a ) the aggregate of the fair value of consideration transferred , the fair value of any noncontrolling interest in the acquiree ( if any ) and the acquisition date fair value of our previously held equity interest in the acquiree ( if any ) , over ( b ) the fair value of net assets acquired and liabilities assumed . at the acquisition date , we measure the fair values of all assets acquired and liabilities assumed that arise from contractual contingencies . we measure the fair values of all noncontractual contingencies if , as of the acquisition date , it is more likely than not that the contingency will give rise to an asset or liability . general our revenues consist mainly of fees we charge customers for collection , transfer , recycling and disposal of non-hazardous solid waste and treatment , recovery and disposal of non-hazardous e & p waste . our solid waste collection business involves the collection of waste from residential , commercial and industrial customers for transport to transfer stations , or directly to landfills or recycling centers . solid waste collection services include both recurring and temporary customer relationships . the services are performed under service agreements , municipal contracts or franchise agreements with governmental entities . our existing franchise agreements and most of our existing municipal contracts give us the exclusive right to provide specified waste services in the specified territory during the contract term . these exclusive arrangements are awarded , at least initially , on a competitive bid basis and subsequently on a bid or negotiated basis . the standard customer service agreements generally range from one to three years in duration , although some exclusive franchises are for significantly longer periods . residential collection services are also provided on a subscription basis with individual households . the fees received for collection services are based primarily on the market , collection frequency and level of service , route density , type and volume , or weight of the waste collected , type of equipment and containers furnished , the distance to the disposal or processing facility , the cost of disposal or processing , and prices charged by competitors for similar services . the terms of our contracts sometimes limit our ability to pass on price increases . long-term solid waste collection contracts often contain a formula , generally based on a published price index , that automatically adjusts fees to cover increases in some , but not all , operating costs , or that limit increases to less than 100 % of the increase in the applicable price index . revenue at landfills is primarily generated by charging tipping fees on a per ton and or per yard basis to third parties based on the volume disposed and the nature of the waste . revenue at transfer stations is primarily generated by charging tipping or disposal fees on a per ton and or per yard basis . the fees charged to third parties are based primarily on the market , type and volume or weight of the waste accepted , the distance to the disposal facility and the cost of disposal . many of our landfill and transfer station customers have entered into one to ten year disposal contracts with us , most of which provide for annual indexed price increases . our revenues from e & p waste services are primarily generated through the treatment , recovery and disposal of non-hazardous exploration and production waste from vertical and horizontal drilling , hydraulic fracturing , production and clean-up activity , as well as other services including closed loop collection systems , the transportation of waste to the disposal facility in certain markets and the sale of recovered products
| liquidity and capital resources the following table sets forth certain cash flow information for the years ended december 31 , 2019 and 2018 ( in thousands of u.s. dollars ) : replace_table_token_12_th operating activities cash flows for the year ended december 31 , 2019 , net cash provided by operating activities was $ 1.541 billion . for the year ended december 31 , 2018 , net cash provided by operating activities was $ 1.411 billion . the $ 129.3 million increase was due primarily to the following : 1 ) increase in earnings — our increase in net cash provided by operating activities was favorably impacted by $ 134.3 million from an increase in net income , excluding depreciation , intangible amortization , lease amortization , deferred taxes , equity based compensation , adjustments to and payments of contingent consideration recorded in earnings and impairments and other operating items , due primarily to the impact of acquisitions closed subsequent to december 31 , 2018 , price-led earnings growth at certain solid waste segments and gross margins recognized on e & p volume growth . 2 ) accounts payable and accrued liabilities — our increase in net cash provided by operating activities was favorably impacted by $ 29.7 million from accounts payable and accrued liabilities due primarily to period end timing of payments to vendors for goods and services . 3 ) accounts receivable — our increase in net cash provided by operating activities was favorably impacted by $ 14.8 million from accounts receivable due to improved collection results . 4 ) prepaid expenses – our increase in net cash provided by operating activities was unfavorably impacted by $ 30.6 million from prepaid expenses due primarily to a higher utilization of prepaid income taxes during the prior year period . 5 ) other long-term liabilities – our increase in net cash provided by operating activities was unfavorably impacted by $ 16.9 million from other long-term liabilities due primarily to lease payments , partially offset by increased liabilities associated with new or renewed leases and an increase in employee contributions and earnings under our deferred compensation plan .
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the extent to which the coronavirus impacts us will depend on future developments , which are highly uncertain and can not be predicted , including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact , among others . our ability to enroll our clinical trials will be dependent on many factors , including the progression of the pandemic and its impact on patients and the investigators at our clinical trial sites . we are actively working with sites and investigators to mitigate these risks . over the coming weeks and months , we will continue to carefully monitor the situation with respect to each of our clinical trials and follow guidance from local and federal health authorities . phenylketonuria our most advanced product candidate is synb1618 , an oral therapy intended for the treatment of pku , a rare metabolic disease in which phe accumulates in the body as a result of genetic defects . elevated levels of phe are toxic to the brain and can lead to neurological dysfunction . synb1618 is designed to function in the gut of patients to reduce excess phe , with the goal of lowering levels in the blood and other tissues . synb1618 has received both fast track designation and orphan drug designation for pku from the u.s. food and drug administration ( fda ) . we initiated a phase 1/2a clinical trial of an early liquid formulation of synb1618 in april 2018 and announced top-line data from healthy volunteers evaluated in this study in september 2018. in july 2019 , we announced data that demonstrated that synb1618 was safe and well-tolerated and achieved proof-of-mechanism of strain activity in both healthy volunteers and patients with pku . synb1618 is a member of a family of synb strains which consume phe . we have additional phe consuming strains for pku in preclinical development . we have evaluated a lyophilized formulation of synb1618 in a bridging study in healthy volunteers . the study of this more patient- and commercialization-appropriate presentation of synb1618 demonstrated improved tolerability over the early liquid formulation . the next step for synb1618 is to conduct a phase 2 clinical trial . the phase 2 trial , referred to as the synpheny-1 study , is designed to evaluate safety and tolerability of a solid formulation of synb1618 as well as its potential to lower blood phe levels in adult pku patients . we continue to evaluate our clinical program progress as a result of the ongoing covid-19 pandemic . the synpheny-1 study is designed to be flexible , with subjects physically coming to the clinic or participating from the patient 's home utilizing home healthcare services . we initiated this study in the third quarter of 2020. enteric hyperoxaluria enteric hyperoxaluria is an acquired metabolic disorder with no approved treatment options . it is caused by increased absorption of dietary oxalate , which is present in many common foods including leafy greens , nuts , and chocolate . enteric hyperoxaluria often occurs as a result of a primary insult to the bowel , such as inflammatory bowel disease , short bowel syndrome , or surgical procedures such as roux-en-y bariatric weight-loss surgery . the disorder may cause dangerously high levels of urinary oxalate and progressive kidney damage . the disorder can lead to high levels of urinary oxalate , which causes progressive kidney damage , kidney stone formation , and nephrocalcinosis . in may 2020 , we announced the nomination of a clinical candidate for enteric hyperoxaluria , synb8802 . we initiated a phase 1 clinical trial of synb8802 in the fourth quarter of 2020. synb8802 will be assessed for safety and tolerability , strain kinetics , changes in plasma and urine biomarkers of strain activity , and the potential to reduce urinary oxalate in the phase 1 clinical study . the study has two parts : part a is a multiple ascending dose study in healthy volunteers in whom we will induce temporary hyperoxaluria via diet ; part b is a placebo controlled , cross-over design study in patients with enteric hyperoxaluria following roux-n-y gastric bypass surgery . oncology we have also developed a portfolio of synthetic biotic medicines to treat certain cancers which are designed to modify the tumor microenvironment , activate the immune system and result in tumor reduction . these synthetic biotic medicines could be used in combination with other cancer therapies such as checkpoint inhibitors . our first synthetic biotic clinical immuno-oncology ( “ io ” ) candidate is synb1891 , an intratumorally administered synthetic biotic medicine engineered to act as a dual innate and adaptive 66 immune activator . synb1891 has been designed to activate the immune response in tumors via the e.coli nissle chassis and production of cyclic di-amp , an activator of the stimulator of interferon genes , also referred to as the sting pathway . in january 2020 , we treated the first subject in a phase 1 clinical trial of synb1891 in patients with advanced solid tumors and lymphoma . the clinical trial is designed to identify a maximum tolerated dose ( mtd ) of synb1891 delivered as a monotherapy . once an mtd is identified , we will evaluate treatment of patients with a combination of synb1891 and the checkpoint inhibitor atezolizumab ( tecentriq ) , provided through a supply agreement with roche . despite the covid-19 pandemic , the phase 1 clinical trial has remained open and currently enrolled patients are continuing on trial . new patient enrollment in the study is also continuing . we released interim data from the ongoing monotherapy arm of this trial in december of 2020 which demonstrated target engagement and the production of biomarkers consistent with sting activation . in december of 2020 we also initiated the combination arm of the phase 1 clinical trial . story_separator_special_tag 70 research and development services if an arrangement is determined to contain a promise or obligation for us to perform research and development services , we must determine whether these services are distinct from the other promises in the arrangement . in assessing whether the services are distinct from the other promises , we consider the capabilities of the customer to perform these same services . in addition , we consider whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promise , whether the value of the promise is dependent on the unsatisfied promise , whether there are other vendors that could provide the remaining promise , and whether it is separately identifiable from the remaining promise . for research and development services that are combined with other promises , we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue . we evaluate the measure of progress each reporting period and , if necessary , adjusts the measure of performance and related revenue recognition . customer options if an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services , the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement , as they are contingent upon option exercise . we evaluate the customer options for material rights , that is , the option to acquire additional goods or services for free or at a discount . if the customer options are determined to represent a material right , the material right is recognized as a separate performance obligation at the outset of the arrangement . we allocate the transaction price to material rights based on an alternative approach when the goods or services are both ( i ) similar to the original goods and services in the contract and ( ii ) provided in accordance with the terms of the original contract . under this alternative , we allocate the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer . amounts allocated to a material right are not recognized as revenue until the option is exercised and the performance obligation is satisfied . milestone payments at the inception of each arrangement that includes milestone payments , we evaluate whether a significant reversal of cumulative revenue provided in conjunction with achieving the milestones is probable and estimate the amount to be included in the transaction price using the most likely amount method . if it is probable that a significant reversal of cumulative revenue would not occur , the associated milestone value is included in the transaction price . milestone payments that are not within our control or the licensee , such as regulatory approvals , are not considered probable of being achieved until those approvals are received . for other milestones , we evaluate factors such as the scientific , clinical , regulatory , commercial , and other risks that must be overcome to achieve the particular milestone in making this assessment . there is considerable judgment involved in determining whether it is probable that a significant reversal of cumulative revenue would not occur . at the end of each subsequent reporting period , we reevaluate the probability of achievement of all milestones subject to constraint and , if necessary , adjusts our estimate of the overall transaction price . any such adjustments are recorded on a cumulative catch-up basis , which would affect revenues and earnings in the period of adjustment . royalties for arrangements that include sales-based royalties , including milestone payments based on a level of sales , and the license is deemed to be the predominant item to which the royalties relate , we recognize revenue at the later of ( i ) when the related sales occur , or ( ii ) when the performance obligation to which some or all of the royalty has been allocated has been satisfied ( or partially satisfied ) . to date , we have not recognized any royalty revenue resulting from any of our licensing arrangements . contract costs we recognize as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered . as a practical expedient , we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less . to date , we have not incurred any incremental costs of obtaining a contract with a customer . research and development expense all research and development expenses are expensed as incurred . research and development expenses comprise costs incurred in performing research and development activities , including compensation , benefits and other employee costs ; equity‑based compensation expense ; laboratory and clinical supplies and other direct expenses ; facilities expenses ; overhead expenses ; fees for contractual services , including preclinical studies , clinical trials , clinical manufacturing and raw materials ; and other external expenses . nonrefundable advance payments for research and development activities are capitalized and expensed over the related service period or as goods are received and services are performed . when third-party service providers ' billing terms do not coincide with our period-end , we are required to make estimates of our obligations to those third parties , including clinical trial costs , contractual service costs and costs for supply of our drug candidates , incurred in a given accounting period and record accruals at the end of the period . we base our estimates on the completion status of the research and development programs
| liquidity and capital resources the following table sets forth certain cash flow information for the years ended december 31 , 2019 and 2018 ( in thousands of u.s. dollars ) : replace_table_token_12_th operating activities cash flows for the year ended december 31 , 2019 , net cash provided by operating activities was $ 1.541 billion . for the year ended december 31 , 2018 , net cash provided by operating activities was $ 1.411 billion . the $ 129.3 million increase was due primarily to the following : 1 ) increase in earnings — our increase in net cash provided by operating activities was favorably impacted by $ 134.3 million from an increase in net income , excluding depreciation , intangible amortization , lease amortization , deferred taxes , equity based compensation , adjustments to and payments of contingent consideration recorded in earnings and impairments and other operating items , due primarily to the impact of acquisitions closed subsequent to december 31 , 2018 , price-led earnings growth at certain solid waste segments and gross margins recognized on e & p volume growth . 2 ) accounts payable and accrued liabilities — our increase in net cash provided by operating activities was favorably impacted by $ 29.7 million from accounts payable and accrued liabilities due primarily to period end timing of payments to vendors for goods and services . 3 ) accounts receivable — our increase in net cash provided by operating activities was favorably impacted by $ 14.8 million from accounts receivable due to improved collection results . 4 ) prepaid expenses – our increase in net cash provided by operating activities was unfavorably impacted by $ 30.6 million from prepaid expenses due primarily to a higher utilization of prepaid income taxes during the prior year period . 5 ) other long-term liabilities – our increase in net cash provided by operating activities was unfavorably impacted by $ 16.9 million from other long-term liabilities due primarily to lease payments , partially offset by increased liabilities associated with new or renewed leases and an increase in employee contributions and earnings under our deferred compensation plan .
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the extent to which the coronavirus impacts us will depend on future developments , which are highly uncertain and can not be predicted , including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact , among others . our ability to enroll our clinical trials will be dependent on many factors , including the progression of the pandemic and its impact on patients and the investigators at our clinical trial sites . we are actively working with sites and investigators to mitigate these risks . over the coming weeks and months , we will continue to carefully monitor the situation with respect to each of our clinical trials and follow guidance from local and federal health authorities . phenylketonuria our most advanced product candidate is synb1618 , an oral therapy intended for the treatment of pku , a rare metabolic disease in which phe accumulates in the body as a result of genetic defects . elevated levels of phe are toxic to the brain and can lead to neurological dysfunction . synb1618 is designed to function in the gut of patients to reduce excess phe , with the goal of lowering levels in the blood and other tissues . synb1618 has received both fast track designation and orphan drug designation for pku from the u.s. food and drug administration ( fda ) . we initiated a phase 1/2a clinical trial of an early liquid formulation of synb1618 in april 2018 and announced top-line data from healthy volunteers evaluated in this study in september 2018. in july 2019 , we announced data that demonstrated that synb1618 was safe and well-tolerated and achieved proof-of-mechanism of strain activity in both healthy volunteers and patients with pku . synb1618 is a member of a family of synb strains which consume phe . we have additional phe consuming strains for pku in preclinical development . we have evaluated a lyophilized formulation of synb1618 in a bridging study in healthy volunteers . the study of this more patient- and commercialization-appropriate presentation of synb1618 demonstrated improved tolerability over the early liquid formulation . the next step for synb1618 is to conduct a phase 2 clinical trial . the phase 2 trial , referred to as the synpheny-1 study , is designed to evaluate safety and tolerability of a solid formulation of synb1618 as well as its potential to lower blood phe levels in adult pku patients . we continue to evaluate our clinical program progress as a result of the ongoing covid-19 pandemic . the synpheny-1 study is designed to be flexible , with subjects physically coming to the clinic or participating from the patient 's home utilizing home healthcare services . we initiated this study in the third quarter of 2020. enteric hyperoxaluria enteric hyperoxaluria is an acquired metabolic disorder with no approved treatment options . it is caused by increased absorption of dietary oxalate , which is present in many common foods including leafy greens , nuts , and chocolate . enteric hyperoxaluria often occurs as a result of a primary insult to the bowel , such as inflammatory bowel disease , short bowel syndrome , or surgical procedures such as roux-en-y bariatric weight-loss surgery . the disorder may cause dangerously high levels of urinary oxalate and progressive kidney damage . the disorder can lead to high levels of urinary oxalate , which causes progressive kidney damage , kidney stone formation , and nephrocalcinosis . in may 2020 , we announced the nomination of a clinical candidate for enteric hyperoxaluria , synb8802 . we initiated a phase 1 clinical trial of synb8802 in the fourth quarter of 2020. synb8802 will be assessed for safety and tolerability , strain kinetics , changes in plasma and urine biomarkers of strain activity , and the potential to reduce urinary oxalate in the phase 1 clinical study . the study has two parts : part a is a multiple ascending dose study in healthy volunteers in whom we will induce temporary hyperoxaluria via diet ; part b is a placebo controlled , cross-over design study in patients with enteric hyperoxaluria following roux-n-y gastric bypass surgery . oncology we have also developed a portfolio of synthetic biotic medicines to treat certain cancers which are designed to modify the tumor microenvironment , activate the immune system and result in tumor reduction . these synthetic biotic medicines could be used in combination with other cancer therapies such as checkpoint inhibitors . our first synthetic biotic clinical immuno-oncology ( “ io ” ) candidate is synb1891 , an intratumorally administered synthetic biotic medicine engineered to act as a dual innate and adaptive 66 immune activator . synb1891 has been designed to activate the immune response in tumors via the e.coli nissle chassis and production of cyclic di-amp , an activator of the stimulator of interferon genes , also referred to as the sting pathway . in january 2020 , we treated the first subject in a phase 1 clinical trial of synb1891 in patients with advanced solid tumors and lymphoma . the clinical trial is designed to identify a maximum tolerated dose ( mtd ) of synb1891 delivered as a monotherapy . once an mtd is identified , we will evaluate treatment of patients with a combination of synb1891 and the checkpoint inhibitor atezolizumab ( tecentriq ) , provided through a supply agreement with roche . despite the covid-19 pandemic , the phase 1 clinical trial has remained open and currently enrolled patients are continuing on trial . new patient enrollment in the study is also continuing . we released interim data from the ongoing monotherapy arm of this trial in december of 2020 which demonstrated target engagement and the production of biomarkers consistent with sting activation . in december of 2020 we also initiated the combination arm of the phase 1 clinical trial . story_separator_special_tag 70 research and development services if an arrangement is determined to contain a promise or obligation for us to perform research and development services , we must determine whether these services are distinct from the other promises in the arrangement . in assessing whether the services are distinct from the other promises , we consider the capabilities of the customer to perform these same services . in addition , we consider whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promise , whether the value of the promise is dependent on the unsatisfied promise , whether there are other vendors that could provide the remaining promise , and whether it is separately identifiable from the remaining promise . for research and development services that are combined with other promises , we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue . we evaluate the measure of progress each reporting period and , if necessary , adjusts the measure of performance and related revenue recognition . customer options if an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services , the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement , as they are contingent upon option exercise . we evaluate the customer options for material rights , that is , the option to acquire additional goods or services for free or at a discount . if the customer options are determined to represent a material right , the material right is recognized as a separate performance obligation at the outset of the arrangement . we allocate the transaction price to material rights based on an alternative approach when the goods or services are both ( i ) similar to the original goods and services in the contract and ( ii ) provided in accordance with the terms of the original contract . under this alternative , we allocate the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer . amounts allocated to a material right are not recognized as revenue until the option is exercised and the performance obligation is satisfied . milestone payments at the inception of each arrangement that includes milestone payments , we evaluate whether a significant reversal of cumulative revenue provided in conjunction with achieving the milestones is probable and estimate the amount to be included in the transaction price using the most likely amount method . if it is probable that a significant reversal of cumulative revenue would not occur , the associated milestone value is included in the transaction price . milestone payments that are not within our control or the licensee , such as regulatory approvals , are not considered probable of being achieved until those approvals are received . for other milestones , we evaluate factors such as the scientific , clinical , regulatory , commercial , and other risks that must be overcome to achieve the particular milestone in making this assessment . there is considerable judgment involved in determining whether it is probable that a significant reversal of cumulative revenue would not occur . at the end of each subsequent reporting period , we reevaluate the probability of achievement of all milestones subject to constraint and , if necessary , adjusts our estimate of the overall transaction price . any such adjustments are recorded on a cumulative catch-up basis , which would affect revenues and earnings in the period of adjustment . royalties for arrangements that include sales-based royalties , including milestone payments based on a level of sales , and the license is deemed to be the predominant item to which the royalties relate , we recognize revenue at the later of ( i ) when the related sales occur , or ( ii ) when the performance obligation to which some or all of the royalty has been allocated has been satisfied ( or partially satisfied ) . to date , we have not recognized any royalty revenue resulting from any of our licensing arrangements . contract costs we recognize as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered . as a practical expedient , we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less . to date , we have not incurred any incremental costs of obtaining a contract with a customer . research and development expense all research and development expenses are expensed as incurred . research and development expenses comprise costs incurred in performing research and development activities , including compensation , benefits and other employee costs ; equity‑based compensation expense ; laboratory and clinical supplies and other direct expenses ; facilities expenses ; overhead expenses ; fees for contractual services , including preclinical studies , clinical trials , clinical manufacturing and raw materials ; and other external expenses . nonrefundable advance payments for research and development activities are capitalized and expensed over the related service period or as goods are received and services are performed . when third-party service providers ' billing terms do not coincide with our period-end , we are required to make estimates of our obligations to those third parties , including clinical trial costs , contractual service costs and costs for supply of our drug candidates , incurred in a given accounting period and record accruals at the end of the period . we base our estimates on the completion status of the research and development programs
| liquidity and capital resources we have incurred losses since our inception on march 14 , 2014 and , as of december 31 , 2020 , we had an accumulated deficit of approximately $ 230.3 million . we have financed our operations to date primarily through the sale of preferred stock , common stock , preferred units , warrants , payments received under our prior abbvie collaboration agreement , interest earned on investments , and cash received in the merger . during the year ended december 31 , 2020 , we received net proceeds of $ 13.5 million from the sale of 5,866,258 shares of our common stock in the atm offering program . in june 2019 , we issued to ginkgo 6,340,771 shares of common stock and accompanying pre-funded warrants ( the “ pre-funded warrants ” ) to purchase an aggregate of 2,548,117 shares of common stock , at a combined purchase price per share and pre-funded warrant of $ 9.00. the pre-funded warrants have an exercise price of $ 9.00 per share , with $ 8.99 of such exercise price paid at the closing of the offering . the net proceeds to us were approximately $ 79.9 million . at december 31 , 2020 , we had approximately $ 100.4 million in cash , cash equivalents , and short-term marketable securities . our cash and cash equivalents include amounts held in money market funds , stated at cost plus unrealized gain and loss , which approximates fair market value .
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( formerly known as arch therapeutics , inc. ) , a massachusetts corporation ( “ abs ” ) , and arch acquisition corporation ( “ merger sub ” ) , the company 's wholly owned subsidiary formed for the purpose of the transaction , pursuant to which merger sub merged with and into abs and abs thereby became the wholly owned subsidiary of the company . as a result of the acquisition of abs , the company abandoned its prior business plan and changed its operations to the business of a biotechnology company . our principal offices are located in framingham , massachusetts . for financial reporting purposes , the merger represented a “ reverse merger ” . abs was deemed to be the accounting acquirer in the transaction and the predecessor of arch . consequently , the accumulated deficit and the historical operations that are reflected in the company 's consolidated financial statements prior to the merger are those of abs . all share information has been restated to reflect the effects of the merger . the company 's financial information has been consolidated with that of abs after consummation of the merger on june 26 , 2013 , and the historical financial statements of the company before the merger have been replaced with the historical financial statements of abs before the merger in this report . abs was incorporated under the laws of the commonwealth of massachusetts on march 6 , 2006 as clear nano solutions , inc. on april 7 , 2008 , abs changed its name from clear nano solutions , inc. to arch therapeutics , inc. effective upon the closing of the merger , abs changed its name from arch therapeutics , inc. to arch biosurgery , inc. liquidity we are in the development stage and have generated no operating revenues to date and do not expect to do so in the foreseeable future due to the early stage nature of our current product candidates . we currently do not have any products that have obtained marketing approval in any jurisdiction . we devote a significant amount of our efforts on fundraising , planning and conducting clinical trials , activities in connection with obtaining regulatory approval , and product research . for the year ended september 30 , 2018 , we had a net loss of $ 4,814,032 versus a net loss of $ 7,788,856 in the comparable period in the prior year . the losses for each of the years ended september 30 , 2018 and 2017 can be attributable to research and development expenses , including regulatory approval and product research , general and administrative costs , primarily relating to legal costs associated with intellectual property and patent application costs , general corporate legal expenses all of which were partially offset by adjustments to the derivative liabilities . cash used in operating activities increased $ 297,315 during the year ended september 30 , 2018 to $ 5,913,563 , compared to $ 5,616,248 for the year ended september 30 , 2017. cash at september 30 , 2018 decreased by $ 1,326,642 to $ 4,667,410 compared to $ 5,994,052 as of september 30 , 2017. business overview we are a biotechnology company in the development stage . we have generated no revenues to date and are devoting substantially all of our operational efforts to the development of our core technology . we are developing a novel approach to stop bleeding ( “ hemostasis ” ) , control leaking ( “ sealant ” ) and manage wounds during surgery , trauma and interventional care . arch is developing products based on an innovative self-assembling barrier technology platform with the goal of making care faster and safer for patients . we believe our technology could support an innovative platform of potential products in the field of stasis and barrier applications . our plan and business model is to develop products that apply that core technology for use with bodily fluids and tissues . our flagship development product candidates , known collectively as the ac5 devices ( which we sometimes refer to as “ ac5 ” , “ ac5 topical gel ” , “ ac5 surgical hemostatic device ” , “ ac5 surgical hemostat ” , “ ac5 topical hemostatic device ” , or “ ac5 topical hemostat ” ) , are being designed to achieve hemostasis during surgical , wound and interventional care . they rely on our self-assembling peptide ( “ sap ” ) technology and are being designed to achieve hemostasis in skin wounds and in minimally invasive and open surgical procedures . we intend to develop other product candidates based on our technology platform for use in a range of indications . ac5 is being designed as a product containing synthetic biocompatible peptides comprising l amino acids , commonly referred to as naturally occurring amino acids . when applied to a wound , ac5 intercalates into the interstices of the connective tissue where it self-assembles into a physical , mechanical nanoscale structure that provides a barrier to leaking substances , such as blood . ac5 may be applied directly as a liquid , which we believe will make it user-friendly and able to conform to irregular wound geometry . additionally , ac5 does not possess sticky or glue-like handling characteristics , which we believe will enhance its utility in several settings , including minimally invasive surgical procedures . further , in certain settings , ac5 lends itself to a concept that we call crystal clear surgery ; the transparency and physical properties of ac5 may enable a surgeon to operate through it in order to maintain a clearer field of vision and prophylactically stop or lessen bleeding as it starts . story_separator_special_tag prior to january 1 , 2018 , the company did not have a sufficient history of market prices of the common stock , and as such volatility is estimated in accordance with asc 718-10-s99 compensation-stock compensation ( “ asc 718-10-s99 ” ) , using historical volatilities of similar public entities . effective january 1 , 2018 , the company is using its historical market prices to calculate the volatility of its common stock . the life term for awards uses the simplified method for all “ plain vanilla ” options , as defined in asc 718-10-s99 and the contractual term for all other employee and non-employee awards . the risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards . the dividend yield assumption is based on history and the expectation of paying no dividends . forfeitures are estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . stock-based compensation expense , when recognized in the financial statements , is based on awards that are ultimately expected to vest . fair value measurements we measure both financial and nonfinancial assets and liabilities in accordance with fasb asc topic 820 , fair value measurements and disclosures , including those that are recognized or disclosed in the financial statements at fair value on a recurring basis . the standard created a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows : level 1 inputs are quoted prices ( unadjusted ) in active markets for identical assets or liabilities ; level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability , either directly or indirectly ; and level 3 inputs are unobservable inputs that reflect our own views about the assumptions market participants would use in pricing the asset or liability . income taxes in accordance with fasb asc 740 , income taxes , we recognize deferred tax assets and liabilities for the expected future tax consequences or events that have been included in our consolidated financial statements and or tax returns . deferred tax assets and liabilities are based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse . deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized . we provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions when management determines that it is probable that a loss will be incurred related to these matters and the amount of the loss is reasonably determinable . on december 22 , 2017 , the tax cuts and jobs act ( “ tcja ” ) was signed into united states law . the tcja includes a number of changes to existing tax law , including , among other things , a permanent reduction in the federal corporate income tax rate to a flat rate of 21 % , effective january 1 , 2018 , as well as the elimination of net operating loss carrybacks for losses arising in taxable years beginning after december 31 , 2017. further , operating losses arising in tax years after december 31 , 2017 , are carried forward indefinitely . due to the tcja , the company 's deferred tax assets and liabilities recognized prior to 2017 were revalued at the newly enacted tax rates , which resulted in a corresponding adjustment in the valuation allowance . derivative liabilities the company accounts for its warrants and other derivative financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument , in accordance with fasb asc topic 815 , derivatives and hedging . warrants classified as equity are recorded at fair value as of the date of issuance on the company 's consolidated balance sheets and no further adjustments to their valuation are made . warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the company 's consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire , with any changes in the fair value between reporting periods recorded as other income or expense . management estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date , as well as assumptions for expected volatility , expected life , yield , and risk-free interest rate . recent accounting guidance accounting standards update ( asu ) 2018-07 , “ compensation—stock compensation ( topic 718 ) improvements to nonemployee share-based payment accounting ” was issued by the financial accounting standards board ( fasb ) in june 2018. the purpose of this amendment is to address aspects of the accounting for nonemployee share-based payment transactions . the amendments in this update are effective for public business entities for fiscal years , and for interim periods within those fiscal years , beginning after december 15 , 2018. early adoption is permitted . the company does not believe that this guidance will have a material impact on its consolidated results of operations , financial position or disclosures . - 40 - asu 2016-15 , “ statement of cash flows ( topic 230 ) classification of certain cash receipts and payments ” was issued by the financial accounting standards board ( fasb ) in august 2016. the purpose of this amendment is to address eight specific cash flow
| liquidity and capital resources we have incurred losses since our inception on march 14 , 2014 and , as of december 31 , 2020 , we had an accumulated deficit of approximately $ 230.3 million . we have financed our operations to date primarily through the sale of preferred stock , common stock , preferred units , warrants , payments received under our prior abbvie collaboration agreement , interest earned on investments , and cash received in the merger . during the year ended december 31 , 2020 , we received net proceeds of $ 13.5 million from the sale of 5,866,258 shares of our common stock in the atm offering program . in june 2019 , we issued to ginkgo 6,340,771 shares of common stock and accompanying pre-funded warrants ( the “ pre-funded warrants ” ) to purchase an aggregate of 2,548,117 shares of common stock , at a combined purchase price per share and pre-funded warrant of $ 9.00. the pre-funded warrants have an exercise price of $ 9.00 per share , with $ 8.99 of such exercise price paid at the closing of the offering . the net proceeds to us were approximately $ 79.9 million . at december 31 , 2020 , we had approximately $ 100.4 million in cash , cash equivalents , and short-term marketable securities . our cash and cash equivalents include amounts held in money market funds , stated at cost plus unrealized gain and loss , which approximates fair market value .
| 0 |
( formerly known as arch therapeutics , inc. ) , a massachusetts corporation ( “ abs ” ) , and arch acquisition corporation ( “ merger sub ” ) , the company 's wholly owned subsidiary formed for the purpose of the transaction , pursuant to which merger sub merged with and into abs and abs thereby became the wholly owned subsidiary of the company . as a result of the acquisition of abs , the company abandoned its prior business plan and changed its operations to the business of a biotechnology company . our principal offices are located in framingham , massachusetts . for financial reporting purposes , the merger represented a “ reverse merger ” . abs was deemed to be the accounting acquirer in the transaction and the predecessor of arch . consequently , the accumulated deficit and the historical operations that are reflected in the company 's consolidated financial statements prior to the merger are those of abs . all share information has been restated to reflect the effects of the merger . the company 's financial information has been consolidated with that of abs after consummation of the merger on june 26 , 2013 , and the historical financial statements of the company before the merger have been replaced with the historical financial statements of abs before the merger in this report . abs was incorporated under the laws of the commonwealth of massachusetts on march 6 , 2006 as clear nano solutions , inc. on april 7 , 2008 , abs changed its name from clear nano solutions , inc. to arch therapeutics , inc. effective upon the closing of the merger , abs changed its name from arch therapeutics , inc. to arch biosurgery , inc. liquidity we are in the development stage and have generated no operating revenues to date and do not expect to do so in the foreseeable future due to the early stage nature of our current product candidates . we currently do not have any products that have obtained marketing approval in any jurisdiction . we devote a significant amount of our efforts on fundraising , planning and conducting clinical trials , activities in connection with obtaining regulatory approval , and product research . for the year ended september 30 , 2018 , we had a net loss of $ 4,814,032 versus a net loss of $ 7,788,856 in the comparable period in the prior year . the losses for each of the years ended september 30 , 2018 and 2017 can be attributable to research and development expenses , including regulatory approval and product research , general and administrative costs , primarily relating to legal costs associated with intellectual property and patent application costs , general corporate legal expenses all of which were partially offset by adjustments to the derivative liabilities . cash used in operating activities increased $ 297,315 during the year ended september 30 , 2018 to $ 5,913,563 , compared to $ 5,616,248 for the year ended september 30 , 2017. cash at september 30 , 2018 decreased by $ 1,326,642 to $ 4,667,410 compared to $ 5,994,052 as of september 30 , 2017. business overview we are a biotechnology company in the development stage . we have generated no revenues to date and are devoting substantially all of our operational efforts to the development of our core technology . we are developing a novel approach to stop bleeding ( “ hemostasis ” ) , control leaking ( “ sealant ” ) and manage wounds during surgery , trauma and interventional care . arch is developing products based on an innovative self-assembling barrier technology platform with the goal of making care faster and safer for patients . we believe our technology could support an innovative platform of potential products in the field of stasis and barrier applications . our plan and business model is to develop products that apply that core technology for use with bodily fluids and tissues . our flagship development product candidates , known collectively as the ac5 devices ( which we sometimes refer to as “ ac5 ” , “ ac5 topical gel ” , “ ac5 surgical hemostatic device ” , “ ac5 surgical hemostat ” , “ ac5 topical hemostatic device ” , or “ ac5 topical hemostat ” ) , are being designed to achieve hemostasis during surgical , wound and interventional care . they rely on our self-assembling peptide ( “ sap ” ) technology and are being designed to achieve hemostasis in skin wounds and in minimally invasive and open surgical procedures . we intend to develop other product candidates based on our technology platform for use in a range of indications . ac5 is being designed as a product containing synthetic biocompatible peptides comprising l amino acids , commonly referred to as naturally occurring amino acids . when applied to a wound , ac5 intercalates into the interstices of the connective tissue where it self-assembles into a physical , mechanical nanoscale structure that provides a barrier to leaking substances , such as blood . ac5 may be applied directly as a liquid , which we believe will make it user-friendly and able to conform to irregular wound geometry . additionally , ac5 does not possess sticky or glue-like handling characteristics , which we believe will enhance its utility in several settings , including minimally invasive surgical procedures . further , in certain settings , ac5 lends itself to a concept that we call crystal clear surgery ; the transparency and physical properties of ac5 may enable a surgeon to operate through it in order to maintain a clearer field of vision and prophylactically stop or lessen bleeding as it starts . story_separator_special_tag prior to january 1 , 2018 , the company did not have a sufficient history of market prices of the common stock , and as such volatility is estimated in accordance with asc 718-10-s99 compensation-stock compensation ( “ asc 718-10-s99 ” ) , using historical volatilities of similar public entities . effective january 1 , 2018 , the company is using its historical market prices to calculate the volatility of its common stock . the life term for awards uses the simplified method for all “ plain vanilla ” options , as defined in asc 718-10-s99 and the contractual term for all other employee and non-employee awards . the risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards . the dividend yield assumption is based on history and the expectation of paying no dividends . forfeitures are estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . stock-based compensation expense , when recognized in the financial statements , is based on awards that are ultimately expected to vest . fair value measurements we measure both financial and nonfinancial assets and liabilities in accordance with fasb asc topic 820 , fair value measurements and disclosures , including those that are recognized or disclosed in the financial statements at fair value on a recurring basis . the standard created a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows : level 1 inputs are quoted prices ( unadjusted ) in active markets for identical assets or liabilities ; level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability , either directly or indirectly ; and level 3 inputs are unobservable inputs that reflect our own views about the assumptions market participants would use in pricing the asset or liability . income taxes in accordance with fasb asc 740 , income taxes , we recognize deferred tax assets and liabilities for the expected future tax consequences or events that have been included in our consolidated financial statements and or tax returns . deferred tax assets and liabilities are based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse . deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized . we provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions when management determines that it is probable that a loss will be incurred related to these matters and the amount of the loss is reasonably determinable . on december 22 , 2017 , the tax cuts and jobs act ( “ tcja ” ) was signed into united states law . the tcja includes a number of changes to existing tax law , including , among other things , a permanent reduction in the federal corporate income tax rate to a flat rate of 21 % , effective january 1 , 2018 , as well as the elimination of net operating loss carrybacks for losses arising in taxable years beginning after december 31 , 2017. further , operating losses arising in tax years after december 31 , 2017 , are carried forward indefinitely . due to the tcja , the company 's deferred tax assets and liabilities recognized prior to 2017 were revalued at the newly enacted tax rates , which resulted in a corresponding adjustment in the valuation allowance . derivative liabilities the company accounts for its warrants and other derivative financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument , in accordance with fasb asc topic 815 , derivatives and hedging . warrants classified as equity are recorded at fair value as of the date of issuance on the company 's consolidated balance sheets and no further adjustments to their valuation are made . warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the company 's consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire , with any changes in the fair value between reporting periods recorded as other income or expense . management estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date , as well as assumptions for expected volatility , expected life , yield , and risk-free interest rate . recent accounting guidance accounting standards update ( asu ) 2018-07 , “ compensation—stock compensation ( topic 718 ) improvements to nonemployee share-based payment accounting ” was issued by the financial accounting standards board ( fasb ) in june 2018. the purpose of this amendment is to address aspects of the accounting for nonemployee share-based payment transactions . the amendments in this update are effective for public business entities for fiscal years , and for interim periods within those fiscal years , beginning after december 15 , 2018. early adoption is permitted . the company does not believe that this guidance will have a material impact on its consolidated results of operations , financial position or disclosures . - 40 - asu 2016-15 , “ statement of cash flows ( topic 230 ) classification of certain cash receipts and payments ” was issued by the financial accounting standards board ( fasb ) in august 2016. the purpose of this amendment is to address eight specific cash flow
| liquidity and capital resources working capital at september 30 , 2018 , we had total current assets of $ 4,819,204 ( including cash of $ 4,667,410 ) and working capital of $ 4,530,819. our working capital as of september 30 , 2018 and september 30 , 2017 is summarized as follows : replace_table_token_3_th total current assets as of september 30 , 2018 were $ 4,819,204 , a decrease of $ 1,260,191 compared to $ 6,079,395 as of september 30 , 2017. the decrease in current assets is primarily attributable to an increase in research and development expenses attributable to product development testing and preparation for regulatory filings , in addition to a decrease in the exercise of warrants . our total current assets as of september 30 , 2018 and september 30 , 2017 were comprised primarily of cash and prepaid expenses . total current liabilities as of september 30 , 2018 were $ 288,385 , a decrease of $ 145,146 compared to $ 433,531 as of september 30 , 2017. the decrease is primarily due to the payment patent prosecution costs . our total current liabilities as of september 30 , 2018 were comprised of accounts payable and accrued expenses . our total current liabilities as of september 30 , 2018 and 2017 were comprised of accounts payable and accrued expenses . cash flow replace_table_token_4_th - 37 - cash used in operating activities cash used in operating activities increased $ 297,315 during the year ended september 30 , 2018 to $ 5,913,563 , compared to $ 5,616,248 during the year ended september 30 , 2017. the increase was primarily due to an increase in general and administrative expense primarily attributable to increased intellectual property costs and research and development expenses incurred in connection with activities to develop our primary product candidate .
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reportable segments our three reportable segments are : lighting products led products power and rf products reportable segments are components of an entity that have separate financial data that the entity 's chief operating decision maker ( codm ) regularly reviews when allocating resources and assessing performance . our codm is the chief executive officer . our codm does not review inter-segment transactions when evaluating segment performance and allocating resources to each segment , and inter-segment transactions are not included in our segment revenue disclosure . as such , total segment revenue is equal to our consolidated revenue . our codm reviews gross profit as the lowest and only level of segment profit . as such , all items below gross profit in the consolidated statements of income must be included to reconcile the consolidated gross profit to our consolidated ( loss ) income before income taxes . for financial results by reportable segment , please refer to note 14 , “ reportable segments , ” in our consolidated financial statements included in item 8 of this annual report . 28 industry dynamics and trends there are a number of industry factors that affect our business which include , among others : overall demand for products and applications using leds . our potential for growth depends significantly on the continued adoption of leds within the general lighting market and our ability to affect this rate of adoption . demand also fluctuates based on various market cycles , a continuously evolving led industry supply chain , and evolving competitive dynamics in the market . these uncertainties make demand difficult to forecast for us and our customers . intense and constantly evolving competitive environment . competition in the led and lighting industries is intense . many companies have made significant investments in led development and production equipment . product pricing pressures exist as market participants often undertake pricing strategies to gain or protect market share , increase the utilization of their production capacity and open new applications to led-based solutions . to remain competitive , market participants must continuously increase product performance and reduce costs . to address these competitive pressures , we have invested in research and development activities to support new product development and to deliver higher levels of performance and lower costs to differentiate our products in the market . lighting sales channel development . commercial lighting is usually sold through lighting agents and distributors in the north american lighting market . the lighting agents typically have exclusive sales rights for a defined territory and are typically aligned with one large lighting company for a majority of their product sales . the size , quality and capability of the lighting agent has a significant effect on winning new projects and sales in a given geographic market . while these agents or distributors can sell other lighting products , the large traditional lighting companies have taken steps to prevent their channel partners from selling competing product lines . we are constantly working to improve the capabilities of our existing channel partners as well as develop new partners to improve our sales effectiveness in each geographic market . technological innovation and advancement . innovations and advancements in leds and lighting continue to expand the potential commercial application for our products . however , new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets . intellectual property issues . market participants rely on patented and non-patented proprietary information relating to product development , manufacturing capabilities and other core competencies of their business . protection of intellectual property is critical . therefore , steps such as additional patent applications , confidentiality and non-disclosure agreements , as well as other security measures are generally taken . to enforce or protect intellectual property rights , litigation or threatened litigation is common . fiscal 2016 overview the following is a summary of our financial results for the year ended june 26 , 2016 : our year-over-year revenue remained flat at $ 1.6 billion . gross margin increased to 30 % . gross profit increased by $ 13 million to $ 487 million . operating loss was $ 10 million in fiscal 2016 compared to operating loss of $ 74 million in fiscal 2015 . net loss per diluted share was $ 0.21 in fiscal 2016 compared to net loss per diluted share of $ 0.57 in fiscal 2015 . combined cash , cash equivalents and short-term investments decreased to $ 0.6 billion at june 26 , 2016 compared to $ 0.7 billion at june 28 , 2015 . cash provided by operating activities was $ 203 million in fiscal 2016 , compared to $ 181 million in fiscal 2015 . we spent $ 150 million to repurchase 5.8 million shares of our common stock . inventories increased to $ 304 million at june 26 , 2016 compared to $ 281 million at june 28 , 2015 . we spent $ 120 million on purchases of property and equipment in fiscal 2016 compared to $ 206 million in fiscal 2015 . 29 business outlook we announced cree 3.0 during fiscal 2016 and updated our strategy to become a more focused led lighting technology company . as part of this strategy , we outlined a plan to separate wolfspeed through an initial public offering ( ipo ) . the decision to sell the wolfspeed business to infineon , instead of continuing down the ipo path , speeds our transition to an led lighting company while providing significant resources to accelerate our growth . divesting wolfspeed is expected to reduce short-term profits , but at the same time increase free cash flow . we believe this transaction will increase management focus on the core growth business and provide capital to support our mission to build a more valuable company . story_separator_special_tag amortization of intangible assets related to our acquisitions is as follows ( in thousands , except percentages ) : replace_table_token_9_th amortization of acquisition-related intangibles increased in fiscal 2016 compared to fiscal 2015 primarily due to the amortization of intangibles related to the apei acquisition as discussed in note 3 , “ acquisition , ” in our consolidated financial statements in part ii , item 8 of this annual report . amortization of acquisition-related intangibles decreased in fiscal 2015 compared to fiscal 2014 primarily due to decreases in amortization expense for customer relationships and developed technology . in the fourth quarter of 2014 , based on our qualitative impairment assessment of our indefinite-lived trade names , we impaired the ruud lighting trade name which had a book value of $ 3.2 million . 35 loss on disposal or impairment of long-lived assets we operate a capital intensive business . as such , we dispose of a certain level of our equipment in the normal course of business as our production processes change due to production improvement initiatives or product mix changes . due to the risk of technological obsolescence or changes in our production process , we regularly review our equipment and capitalized patent costs for possible impairment . the following table sets forth our loss on disposal or impairment of long-lived assets ( in thousands , except percentages ) : replace_table_token_10_th we recognized a net loss of $ 16.9 million , $ 47.7 million , and $ 2.7 million on the disposal of long-lived assets in fiscal years 2016 , 2015 , and 2014 , respectively . the net losses in fiscal 2016 and fiscal 2015 were primarily due to the planned sale or abandonment of certain long-lived assets to reduce excess manufacturing capacity pursuant to our restructuring plan discussed above . the net loss for fiscal 2014 was primarily the result of disposals of equipment due to changes in various manufacturing processes and the abandonment of certain patent assets as a result of technological obsolescence . non-operating ( expense ) income , net the following table sets forth our non-operating ( expense ) income , net ( in thousands , except percentages ) : replace_table_token_11_th during fiscal 2016 , 2015 and 2014 we were in a net interest income position . our short-term investments consisted primarily of municipal bonds , corporate bonds , u.s. agency securities , non-u.s. certificates of deposit and non-u.s. government securities . the primary objective of our investment policy is preservation of principal . other long-term investments consisted of our approximately 14 % common stock ownership interest in lextar electronics corporation ( lextar ) , which was completed in december 2014. this investment was accounted for under the equity method from the date of investment until june 2016 when we chose not to stand for re-election as a member of the lextar board of directors . we utilize the fair value option in accounting for our investment in lextar . gain on sale of investments , net . gain on sale of investments , net was $ 238 thousand , $ 925 thousand and $ 68 thousand in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . gain on sale of investments , net decreased in fiscal 2016 primarily due to lower sales of investments . gain on sale of investments , net increased in fiscal 2015 primarily due to gains realized on the sale of investments liquidated in order to fund the repurchase of our common stock . loss on equity method investment . loss on equity method investment was $ 15.4 million in fiscal 2016 and $ 22.6 million in fiscal 2015 due to decreases in the fair value of our lextar investment . lextar 's stock is publicly traded on the taiwan stock exchange and its share price declined from 30 new taiwan dollar ( twd ) at the date of our investment in december 2014 to 21.55 twd at june 28 , 2015 and to 15.70 twd at june 26 , 2016. this downward stock price trend may continue in the future given the risks inherent in lextar 's business and trends affecting the taiwan and global equity markets . any future stock price declines will be recorded as further losses based on the decrease in the fair value of the investment during the applicable fiscal period , which could have a material adverse effect on our results of operations . dividends from equity method investment . dividends from equity method investment were $ 1.7 million in fiscal 2016 and $ 2.6 million in fiscal 2015 due to our lextar investment . 36 interest income , net . interest income , net was $ 4.5 million , $ 9.1 million and $ 11.9 million in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . the decrease in interest income , net in fiscal 2016 compared to fiscal 2015 was primarily due to lower invested balances and higher interest expense due to overall higher borrowings associated with our line of credit , partially offset by higher investment yields . the decrease in interest income , net in fiscal 2015 compared to fiscal 2014 was primarily due to earning lower investment yields and lower invested balances , partially offset by interest expense associated with our revolving line of credit . foreign currency ( loss ) gain , net . foreign currency ( loss ) gain , net consisted primarily of remeasurement adjustments resulting from our lextar investment and consolidating our international subsidiaries . the foreign currency loss , net in fiscal 2016 was primarily due to unfavorable fluctuation in the exchange rate between the twd and the united states dollar related to our lextar investment and unfavorable fluctuation in the exchange rate between the chinese yuan and the united states dollar . the foreign currency loss , net in fiscal 2015 was primarily due to unfavorable fluctuation in the exchange rate between the twd and the united states dollar
| liquidity and capital resources working capital at september 30 , 2018 , we had total current assets of $ 4,819,204 ( including cash of $ 4,667,410 ) and working capital of $ 4,530,819. our working capital as of september 30 , 2018 and september 30 , 2017 is summarized as follows : replace_table_token_3_th total current assets as of september 30 , 2018 were $ 4,819,204 , a decrease of $ 1,260,191 compared to $ 6,079,395 as of september 30 , 2017. the decrease in current assets is primarily attributable to an increase in research and development expenses attributable to product development testing and preparation for regulatory filings , in addition to a decrease in the exercise of warrants . our total current assets as of september 30 , 2018 and september 30 , 2017 were comprised primarily of cash and prepaid expenses . total current liabilities as of september 30 , 2018 were $ 288,385 , a decrease of $ 145,146 compared to $ 433,531 as of september 30 , 2017. the decrease is primarily due to the payment patent prosecution costs . our total current liabilities as of september 30 , 2018 were comprised of accounts payable and accrued expenses . our total current liabilities as of september 30 , 2018 and 2017 were comprised of accounts payable and accrued expenses . cash flow replace_table_token_4_th - 37 - cash used in operating activities cash used in operating activities increased $ 297,315 during the year ended september 30 , 2018 to $ 5,913,563 , compared to $ 5,616,248 during the year ended september 30 , 2017. the increase was primarily due to an increase in general and administrative expense primarily attributable to increased intellectual property costs and research and development expenses incurred in connection with activities to develop our primary product candidate .
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reportable segments our three reportable segments are : lighting products led products power and rf products reportable segments are components of an entity that have separate financial data that the entity 's chief operating decision maker ( codm ) regularly reviews when allocating resources and assessing performance . our codm is the chief executive officer . our codm does not review inter-segment transactions when evaluating segment performance and allocating resources to each segment , and inter-segment transactions are not included in our segment revenue disclosure . as such , total segment revenue is equal to our consolidated revenue . our codm reviews gross profit as the lowest and only level of segment profit . as such , all items below gross profit in the consolidated statements of income must be included to reconcile the consolidated gross profit to our consolidated ( loss ) income before income taxes . for financial results by reportable segment , please refer to note 14 , “ reportable segments , ” in our consolidated financial statements included in item 8 of this annual report . 28 industry dynamics and trends there are a number of industry factors that affect our business which include , among others : overall demand for products and applications using leds . our potential for growth depends significantly on the continued adoption of leds within the general lighting market and our ability to affect this rate of adoption . demand also fluctuates based on various market cycles , a continuously evolving led industry supply chain , and evolving competitive dynamics in the market . these uncertainties make demand difficult to forecast for us and our customers . intense and constantly evolving competitive environment . competition in the led and lighting industries is intense . many companies have made significant investments in led development and production equipment . product pricing pressures exist as market participants often undertake pricing strategies to gain or protect market share , increase the utilization of their production capacity and open new applications to led-based solutions . to remain competitive , market participants must continuously increase product performance and reduce costs . to address these competitive pressures , we have invested in research and development activities to support new product development and to deliver higher levels of performance and lower costs to differentiate our products in the market . lighting sales channel development . commercial lighting is usually sold through lighting agents and distributors in the north american lighting market . the lighting agents typically have exclusive sales rights for a defined territory and are typically aligned with one large lighting company for a majority of their product sales . the size , quality and capability of the lighting agent has a significant effect on winning new projects and sales in a given geographic market . while these agents or distributors can sell other lighting products , the large traditional lighting companies have taken steps to prevent their channel partners from selling competing product lines . we are constantly working to improve the capabilities of our existing channel partners as well as develop new partners to improve our sales effectiveness in each geographic market . technological innovation and advancement . innovations and advancements in leds and lighting continue to expand the potential commercial application for our products . however , new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets . intellectual property issues . market participants rely on patented and non-patented proprietary information relating to product development , manufacturing capabilities and other core competencies of their business . protection of intellectual property is critical . therefore , steps such as additional patent applications , confidentiality and non-disclosure agreements , as well as other security measures are generally taken . to enforce or protect intellectual property rights , litigation or threatened litigation is common . fiscal 2016 overview the following is a summary of our financial results for the year ended june 26 , 2016 : our year-over-year revenue remained flat at $ 1.6 billion . gross margin increased to 30 % . gross profit increased by $ 13 million to $ 487 million . operating loss was $ 10 million in fiscal 2016 compared to operating loss of $ 74 million in fiscal 2015 . net loss per diluted share was $ 0.21 in fiscal 2016 compared to net loss per diluted share of $ 0.57 in fiscal 2015 . combined cash , cash equivalents and short-term investments decreased to $ 0.6 billion at june 26 , 2016 compared to $ 0.7 billion at june 28 , 2015 . cash provided by operating activities was $ 203 million in fiscal 2016 , compared to $ 181 million in fiscal 2015 . we spent $ 150 million to repurchase 5.8 million shares of our common stock . inventories increased to $ 304 million at june 26 , 2016 compared to $ 281 million at june 28 , 2015 . we spent $ 120 million on purchases of property and equipment in fiscal 2016 compared to $ 206 million in fiscal 2015 . 29 business outlook we announced cree 3.0 during fiscal 2016 and updated our strategy to become a more focused led lighting technology company . as part of this strategy , we outlined a plan to separate wolfspeed through an initial public offering ( ipo ) . the decision to sell the wolfspeed business to infineon , instead of continuing down the ipo path , speeds our transition to an led lighting company while providing significant resources to accelerate our growth . divesting wolfspeed is expected to reduce short-term profits , but at the same time increase free cash flow . we believe this transaction will increase management focus on the core growth business and provide capital to support our mission to build a more valuable company . story_separator_special_tag amortization of intangible assets related to our acquisitions is as follows ( in thousands , except percentages ) : replace_table_token_9_th amortization of acquisition-related intangibles increased in fiscal 2016 compared to fiscal 2015 primarily due to the amortization of intangibles related to the apei acquisition as discussed in note 3 , “ acquisition , ” in our consolidated financial statements in part ii , item 8 of this annual report . amortization of acquisition-related intangibles decreased in fiscal 2015 compared to fiscal 2014 primarily due to decreases in amortization expense for customer relationships and developed technology . in the fourth quarter of 2014 , based on our qualitative impairment assessment of our indefinite-lived trade names , we impaired the ruud lighting trade name which had a book value of $ 3.2 million . 35 loss on disposal or impairment of long-lived assets we operate a capital intensive business . as such , we dispose of a certain level of our equipment in the normal course of business as our production processes change due to production improvement initiatives or product mix changes . due to the risk of technological obsolescence or changes in our production process , we regularly review our equipment and capitalized patent costs for possible impairment . the following table sets forth our loss on disposal or impairment of long-lived assets ( in thousands , except percentages ) : replace_table_token_10_th we recognized a net loss of $ 16.9 million , $ 47.7 million , and $ 2.7 million on the disposal of long-lived assets in fiscal years 2016 , 2015 , and 2014 , respectively . the net losses in fiscal 2016 and fiscal 2015 were primarily due to the planned sale or abandonment of certain long-lived assets to reduce excess manufacturing capacity pursuant to our restructuring plan discussed above . the net loss for fiscal 2014 was primarily the result of disposals of equipment due to changes in various manufacturing processes and the abandonment of certain patent assets as a result of technological obsolescence . non-operating ( expense ) income , net the following table sets forth our non-operating ( expense ) income , net ( in thousands , except percentages ) : replace_table_token_11_th during fiscal 2016 , 2015 and 2014 we were in a net interest income position . our short-term investments consisted primarily of municipal bonds , corporate bonds , u.s. agency securities , non-u.s. certificates of deposit and non-u.s. government securities . the primary objective of our investment policy is preservation of principal . other long-term investments consisted of our approximately 14 % common stock ownership interest in lextar electronics corporation ( lextar ) , which was completed in december 2014. this investment was accounted for under the equity method from the date of investment until june 2016 when we chose not to stand for re-election as a member of the lextar board of directors . we utilize the fair value option in accounting for our investment in lextar . gain on sale of investments , net . gain on sale of investments , net was $ 238 thousand , $ 925 thousand and $ 68 thousand in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . gain on sale of investments , net decreased in fiscal 2016 primarily due to lower sales of investments . gain on sale of investments , net increased in fiscal 2015 primarily due to gains realized on the sale of investments liquidated in order to fund the repurchase of our common stock . loss on equity method investment . loss on equity method investment was $ 15.4 million in fiscal 2016 and $ 22.6 million in fiscal 2015 due to decreases in the fair value of our lextar investment . lextar 's stock is publicly traded on the taiwan stock exchange and its share price declined from 30 new taiwan dollar ( twd ) at the date of our investment in december 2014 to 21.55 twd at june 28 , 2015 and to 15.70 twd at june 26 , 2016. this downward stock price trend may continue in the future given the risks inherent in lextar 's business and trends affecting the taiwan and global equity markets . any future stock price declines will be recorded as further losses based on the decrease in the fair value of the investment during the applicable fiscal period , which could have a material adverse effect on our results of operations . dividends from equity method investment . dividends from equity method investment were $ 1.7 million in fiscal 2016 and $ 2.6 million in fiscal 2015 due to our lextar investment . 36 interest income , net . interest income , net was $ 4.5 million , $ 9.1 million and $ 11.9 million in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . the decrease in interest income , net in fiscal 2016 compared to fiscal 2015 was primarily due to lower invested balances and higher interest expense due to overall higher borrowings associated with our line of credit , partially offset by higher investment yields . the decrease in interest income , net in fiscal 2015 compared to fiscal 2014 was primarily due to earning lower investment yields and lower invested balances , partially offset by interest expense associated with our revolving line of credit . foreign currency ( loss ) gain , net . foreign currency ( loss ) gain , net consisted primarily of remeasurement adjustments resulting from our lextar investment and consolidating our international subsidiaries . the foreign currency loss , net in fiscal 2016 was primarily due to unfavorable fluctuation in the exchange rate between the twd and the united states dollar related to our lextar investment and unfavorable fluctuation in the exchange rate between the chinese yuan and the united states dollar . the foreign currency loss , net in fiscal 2015 was primarily due to unfavorable fluctuation in the exchange rate between the twd and the united states dollar
| cash flows in summary , our cash flows were as follows ( in thousands ) : replace_table_token_16_th the following is a discussion of our primary sources and uses of cash in our operating , investing and financing activities . cash flows from operating activities net cash provided by operating activities increased to $ 203.3 million in fiscal 2016 from $ 181.3 million in fiscal 2015 , primarily due to a lower net loss in fiscal 2016 as compared to fiscal 2015 . net cash provided by operating activities decreased to $ 181.3 million in fiscal 2015 from $ 319.3 million in fiscal 2014 , primarily due to a net loss in fiscal 2015 as compared to net income in fiscal 2014 . 39 cash flows from investing activities our investing activities primarily relate to transactions within our short-term investments , purchases of property and equipment and payments for patents and licensing rights . net cash used in investing activities was $ 7.9 million in fiscal 2016 compared to $ 16.1 million in fiscal 2015 . net purchases of property and equipment decreased by $ 91.2 million in fiscal 2016 compared to fiscal 2015. net proceeds from the sale of short-term investments decreased $ 156 million in fiscal 2016 compared to fiscal 2015 . this year over year decrease was primarily due to a decrease in proceeds from the sale and maturities of short-term investments , partially offset by a decrease in short-term investment purchase activity . fiscal 2016 included $ 12.5 million in net expenditures to acquire apei while fiscal 2015 included the $ 80.6 million investment in lextar . net cash used in investing activities was $ 16.1 million in fiscal 2015 compared to $ 242.3 million in fiscal 2014 . net proceeds from the sale of short-term investments increased $ 333.4 million in fiscal 2015 compared to fiscal 2014. this year over year increase was primarily due to an overall net decrease in short-term investment purchase activity and increase in proceeds from the sale of short-term investments . this net increase was partially offset by the $ 80.6
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we apply asc 985 to software deliverables when relevant . the consideration for the arrangements under asc 605-25 is allocated to the separate units of accounting using the relative selling price method . the relative selling price method allocates the consideration based on our specific assumptions rather than assumptions of a marketplace participant , and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable 's selling price . 24 applicable revenue recognition criteria are considered separately for each separate unit of accounting as follows : service revenue is generally determined based on time and materials . revenue for development and consulting services is recognized as the services are performed . billing for services rendered generally occurs within one month after the services are provided . subscription revenue , which includes digimarc discover , digimarc barcode and guardian products and services , is generally paid in advance and recognized over the term of the subscription , which is generally one to three years . license revenue is recognized when amounts owed to digimarc have been earned , are fixed or determinable ( within our normal 30 to 60 day payment terms ) , and collection is reasonably assured . if the payment terms extend beyond our normal 30 to 60 days , the fee may not be considered to be fixed or determinable , and the revenue would then be recognized when installments are due . we record revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured . our standard payment terms for license arrangements are 30 to 60 days . extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond our standard payment terms , primarily because of the risk of substantial modification present in our patent licensing business . as such , revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable . goodwill : we account for business combinations under the acquisition method of accounting in accordance with asc 805 , business combinations , where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values . the purchase price is allocated using the information currently available , and may be adjusted , up to one-year from acquisition date , after obtaining more information regarding , among other things , asset valuations , liabilities assumed and revisions to preliminary estimates . contingent consideration , if any , is recorded at the acquisition date based upon the estimated fair value of the contingent payments . the fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in earnings from operations . the purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill . we test goodwill for impairment annually in june and whenever events or changes in circumstances indicate that the carrying value may not be recoverable . such reviews assess the fair value of our assets compared to their carrying value . we operate as a single reporting unit . we estimate the fair value of our single reporting unit using a market approach , which takes into account our market capitalization plus an estimated control premium . in connection with our annual impairment test of goodwill as of june 30 , 2015 and 2014 , we concluded that there was no impairment because the estimated fair value of our single reporting unit substantially exceeded the carrying value . impairment of long-lived assets : we assess long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable , in accordance with the provisions of asc 360 property , plant and equipment . conditions that could trigger a long-lived asset impairment assessment include , but are not limited to , a significant decrease in the market price of a long-lived asset , a significant adverse change in legal factors or in the business climate that could affect the value of an asset , or a current-period operating or cash flow loss combined with a history of operating or cash flow losses . 25 recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows expected to be generated by the assets over their remaining useful life . if such assets are considered to be impaired , the impairment would be recognized in operating results at the amount by which the carrying amount of the assets exceeds the fair value of the assets . fair value is determined based on discounted cash flows or appraised values , depending on the nature of the assets . considerable management judgment is required in determining if and when a condition would trigger an impairment assessment of our long-lived assets and once such a determination has been made , considerable management judgment is required to determine the expected net undiscounted future cash flows to be generated by the assets over their remaining useful life and , if necessary , the fair market value of those assets . we evaluated our long-lived assets for impairment as of december 31 , 2015 and 2014 and concluded there was no impairment . assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell . contingencies : we evaluate all pending or threatened contingencies or commitments , if any , that are reasonably likely to have a material adverse effect on our operations or financial position . story_separator_special_tag these initiatives included developing and marketing digimarc discover , digimarc barcode and other aspects of our intuitive computing platform as well as further developing our retained patent assets and exploring strategic opportunities in the mobile payments market . in 2014 , we continued these investments and made additional investments to expand our sales organization and expand the guardian product offering . total revenue decreased 27 % to $ 25.7 million in 2014 from $ 35.0 million in 2013 primarily due to the scheduled completion of the quarterly license fee payments from intellectual ventures ( iv ) in the second quarter of 2013 and from the nielsen company ( nielsen ) in the first quarter of 2014. total operating expenses increased 11 % to $ 32.5 million from $ 29.2 million in 2013 primarily reflecting the full-year impact of the continued investments in our product development and sales growth initiatives . 37 revenue replace_table_token_18_th the increase in service revenue was due primarily to higher billing rates under our contract with the central banks , partially offset by lower revenue due to timing of work with a government agency contractor . the increase in subscription revenue was due primarily to higher sales of our digimarc discover , digimarc barcode and guardian products and services . the decrease in license revenue was due primarily to the scheduled completion of the quarterly license fee payments from iv in the second quarter of 2013 and from nielsen in the first quarter of 2014 and lower reported quarterly royalties from other licensees , partially offset by a $ 1.0 million license fee payment from verance in the third quarter of 2014 to extend an existing license through 2023 in effect waiving any future royalties and license fees . revenue by geography replace_table_token_19_th the decrease in domestic revenue was primarily the result of the scheduled completion of the quarterly license fee payments from iv and nielsen in the second quarter of 2013 and first quarter of 2014 , respectively . the decrease in international revenue was primarily due to lower reported quarterly royalties from an international licensee , partially offset by higher billing rates under our contract with the central banks . 38 gross profit replace_table_token_20_th the decrease in total gross profit was due primarily to lower license revenue . the increase in service gross profit as a percentage of service revenue was due primarily to higher billable rates under our contract with the central banks . the decrease in subscription gross profit as a percentage of subscription revenue was due primarily to higher contractor costs to support new guardian customers . the decrease in license gross profit as a percentage of license revenue was due primarily to lower license revenue . operating expenses sales and marketing replace_table_token_21_th the increase in sales and marketing expenses primarily reflects the full-year impact of our continued investments in our sales growth initiatives , resulting in : increased headcount and compensation-related expenses of $ 1.4 million ; increased travel expenses of $ 0.2 million ; and increased allocation of facilities and information technology costs of $ 0.2 million . research , development and engineering replace_table_token_22_th 39 the increase in research , development and engineering expenses primarily reflects the full-year impact of our continued investments in our product development initiatives , resulting in : increased headcount and compensation-related expenses of $ 1.5 million ; partially offset by decreased recruiting costs of $ 0.2 million . general and administrative replace_table_token_23_th the decrease in general and administrative expenses resulted primarily from : decreased legal fees of $ 0.7 million due to the completion of the licensing audit of iv in january 2014 , partially offset by legal fees associated with the litigation and settlement with blue spike in october 2014 ; decreased accounting and tax fees of $ 0.2 million associated with the acquisition of attributor that were incurred in 2013 ; decreased allocation of $ 0.1 million of facilities and information technology costs ; partially offset by increased stock-based compensation expenses of $ 0.3 million largely due to the timing of restricted stock grants ; and lower expenses in 2013 resulting from the reversal of $ 0.2 million liability for contingent merger consideration related to the acquisition of attributor . intellectual property replace_table_token_24_th the increase in intellectual property expenses resulted primarily from : increased headcount and compensation-related expenses of $ 0.2 million ; increased consulting expenses of $ 0.2 million related to a intellectual property marketing study ; and increased write-off for patent assets we abandoned of $ 0.2 million . stock-based compensation replace_table_token_25_th 40 the increase in total stock-based compensation was primarily due to higher headcount and the timing of restricted stock grants . other income , net year ended december 31 , 2014 year ended december 31 , 2013 dollar decrease percent decrease other income , net $ 55 $ 109 $ ( 54 ) ( 50 ) % other income , net ( as % of total revenue ) * * * less than 1 % the decrease in other income , net was primarily due to losses on foreign currency and lower interest income , due to a combination of lower investment balances and lower interest rates on investments . provision ( benefit ) for income taxes for the year ended december 31 , 2014 , we recognized an income tax provision of $ 0.7 million on a pretax loss of $ 15.2 million , resulting in an effective tax rate of ( 4 % ) . the income tax provision included a $ 6.8 million non-cash charge during the fourth quarter of 2014 to record a full valuation allowance against our deferred tax assets . a full valuation allowance was recorded largely due to the cumulative loss we have incurred over the previous three years , which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets . for the year ended december 31 , 2013 , we recognized an income tax
| cash flows in summary , our cash flows were as follows ( in thousands ) : replace_table_token_16_th the following is a discussion of our primary sources and uses of cash in our operating , investing and financing activities . cash flows from operating activities net cash provided by operating activities increased to $ 203.3 million in fiscal 2016 from $ 181.3 million in fiscal 2015 , primarily due to a lower net loss in fiscal 2016 as compared to fiscal 2015 . net cash provided by operating activities decreased to $ 181.3 million in fiscal 2015 from $ 319.3 million in fiscal 2014 , primarily due to a net loss in fiscal 2015 as compared to net income in fiscal 2014 . 39 cash flows from investing activities our investing activities primarily relate to transactions within our short-term investments , purchases of property and equipment and payments for patents and licensing rights . net cash used in investing activities was $ 7.9 million in fiscal 2016 compared to $ 16.1 million in fiscal 2015 . net purchases of property and equipment decreased by $ 91.2 million in fiscal 2016 compared to fiscal 2015. net proceeds from the sale of short-term investments decreased $ 156 million in fiscal 2016 compared to fiscal 2015 . this year over year decrease was primarily due to a decrease in proceeds from the sale and maturities of short-term investments , partially offset by a decrease in short-term investment purchase activity . fiscal 2016 included $ 12.5 million in net expenditures to acquire apei while fiscal 2015 included the $ 80.6 million investment in lextar . net cash used in investing activities was $ 16.1 million in fiscal 2015 compared to $ 242.3 million in fiscal 2014 . net proceeds from the sale of short-term investments increased $ 333.4 million in fiscal 2015 compared to fiscal 2014. this year over year increase was primarily due to an overall net decrease in short-term investment purchase activity and increase in proceeds from the sale of short-term investments . this net increase was partially offset by the $ 80.6
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we apply asc 985 to software deliverables when relevant . the consideration for the arrangements under asc 605-25 is allocated to the separate units of accounting using the relative selling price method . the relative selling price method allocates the consideration based on our specific assumptions rather than assumptions of a marketplace participant , and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable 's selling price . 24 applicable revenue recognition criteria are considered separately for each separate unit of accounting as follows : service revenue is generally determined based on time and materials . revenue for development and consulting services is recognized as the services are performed . billing for services rendered generally occurs within one month after the services are provided . subscription revenue , which includes digimarc discover , digimarc barcode and guardian products and services , is generally paid in advance and recognized over the term of the subscription , which is generally one to three years . license revenue is recognized when amounts owed to digimarc have been earned , are fixed or determinable ( within our normal 30 to 60 day payment terms ) , and collection is reasonably assured . if the payment terms extend beyond our normal 30 to 60 days , the fee may not be considered to be fixed or determinable , and the revenue would then be recognized when installments are due . we record revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured . our standard payment terms for license arrangements are 30 to 60 days . extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond our standard payment terms , primarily because of the risk of substantial modification present in our patent licensing business . as such , revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable . goodwill : we account for business combinations under the acquisition method of accounting in accordance with asc 805 , business combinations , where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values . the purchase price is allocated using the information currently available , and may be adjusted , up to one-year from acquisition date , after obtaining more information regarding , among other things , asset valuations , liabilities assumed and revisions to preliminary estimates . contingent consideration , if any , is recorded at the acquisition date based upon the estimated fair value of the contingent payments . the fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in earnings from operations . the purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill . we test goodwill for impairment annually in june and whenever events or changes in circumstances indicate that the carrying value may not be recoverable . such reviews assess the fair value of our assets compared to their carrying value . we operate as a single reporting unit . we estimate the fair value of our single reporting unit using a market approach , which takes into account our market capitalization plus an estimated control premium . in connection with our annual impairment test of goodwill as of june 30 , 2015 and 2014 , we concluded that there was no impairment because the estimated fair value of our single reporting unit substantially exceeded the carrying value . impairment of long-lived assets : we assess long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable , in accordance with the provisions of asc 360 property , plant and equipment . conditions that could trigger a long-lived asset impairment assessment include , but are not limited to , a significant decrease in the market price of a long-lived asset , a significant adverse change in legal factors or in the business climate that could affect the value of an asset , or a current-period operating or cash flow loss combined with a history of operating or cash flow losses . 25 recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows expected to be generated by the assets over their remaining useful life . if such assets are considered to be impaired , the impairment would be recognized in operating results at the amount by which the carrying amount of the assets exceeds the fair value of the assets . fair value is determined based on discounted cash flows or appraised values , depending on the nature of the assets . considerable management judgment is required in determining if and when a condition would trigger an impairment assessment of our long-lived assets and once such a determination has been made , considerable management judgment is required to determine the expected net undiscounted future cash flows to be generated by the assets over their remaining useful life and , if necessary , the fair market value of those assets . we evaluated our long-lived assets for impairment as of december 31 , 2015 and 2014 and concluded there was no impairment . assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell . contingencies : we evaluate all pending or threatened contingencies or commitments , if any , that are reasonably likely to have a material adverse effect on our operations or financial position . story_separator_special_tag these initiatives included developing and marketing digimarc discover , digimarc barcode and other aspects of our intuitive computing platform as well as further developing our retained patent assets and exploring strategic opportunities in the mobile payments market . in 2014 , we continued these investments and made additional investments to expand our sales organization and expand the guardian product offering . total revenue decreased 27 % to $ 25.7 million in 2014 from $ 35.0 million in 2013 primarily due to the scheduled completion of the quarterly license fee payments from intellectual ventures ( iv ) in the second quarter of 2013 and from the nielsen company ( nielsen ) in the first quarter of 2014. total operating expenses increased 11 % to $ 32.5 million from $ 29.2 million in 2013 primarily reflecting the full-year impact of the continued investments in our product development and sales growth initiatives . 37 revenue replace_table_token_18_th the increase in service revenue was due primarily to higher billing rates under our contract with the central banks , partially offset by lower revenue due to timing of work with a government agency contractor . the increase in subscription revenue was due primarily to higher sales of our digimarc discover , digimarc barcode and guardian products and services . the decrease in license revenue was due primarily to the scheduled completion of the quarterly license fee payments from iv in the second quarter of 2013 and from nielsen in the first quarter of 2014 and lower reported quarterly royalties from other licensees , partially offset by a $ 1.0 million license fee payment from verance in the third quarter of 2014 to extend an existing license through 2023 in effect waiving any future royalties and license fees . revenue by geography replace_table_token_19_th the decrease in domestic revenue was primarily the result of the scheduled completion of the quarterly license fee payments from iv and nielsen in the second quarter of 2013 and first quarter of 2014 , respectively . the decrease in international revenue was primarily due to lower reported quarterly royalties from an international licensee , partially offset by higher billing rates under our contract with the central banks . 38 gross profit replace_table_token_20_th the decrease in total gross profit was due primarily to lower license revenue . the increase in service gross profit as a percentage of service revenue was due primarily to higher billable rates under our contract with the central banks . the decrease in subscription gross profit as a percentage of subscription revenue was due primarily to higher contractor costs to support new guardian customers . the decrease in license gross profit as a percentage of license revenue was due primarily to lower license revenue . operating expenses sales and marketing replace_table_token_21_th the increase in sales and marketing expenses primarily reflects the full-year impact of our continued investments in our sales growth initiatives , resulting in : increased headcount and compensation-related expenses of $ 1.4 million ; increased travel expenses of $ 0.2 million ; and increased allocation of facilities and information technology costs of $ 0.2 million . research , development and engineering replace_table_token_22_th 39 the increase in research , development and engineering expenses primarily reflects the full-year impact of our continued investments in our product development initiatives , resulting in : increased headcount and compensation-related expenses of $ 1.5 million ; partially offset by decreased recruiting costs of $ 0.2 million . general and administrative replace_table_token_23_th the decrease in general and administrative expenses resulted primarily from : decreased legal fees of $ 0.7 million due to the completion of the licensing audit of iv in january 2014 , partially offset by legal fees associated with the litigation and settlement with blue spike in october 2014 ; decreased accounting and tax fees of $ 0.2 million associated with the acquisition of attributor that were incurred in 2013 ; decreased allocation of $ 0.1 million of facilities and information technology costs ; partially offset by increased stock-based compensation expenses of $ 0.3 million largely due to the timing of restricted stock grants ; and lower expenses in 2013 resulting from the reversal of $ 0.2 million liability for contingent merger consideration related to the acquisition of attributor . intellectual property replace_table_token_24_th the increase in intellectual property expenses resulted primarily from : increased headcount and compensation-related expenses of $ 0.2 million ; increased consulting expenses of $ 0.2 million related to a intellectual property marketing study ; and increased write-off for patent assets we abandoned of $ 0.2 million . stock-based compensation replace_table_token_25_th 40 the increase in total stock-based compensation was primarily due to higher headcount and the timing of restricted stock grants . other income , net year ended december 31 , 2014 year ended december 31 , 2013 dollar decrease percent decrease other income , net $ 55 $ 109 $ ( 54 ) ( 50 ) % other income , net ( as % of total revenue ) * * * less than 1 % the decrease in other income , net was primarily due to losses on foreign currency and lower interest income , due to a combination of lower investment balances and lower interest rates on investments . provision ( benefit ) for income taxes for the year ended december 31 , 2014 , we recognized an income tax provision of $ 0.7 million on a pretax loss of $ 15.2 million , resulting in an effective tax rate of ( 4 % ) . the income tax provision included a $ 6.8 million non-cash charge during the fourth quarter of 2014 to record a full valuation allowance against our deferred tax assets . a full valuation allowance was recorded largely due to the cumulative loss we have incurred over the previous three years , which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets . for the year ended december 31 , 2013 , we recognized an income tax
| cash flows from operating activities the components of operating cash flows were : replace_table_token_27_th replace_table_token_28_th cash flows used in operating activities in 2015 compared to 2014 increased by $ 3.0 million , primarily as the result of a higher net loss and lower non-cash items , partially offset by changes in operating assets and liabilities . the decrease in non-cash items reflects the impact of no non-cash charge for deferred income taxes in 2015. the impact from changes in operating assets and liabilities was primarily due to changes in other current assets . cash flows from operating activities in 2014 compared to 2013 decreased by $ 10.2 million , primarily as the result of a higher net loss , partially offset by the increase in non-cash items , primarily the result of a $ 6.8 million income tax charge during the fourth quarter of 2014 to record a full valuation allowance against our deferred tax assets . 42 cash flows from investing activities cash flows used in investing activities in 2015 compared to 2014 increased by $ 0.8 million from $ 4.4 million to $ 5.2 million , primarily as a result of higher net purchases of marketable securities , partially offset by lower purchases of property and equipment and capitalized patent costs . cash flows used in investing activities in 2014 compared to 2013 increased by $ 2.7 million from $ 1.7 million to $ 4.4 million , primarily as a result of higher net purchases of marketable securities . cash flows from financing activities cash flows from financing activities in 2015 compared to 2014 decreased by $ 1.4 million from $ 13.4 million to $ 12.0 million , primarily as a result of lower cash proceeds from the issuance of common stock , partially offset by no cash dividends paid in 2015. cash flows from financing activities in 2014 compared to 2013 increased $ 18.2 million from $ 4.8 million of cash used to $ 13.4 million of cash provided .
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once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology 's estimated useful life of three years . we have begun to amortize capitalized development costs in may 2016. for the year ended september 30 , 2017 and september 30 , 2016 amortization expense related to capitalized software development costs were $ 22,700 and $ 12,611 respectively and the accumulated amortization was $ 35,311 and $ 12,611 respectively . intangible assets intangible assets with finite lives primarily consist of licensed technology and are amortized on a straight-line basis over the expected period to be benefited by future cash flows of two years and reviewed for impairment . for the year ended september 30 , 2017 and september 30 , 2016 amortization expense related to licensed technology were $ 7,917 and $ 0 respectively and the accumulated amortization was $ 7,917 and $ 0 respectively . impairment of long-lived assets in accordance with asc topic 360 , the company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable , or at least annually . the company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset . the amount of impairment is measured as the difference between the asset 's estimated fair value and its book value . the company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable , as a result during the year ended september 30 , 2017 , we recorded a non-cash impairment charge of $ 85,572 ( which consisted of a $ 128,800 cost less accumulated amortization of $ 43,228 ) , associated with our software development costs . these charges are included in the statements of operations . - 16 - revenue recognition we recognize revenue when persuasive evidence of a sale arrangement exists , services have been rendered , the sales price is fixed and determinable and collectability is reasonably assured . revenues consists of fees generated through the electronic processing of payment transactions and related services , and is recognized as revenue during the period the transactions are processed or when the related services are performed . merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and , in some instances , additional fees are charged for each transaction . merchant customers are generally charged a flat fee per transaction , while others may also be charged miscellaneous fees , including fees for chargebacks or returns , monthly minimums , and other miscellaneous services . revenues also includes any up-front fees for the work involved in implementing the basic functionality required to provide electronic payment processing services to a customer . revenue from such implementation fees is recognized over the term of the related service contract . our revenue is comprised of monthly recurring services provided to customers , for whom charges are contracted for over a specified period of time . payments received from customers that are related to future periods are recorded as deferred revenue until the service is provided . stock-based compensation stock-based compensation is accounted for based on the requirements of the asc 718 , share-based payment , which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award ( presumptively , the vesting period ) . the financial accounting standards board ( “ fasb ” ) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award . pursuant to asc topic 505-50 , for share-based payments to consultants and other third-parties , compensation expense is determined at the “ measurement date . ” the expense is recognized over the vesting period of the award . until the measurement date is reached , the total amount of compensation expense remains uncertain . we record compensation expense based on the fair value of the award at the reporting date . - 17 - recent accounting pronouncements in may 2014 , the fasb issued accounting standards update no . 2014-09 , “ revenue from contracts with customers ( topic 606 ) , ” ( “ asu 2014-09 ” ) . asu 2014-09 outlines a new , single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance , including industry-specific guidance . this new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized . the new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services . asu 2014-09 is effective for public entities for annual reporting periods beginning after december 15 , 2016 and interim periods within those periods . early adoption is not permitted . the fasb has approved a one-year deferral of the effective date with the option to early adopt using the original effective date . entities may use either a full retrospective or a modified retrospective approach to adopt asu 2014-09. in december 2016 , the fasb issued accounting standards update no . 2016-20 , technical corrections and improvements to topic 606 , revenue from contracts with customers , or asu 2016-20. in may 2016 , the fasb issued accounting standards update no . story_separator_special_tag cost of revenues for the year ended september 30 , 2017 , we had $ 29,527 in cost of revenues as compared to $ 21,813 for the year ended september 30 , 2016 , an increase of $ 7,714. cost of revenues increased primarily due to an increase in hosting and software maintenance fees , operating expenses for the year ended september 30 , 2017 , we incurred $ 5,049,196 in operating expenses as compared to $ 144,701 for the year ended september 30 , 2016 , an increase of $ 4,904,495. operating expenses consisted of the following : replace_table_token_0_th operating expenses increased primarily due to · for the year ended september 30 , 2017 , we had an increase in compensation of $ 3,043,350 , primarily due to stock based compensation to our directors and ceo for $ 3,045,000 . · we had an increase in professional fees of $ 1,754,498 , primarily due to an increase in consulting fees of $ 1,622,700 from stock based compensation , increase in investor relations fees of $ 99,100 , primarily due to stock based consulting fees of $ 51,000 , an increase in accounting and audit fees of $ 14,635 , due to the hiring of an accounting consultant , an increase in fees incurred to become a trading company of $ 12,000 , offset by a decrease in legal fees of $ 6,948 . · we had an increase in amortization of development costs of $ 10,089 . · we had an increase in amortization of intangible assets of $ 7,917 , which we started to amortize in may , 2017 . · we recorded of an impairment charge of $ 85,572 related to software development cost and intangible assets . - 20 - loss from operations for the year ended september 30 , 2017 , we incurred a loss from operations of $ 5,050,684 as compared to $ 138,929 for the year ended september 30 , 2016 , an increase of $ 4,911,755. the increase of $ 4,911,755 , was resulting from the discussion above . since inception , our business activity has focused on the development of our corporate entity , business plan , marketing strategy , contact development , website design and product design , and development of our payment gateway called “ clickdirectpay ” . other expenses for the year september 30 , 2017 , we incurred total other expense of $ 1,151 as compared to other expense of $ 3,534 , a decrease of $ 2,383 for the year ended september 30 , 2017. the decrease in other expenses was related to the recording of a loss on sale of marketable securities of $ 1,693 during the year ended september 30 , 2017 as compared to a loss of $ 2,445 for year ended september 30 , 2016. net loss for the year ended september 30 , 2017 , we incurred a net loss of $ 5,051,835 or $ ( 0.10 ) per common share as compared to $ 142,463 or $ ( 0.00 ) per common share for the year ended september 30 , 2016 , an increase of $ 4,909,372 , resulting from the discussion above . unrealized loss on available-for-sale marketable securities for the year september 30 , 2017 , we incurred an unrealized gain on available-for-sale marketable securities of $ 2,011 as compared to an unrealized ( loss ) of ( $ 1,115 ) for the year ended september 30 , 2016 , an increase of $ 3,126 related to our marketable securities that we invested during fiscal 2017. comprehensive loss for the year ended september 30 , 2017 , we incurred a comprehensive loss of $ 5,049,824 as compared to $ 143,578 for the year ended september 30 , 2016 , an increase of $ 4,906,246 resulting from the discussion above . liquidity , capital resources , and off-balance sheet arrangements liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements . we had working capital of $ 262 and $ 12,694 of cash at september 30 , 2017 and working capital of $ 15,189 and $ 34,572 of cash at september 30 , 2016. cash flows for the year ended september 30 , 2017 compared to the year ended september 30 , 2016 net cash flow used in operating activities was $ 147,156 for the year ended september 30 , 2017 as compared to $ 69,559 for the year ended september 30 , 2016 , an increase of $ 77,597 . ● net cash flow used in operating activities for the year ended september 30 , 2017 primarily reflected a net loss of $ 5,051,835 and the add-back of non-cash items consisting of stock-based compensation of $ 4,779,950 , amortization of software development costs and intangible asset of $ 30,617 , a non-cash asset impairment charge of $ 85,572 and a loss on sale of marketable securities of $ 1,693 , offset by changes in operating assets and liabilities of $ 6,847 primarily related to an increase in prepaid expenses of $ 4,167 offset by an increase in accounts payable of $ 18,532. during the year ended september 30 , 2017 , cash used in operating activities primarily consisted of payments of professional fees . ● net cash flow used in operating activities for the year ended september 30 , 2016 primarily reflected a net loss of $ 142,463 and the addback of noncash items consisting of stock-based compensation of $ 45,150 , amortization of development costs of $ 12,611 , and a loss on sale of marketable securities of $ 2,445 , and changes in operating assets and liabilities of $ 12.698. during the year ended september 30 , 2016 , cash used in operating activities primarily consisted of payments of professional fees . - 21 - net cash flow provided by investing activities was $ 10,020 for the year ended september 30 , 2017 as compared to
| cash flows from operating activities the components of operating cash flows were : replace_table_token_27_th replace_table_token_28_th cash flows used in operating activities in 2015 compared to 2014 increased by $ 3.0 million , primarily as the result of a higher net loss and lower non-cash items , partially offset by changes in operating assets and liabilities . the decrease in non-cash items reflects the impact of no non-cash charge for deferred income taxes in 2015. the impact from changes in operating assets and liabilities was primarily due to changes in other current assets . cash flows from operating activities in 2014 compared to 2013 decreased by $ 10.2 million , primarily as the result of a higher net loss , partially offset by the increase in non-cash items , primarily the result of a $ 6.8 million income tax charge during the fourth quarter of 2014 to record a full valuation allowance against our deferred tax assets . 42 cash flows from investing activities cash flows used in investing activities in 2015 compared to 2014 increased by $ 0.8 million from $ 4.4 million to $ 5.2 million , primarily as a result of higher net purchases of marketable securities , partially offset by lower purchases of property and equipment and capitalized patent costs . cash flows used in investing activities in 2014 compared to 2013 increased by $ 2.7 million from $ 1.7 million to $ 4.4 million , primarily as a result of higher net purchases of marketable securities . cash flows from financing activities cash flows from financing activities in 2015 compared to 2014 decreased by $ 1.4 million from $ 13.4 million to $ 12.0 million , primarily as a result of lower cash proceeds from the issuance of common stock , partially offset by no cash dividends paid in 2015. cash flows from financing activities in 2014 compared to 2013 increased $ 18.2 million from $ 4.8 million of cash used to $ 13.4 million of cash provided .
| 0 |
once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology 's estimated useful life of three years . we have begun to amortize capitalized development costs in may 2016. for the year ended september 30 , 2017 and september 30 , 2016 amortization expense related to capitalized software development costs were $ 22,700 and $ 12,611 respectively and the accumulated amortization was $ 35,311 and $ 12,611 respectively . intangible assets intangible assets with finite lives primarily consist of licensed technology and are amortized on a straight-line basis over the expected period to be benefited by future cash flows of two years and reviewed for impairment . for the year ended september 30 , 2017 and september 30 , 2016 amortization expense related to licensed technology were $ 7,917 and $ 0 respectively and the accumulated amortization was $ 7,917 and $ 0 respectively . impairment of long-lived assets in accordance with asc topic 360 , the company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable , or at least annually . the company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset . the amount of impairment is measured as the difference between the asset 's estimated fair value and its book value . the company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable , as a result during the year ended september 30 , 2017 , we recorded a non-cash impairment charge of $ 85,572 ( which consisted of a $ 128,800 cost less accumulated amortization of $ 43,228 ) , associated with our software development costs . these charges are included in the statements of operations . - 16 - revenue recognition we recognize revenue when persuasive evidence of a sale arrangement exists , services have been rendered , the sales price is fixed and determinable and collectability is reasonably assured . revenues consists of fees generated through the electronic processing of payment transactions and related services , and is recognized as revenue during the period the transactions are processed or when the related services are performed . merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and , in some instances , additional fees are charged for each transaction . merchant customers are generally charged a flat fee per transaction , while others may also be charged miscellaneous fees , including fees for chargebacks or returns , monthly minimums , and other miscellaneous services . revenues also includes any up-front fees for the work involved in implementing the basic functionality required to provide electronic payment processing services to a customer . revenue from such implementation fees is recognized over the term of the related service contract . our revenue is comprised of monthly recurring services provided to customers , for whom charges are contracted for over a specified period of time . payments received from customers that are related to future periods are recorded as deferred revenue until the service is provided . stock-based compensation stock-based compensation is accounted for based on the requirements of the asc 718 , share-based payment , which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award ( presumptively , the vesting period ) . the financial accounting standards board ( “ fasb ” ) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award . pursuant to asc topic 505-50 , for share-based payments to consultants and other third-parties , compensation expense is determined at the “ measurement date . ” the expense is recognized over the vesting period of the award . until the measurement date is reached , the total amount of compensation expense remains uncertain . we record compensation expense based on the fair value of the award at the reporting date . - 17 - recent accounting pronouncements in may 2014 , the fasb issued accounting standards update no . 2014-09 , “ revenue from contracts with customers ( topic 606 ) , ” ( “ asu 2014-09 ” ) . asu 2014-09 outlines a new , single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance , including industry-specific guidance . this new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized . the new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services . asu 2014-09 is effective for public entities for annual reporting periods beginning after december 15 , 2016 and interim periods within those periods . early adoption is not permitted . the fasb has approved a one-year deferral of the effective date with the option to early adopt using the original effective date . entities may use either a full retrospective or a modified retrospective approach to adopt asu 2014-09. in december 2016 , the fasb issued accounting standards update no . 2016-20 , technical corrections and improvements to topic 606 , revenue from contracts with customers , or asu 2016-20. in may 2016 , the fasb issued accounting standards update no . story_separator_special_tag cost of revenues for the year ended september 30 , 2017 , we had $ 29,527 in cost of revenues as compared to $ 21,813 for the year ended september 30 , 2016 , an increase of $ 7,714. cost of revenues increased primarily due to an increase in hosting and software maintenance fees , operating expenses for the year ended september 30 , 2017 , we incurred $ 5,049,196 in operating expenses as compared to $ 144,701 for the year ended september 30 , 2016 , an increase of $ 4,904,495. operating expenses consisted of the following : replace_table_token_0_th operating expenses increased primarily due to · for the year ended september 30 , 2017 , we had an increase in compensation of $ 3,043,350 , primarily due to stock based compensation to our directors and ceo for $ 3,045,000 . · we had an increase in professional fees of $ 1,754,498 , primarily due to an increase in consulting fees of $ 1,622,700 from stock based compensation , increase in investor relations fees of $ 99,100 , primarily due to stock based consulting fees of $ 51,000 , an increase in accounting and audit fees of $ 14,635 , due to the hiring of an accounting consultant , an increase in fees incurred to become a trading company of $ 12,000 , offset by a decrease in legal fees of $ 6,948 . · we had an increase in amortization of development costs of $ 10,089 . · we had an increase in amortization of intangible assets of $ 7,917 , which we started to amortize in may , 2017 . · we recorded of an impairment charge of $ 85,572 related to software development cost and intangible assets . - 20 - loss from operations for the year ended september 30 , 2017 , we incurred a loss from operations of $ 5,050,684 as compared to $ 138,929 for the year ended september 30 , 2016 , an increase of $ 4,911,755. the increase of $ 4,911,755 , was resulting from the discussion above . since inception , our business activity has focused on the development of our corporate entity , business plan , marketing strategy , contact development , website design and product design , and development of our payment gateway called “ clickdirectpay ” . other expenses for the year september 30 , 2017 , we incurred total other expense of $ 1,151 as compared to other expense of $ 3,534 , a decrease of $ 2,383 for the year ended september 30 , 2017. the decrease in other expenses was related to the recording of a loss on sale of marketable securities of $ 1,693 during the year ended september 30 , 2017 as compared to a loss of $ 2,445 for year ended september 30 , 2016. net loss for the year ended september 30 , 2017 , we incurred a net loss of $ 5,051,835 or $ ( 0.10 ) per common share as compared to $ 142,463 or $ ( 0.00 ) per common share for the year ended september 30 , 2016 , an increase of $ 4,909,372 , resulting from the discussion above . unrealized loss on available-for-sale marketable securities for the year september 30 , 2017 , we incurred an unrealized gain on available-for-sale marketable securities of $ 2,011 as compared to an unrealized ( loss ) of ( $ 1,115 ) for the year ended september 30 , 2016 , an increase of $ 3,126 related to our marketable securities that we invested during fiscal 2017. comprehensive loss for the year ended september 30 , 2017 , we incurred a comprehensive loss of $ 5,049,824 as compared to $ 143,578 for the year ended september 30 , 2016 , an increase of $ 4,906,246 resulting from the discussion above . liquidity , capital resources , and off-balance sheet arrangements liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements . we had working capital of $ 262 and $ 12,694 of cash at september 30 , 2017 and working capital of $ 15,189 and $ 34,572 of cash at september 30 , 2016. cash flows for the year ended september 30 , 2017 compared to the year ended september 30 , 2016 net cash flow used in operating activities was $ 147,156 for the year ended september 30 , 2017 as compared to $ 69,559 for the year ended september 30 , 2016 , an increase of $ 77,597 . ● net cash flow used in operating activities for the year ended september 30 , 2017 primarily reflected a net loss of $ 5,051,835 and the add-back of non-cash items consisting of stock-based compensation of $ 4,779,950 , amortization of software development costs and intangible asset of $ 30,617 , a non-cash asset impairment charge of $ 85,572 and a loss on sale of marketable securities of $ 1,693 , offset by changes in operating assets and liabilities of $ 6,847 primarily related to an increase in prepaid expenses of $ 4,167 offset by an increase in accounts payable of $ 18,532. during the year ended september 30 , 2017 , cash used in operating activities primarily consisted of payments of professional fees . ● net cash flow used in operating activities for the year ended september 30 , 2016 primarily reflected a net loss of $ 142,463 and the addback of noncash items consisting of stock-based compensation of $ 45,150 , amortization of development costs of $ 12,611 , and a loss on sale of marketable securities of $ 2,445 , and changes in operating assets and liabilities of $ 12.698. during the year ended september 30 , 2016 , cash used in operating activities primarily consisted of payments of professional fees . - 21 - net cash flow provided by investing activities was $ 10,020 for the year ended september 30 , 2017 as compared to
| cash requirements our management does not believe that our current capital resources will be adequate to continue operating our company and maintaining our business strategy for much more than 12 months . at the date hereof , we have minimal cash at hand . we require additional capital to implement our business and fund our operations . between october 2016 and march 2017 , we issued 571,900 of shares of common stock for cash of $ 115,258. on october 10 , 2017 , the company issued a 12 % convertible promissory note for principal borrowings of $ 160,000 to a non-related party . the 12 % convertible promissory note and all accrued interest are due on july 10 , 2018. the company received proceeds of $ 143,250 in cash which is net of offering costs of $ 16,750. the note is unsecured and bears interest at the rate of 12 % per annum from the issuance date thereof until the note is paid . the company paid original issuance cost of $ 16,750 in connection with this note payable which will be recorded at a discount and amortized over the term of the note . since inception we have funded our operations primarily through equity financings and we expect that wewill continue to fund our operations through the equity and debt financing , either alone or through strategic alliances .
| 1 |
we contributed the net proceeds from the issuance of the 43,057,802 shares of common stock in our ipo ( inclusive of the shares issued pursuant to the partial exercise by the underwriters of their option to purchase additional shares ) and the concurrent private placement of common stock to eldridge to the operating partnership in exchange for a like number of op units . we generally lease each of our properties to a single tenant on a triple-net , long-term basis , and we generate our cash from operations primarily through the monthly lease payments , or base rent , we receive from the tenants that occupy our properties . as of december 31 , 2018 , we had a portfolio of real estate investments at 677 properties ( inclusive of one undeveloped land parcel and 12 properties which 53 secure our investments in mortgage loans receivable ) that was diversified by tenant , industry and geography , had annualized base rent of $ 106.8 million and was 100.0 % occupied . substantially all of our leases provide for periodic contractual rent escalations . as of december 31 , 2018 , leases contributing 97.1 % of our annualized base rent provided for increases in future annual base rent , generally ranging from 1 % to 4 % annually , with a weighted average annual escalation equal to 1.5 % of base rent . as of december 31 , 2018 , leases contributing 91.9 % of annualized base rent were triple-net , which means that our tenant is responsible for all operating expenses , such as maintenance , insurance , utility and tax expense , related to the leased property ( including any increases in those costs that may occur as a result of inflation ) . our remaining leases were “ double net , ” where the tenant is responsible for certain expenses , such as taxes and insurance , but we retain responsibility for other expenses , generally related to maintenance and structural component replacement that may be required on such leased properties in the future . also , we incur property-level expenses associated with our vacant properties and we occasionally incur nominal property-level expenses that are not paid by our tenants , such as the costs of periodically making site inspections of our properties . since our properties are predominantly single-tenant properties , which are generally subject to long-term leases , it is not necessary for us to perform any significant ongoing leasing activities on our properties . as of december 31 , 2018 , the weighted average remaining term of our leases was 14.2 years ( based on annualized base rent ) , excluding renewal options that have not been exercised , with 3.1 % of our annualized base rent attributable to leases expiring prior to january 1 , 2023. renewal options are exercisable at the option of our tenants upon expiration of their base lease term . our leases providing for tenant renewal options generally provide for periodic contractual rent escalations during any renewed term that are similar to those applicable during the initial term of the lease . as of december 31 , 2018 , 67.4 % of our annualized base rent was attributable to master leases , where we have acquired multiple properties from a seller and leased them back to the seller under a master lease . since properties are generally leased under a master lease on an “ all or none ” basis , the structure prevents a tenant from “ cherry picking ” locations , where it unilaterally gives up underperforming properties while maintaining its leasehold interest in well-performing properties . consistent with our intent to elect to qualify as a reit for federal income tax purposes commencing with our taxable year ended december 31 , 2018 , we believe that we were organized and operated in a manner that will allow us to qualify as a reit , and we intend to continue operating in such a manner . liquidity and capital resources we seek to acquire real estate with a combination of debt and equity capital and with cash from operations that will not otherwise be distributed to our stockholders . prior to the ipo , equity capital needed for our real estate investments had been provided to us by eldridge , our primary institutional capital provider . subsequent to the ipo , we added public equity capital to our initial private institutional equity capital to facilitate our growth . additionally , we used the net proceeds from the ipo and the concurrent private placement to repay promissory notes issued to an affiliate of eldridge , which had been our primary source of short-term debt capital prior to the ipo . historically , upon accumulating a sufficiently large and diverse pool of real estate , we generally refinanced this debt through the issuance of long-term , fixed-rate debt through our master trust funding program , as further described below . in june 2018 , we entered into the revolving credit facility , which is available to fund our short-term debt capital requirements , as further described below . over time , we may access additional long-term debt capital with future debt issuances through our master trust funding program . additionally , future sources of debt capital may include term borrowings from insurance companies , banks and other sources , single-asset mortgage financing and cmbs borrowings , and may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital . over time , we may choose to issue preferred equity as a part of our overall funding strategy . as our outstanding debt matures , we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under the revolving credit facility . story_separator_special_tag at our election , on and after receipt of an investment grade corporate credit rating from s & p or moody 's , the applicable margin will be a spread set according to our corporate credit ratings by s & p and or moody 's . the revolving credit facility is freely prepayable at any time and will be mandatorily prepayable if borrowings exceed the borrowing base or the facility limit . we may re-borrow amounts paid down , subject to customary borrowing conditions . we are required to pay revolving credit commitment fees throughout the term of the revolving credit facility based upon our usage of the revolving credit facility , at a rate which depends on our usage of the revolving credit facility during the period before we receive an investment grade corporate credit rating from s & p or moody 's , and which rate shall be based on the corporate credit rating from s & p and or moody 's after the time , if applicable , we receive such a rating . however , there can be no assurance that we will receive an investment grade corporate rating from s & p and or moody 's . the revolving credit facility provides an accordion feature to increase , subject to certain conditions , the maximum availability of the facility by up to an additional $ 200.0 million . the operating partnership is the borrower under the revolving credit facility , and we and each of the subsidiaries of the operating partnership that owns a direct or indirect interest in an eligible real property asset are guarantors under the revolving credit facility . we are subject to financial covenants under the revolving credit facility , including maintaining : a limitation on total consolidated leverage of not more than 60 % of the total value of certain of our assets ( including unencumbered cash and cash equivalents , the value of real property assets , mortgage notes receivable and up to $ 10 million of construction or redevelopment costs ) ( “ total consolidated assets ” ) with a step up on two non-consecutive occasions to 65 % , at our election , for two consecutive quarters each following a material acquisition ; a consolidated fixed charge coverage ratio of at least 1.50x ; a consolidated tangible net worth of at least 75 % of our tangible net worth at the date of the facility plus 75 % of future net equity proceeds ; a consolidated secured leverage ratio of not more than 50 % of our total consolidated assets ; a secured recourse debt ratio of not more than 10 % of our total consolidated assets ; an unencumbered leverage ratio of not more than 60 % of our consolidated unencumbered real property and mortgage notes receivable with a step up on two non-consecutive occasions to 65 % , at our election , for two consecutive quarters each following a material acquisition ; and an unencumbered interest coverage ratio of at least 1.75x . the revolving credit facility restricts our ability to pay distributions to our stockholders under certain circumstances . in particular , we are generally limited to paying cash distributions with respect to 58 any period of four fiscal quarters in an amount not to exceed the greater of ( i ) 95 % of adjusted funds from operations ( as defined in the credit agreement ) , or ( ii ) the amount required for us to maintain our status as a reit , and such cash distributions may be further limited during events of default . the revolving credit facility contains certain covenants that , subject to exceptions , limits or restricts , among other things , our incurrence of indebtedness and liens , disposition of assets , transactions with affiliates , mergers and fundamental changes , modification of organizational documents , changes to fiscal periods , making of investments , negative pledge clauses and lines of business and reit qualification . story_separator_special_tag investments in real estate , $ 3.7 million to acquire investments in direct financing receivables , $ 2.0 million paid to tenants as lease incentives , $ 1.0 million to fund construction in progress and $ 0.1 million paid for deposits on prospective real estate investments . these cash outflows were partially offset by $ 16.5 million of proceeds from sales of investments , net of disposition costs , and approximately $ 37,000 of principal collections on our direct financing lease receivables . net cash provided by financing activities of $ 280.5 million during the period from march 30 , 2016 ( commencement of operations ) to december 31 , 2016 related to cash inflows of $ 288.6 million of capital contributions to the predecessor and $ 7.5 million of proceeds from secured borrowings under our master trust funding program . these cash inflows were partially offset by $ 7.7 million of deferred financing costs , $ 7.5 million of equity distributions by the predecessor and $ 0.3 million of repayments of secured borrowing principal . off-balance sheet arrangements we had no off-balance sheet arrangements as of december 31 , 2018 . 60 contractual obligations the following table provides information with respect to our commitments as of december 31 , 2018. replace_table_token_11_th ( 1 ) includes interest payments on outstanding indebtedness issued under the master trust funding program through the anticipated repayment dates . ( 2 ) as of december 31 , 2018 , balances on the revolving credit facility bear interest at an annual rate of prime rate plus a leverage-based credit spread of 0.45 % . we also pay a facility fee on the total unused commitment amount of 0.15 % . subsequent to december 31 , 2018 , balances on the revolving credit facility bear interest at an annual rate of applicable libor plus an applicable margin between 1.45 % and 2.15 % . ( 3 ) includes obligations to reimburse certain of our tenants for
| cash requirements our management does not believe that our current capital resources will be adequate to continue operating our company and maintaining our business strategy for much more than 12 months . at the date hereof , we have minimal cash at hand . we require additional capital to implement our business and fund our operations . between october 2016 and march 2017 , we issued 571,900 of shares of common stock for cash of $ 115,258. on october 10 , 2017 , the company issued a 12 % convertible promissory note for principal borrowings of $ 160,000 to a non-related party . the 12 % convertible promissory note and all accrued interest are due on july 10 , 2018. the company received proceeds of $ 143,250 in cash which is net of offering costs of $ 16,750. the note is unsecured and bears interest at the rate of 12 % per annum from the issuance date thereof until the note is paid . the company paid original issuance cost of $ 16,750 in connection with this note payable which will be recorded at a discount and amortized over the term of the note . since inception we have funded our operations primarily through equity financings and we expect that wewill continue to fund our operations through the equity and debt financing , either alone or through strategic alliances .
| 0 |
we contributed the net proceeds from the issuance of the 43,057,802 shares of common stock in our ipo ( inclusive of the shares issued pursuant to the partial exercise by the underwriters of their option to purchase additional shares ) and the concurrent private placement of common stock to eldridge to the operating partnership in exchange for a like number of op units . we generally lease each of our properties to a single tenant on a triple-net , long-term basis , and we generate our cash from operations primarily through the monthly lease payments , or base rent , we receive from the tenants that occupy our properties . as of december 31 , 2018 , we had a portfolio of real estate investments at 677 properties ( inclusive of one undeveloped land parcel and 12 properties which 53 secure our investments in mortgage loans receivable ) that was diversified by tenant , industry and geography , had annualized base rent of $ 106.8 million and was 100.0 % occupied . substantially all of our leases provide for periodic contractual rent escalations . as of december 31 , 2018 , leases contributing 97.1 % of our annualized base rent provided for increases in future annual base rent , generally ranging from 1 % to 4 % annually , with a weighted average annual escalation equal to 1.5 % of base rent . as of december 31 , 2018 , leases contributing 91.9 % of annualized base rent were triple-net , which means that our tenant is responsible for all operating expenses , such as maintenance , insurance , utility and tax expense , related to the leased property ( including any increases in those costs that may occur as a result of inflation ) . our remaining leases were “ double net , ” where the tenant is responsible for certain expenses , such as taxes and insurance , but we retain responsibility for other expenses , generally related to maintenance and structural component replacement that may be required on such leased properties in the future . also , we incur property-level expenses associated with our vacant properties and we occasionally incur nominal property-level expenses that are not paid by our tenants , such as the costs of periodically making site inspections of our properties . since our properties are predominantly single-tenant properties , which are generally subject to long-term leases , it is not necessary for us to perform any significant ongoing leasing activities on our properties . as of december 31 , 2018 , the weighted average remaining term of our leases was 14.2 years ( based on annualized base rent ) , excluding renewal options that have not been exercised , with 3.1 % of our annualized base rent attributable to leases expiring prior to january 1 , 2023. renewal options are exercisable at the option of our tenants upon expiration of their base lease term . our leases providing for tenant renewal options generally provide for periodic contractual rent escalations during any renewed term that are similar to those applicable during the initial term of the lease . as of december 31 , 2018 , 67.4 % of our annualized base rent was attributable to master leases , where we have acquired multiple properties from a seller and leased them back to the seller under a master lease . since properties are generally leased under a master lease on an “ all or none ” basis , the structure prevents a tenant from “ cherry picking ” locations , where it unilaterally gives up underperforming properties while maintaining its leasehold interest in well-performing properties . consistent with our intent to elect to qualify as a reit for federal income tax purposes commencing with our taxable year ended december 31 , 2018 , we believe that we were organized and operated in a manner that will allow us to qualify as a reit , and we intend to continue operating in such a manner . liquidity and capital resources we seek to acquire real estate with a combination of debt and equity capital and with cash from operations that will not otherwise be distributed to our stockholders . prior to the ipo , equity capital needed for our real estate investments had been provided to us by eldridge , our primary institutional capital provider . subsequent to the ipo , we added public equity capital to our initial private institutional equity capital to facilitate our growth . additionally , we used the net proceeds from the ipo and the concurrent private placement to repay promissory notes issued to an affiliate of eldridge , which had been our primary source of short-term debt capital prior to the ipo . historically , upon accumulating a sufficiently large and diverse pool of real estate , we generally refinanced this debt through the issuance of long-term , fixed-rate debt through our master trust funding program , as further described below . in june 2018 , we entered into the revolving credit facility , which is available to fund our short-term debt capital requirements , as further described below . over time , we may access additional long-term debt capital with future debt issuances through our master trust funding program . additionally , future sources of debt capital may include term borrowings from insurance companies , banks and other sources , single-asset mortgage financing and cmbs borrowings , and may offer us the opportunity to lower our cost of funding and further diversify our sources of debt capital . over time , we may choose to issue preferred equity as a part of our overall funding strategy . as our outstanding debt matures , we may refinance it as it comes due or choose to repay it using cash and cash equivalents or borrowings under the revolving credit facility . story_separator_special_tag at our election , on and after receipt of an investment grade corporate credit rating from s & p or moody 's , the applicable margin will be a spread set according to our corporate credit ratings by s & p and or moody 's . the revolving credit facility is freely prepayable at any time and will be mandatorily prepayable if borrowings exceed the borrowing base or the facility limit . we may re-borrow amounts paid down , subject to customary borrowing conditions . we are required to pay revolving credit commitment fees throughout the term of the revolving credit facility based upon our usage of the revolving credit facility , at a rate which depends on our usage of the revolving credit facility during the period before we receive an investment grade corporate credit rating from s & p or moody 's , and which rate shall be based on the corporate credit rating from s & p and or moody 's after the time , if applicable , we receive such a rating . however , there can be no assurance that we will receive an investment grade corporate rating from s & p and or moody 's . the revolving credit facility provides an accordion feature to increase , subject to certain conditions , the maximum availability of the facility by up to an additional $ 200.0 million . the operating partnership is the borrower under the revolving credit facility , and we and each of the subsidiaries of the operating partnership that owns a direct or indirect interest in an eligible real property asset are guarantors under the revolving credit facility . we are subject to financial covenants under the revolving credit facility , including maintaining : a limitation on total consolidated leverage of not more than 60 % of the total value of certain of our assets ( including unencumbered cash and cash equivalents , the value of real property assets , mortgage notes receivable and up to $ 10 million of construction or redevelopment costs ) ( “ total consolidated assets ” ) with a step up on two non-consecutive occasions to 65 % , at our election , for two consecutive quarters each following a material acquisition ; a consolidated fixed charge coverage ratio of at least 1.50x ; a consolidated tangible net worth of at least 75 % of our tangible net worth at the date of the facility plus 75 % of future net equity proceeds ; a consolidated secured leverage ratio of not more than 50 % of our total consolidated assets ; a secured recourse debt ratio of not more than 10 % of our total consolidated assets ; an unencumbered leverage ratio of not more than 60 % of our consolidated unencumbered real property and mortgage notes receivable with a step up on two non-consecutive occasions to 65 % , at our election , for two consecutive quarters each following a material acquisition ; and an unencumbered interest coverage ratio of at least 1.75x . the revolving credit facility restricts our ability to pay distributions to our stockholders under certain circumstances . in particular , we are generally limited to paying cash distributions with respect to 58 any period of four fiscal quarters in an amount not to exceed the greater of ( i ) 95 % of adjusted funds from operations ( as defined in the credit agreement ) , or ( ii ) the amount required for us to maintain our status as a reit , and such cash distributions may be further limited during events of default . the revolving credit facility contains certain covenants that , subject to exceptions , limits or restricts , among other things , our incurrence of indebtedness and liens , disposition of assets , transactions with affiliates , mergers and fundamental changes , modification of organizational documents , changes to fiscal periods , making of investments , negative pledge clauses and lines of business and reit qualification . story_separator_special_tag investments in real estate , $ 3.7 million to acquire investments in direct financing receivables , $ 2.0 million paid to tenants as lease incentives , $ 1.0 million to fund construction in progress and $ 0.1 million paid for deposits on prospective real estate investments . these cash outflows were partially offset by $ 16.5 million of proceeds from sales of investments , net of disposition costs , and approximately $ 37,000 of principal collections on our direct financing lease receivables . net cash provided by financing activities of $ 280.5 million during the period from march 30 , 2016 ( commencement of operations ) to december 31 , 2016 related to cash inflows of $ 288.6 million of capital contributions to the predecessor and $ 7.5 million of proceeds from secured borrowings under our master trust funding program . these cash inflows were partially offset by $ 7.7 million of deferred financing costs , $ 7.5 million of equity distributions by the predecessor and $ 0.3 million of repayments of secured borrowing principal . off-balance sheet arrangements we had no off-balance sheet arrangements as of december 31 , 2018 . 60 contractual obligations the following table provides information with respect to our commitments as of december 31 , 2018. replace_table_token_11_th ( 1 ) includes interest payments on outstanding indebtedness issued under the master trust funding program through the anticipated repayment dates . ( 2 ) as of december 31 , 2018 , balances on the revolving credit facility bear interest at an annual rate of prime rate plus a leverage-based credit spread of 0.45 % . we also pay a facility fee on the total unused commitment amount of 0.15 % . subsequent to december 31 , 2018 , balances on the revolving credit facility bear interest at an annual rate of applicable libor plus an applicable margin between 1.45 % and 2.15 % . ( 3 ) includes obligations to reimburse certain of our tenants for
| cash flows the following discussion of changes in cash flows includes the results of the company and the predecessor collectively for the periods presented . comparison of the years ended december 31 , 2018 and 2017 and the period from march 30 , 2016 ( commencement of operations ) to december 31 , 2016 as of december 31 , 2018 , we had $ 4.2 million of cash and cash equivalents and $ 12.0 million of restricted cash as compared to $ 7.3 million and $ 12.2 million , respectively , as of december 31 , 2017 and $ 1.8 million and $ 10.1 million , respectively , as of december 31 , 2016. cash flows for the year ended december 31 , 2018 during the year ended december 31 , 2018 , net cash provided by operating activities was $ 45.9 million . our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio , the rental rates specified in our leases , the collectability of rent and the level of our operating expenses and other general and administrative costs . cash inflows related to a net income adjusted for non-cash items of $ 48.3 million ( net income of $ 20.6 million adjusted for non-cash items , including depreciation and amortization of tangible and intangible real estate assets , amortization of deferred financing costs , provision for impairment of real estate , gains on dispositions of investments , net , straight-line rent receivable , equity-based compensation and allowance for doubtful accounts , of $ 27.7 million ) . these cash inflows were partially offset by a decrease of $ 1.6 million in accrued liabilities and other payables and an increase of $ 0.8 million in prepaid expenses and other assets . net cash used in investing activities during the year ended december 31 , 2018 was $ 461.9 million .
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initiated phase 3 study in asthma report results from phase 3 atopic dermatitis pivotal trials presented positive pivotal phase 2b data in asthma at the american thoracic society 2015 international conference complete rolling bla submission for atopic dermatitis in the united states completed patient enrollment in phase 3 atopic dermatitis pivotal trials initiate efficacy and safety studies in pediatric patients in both atopic dermatitis and asthma fda granted breakthrough therapy designation to dupilumab in atopic dermatitis uk mhra granted pim designation to dupilumab in atopic dermatitis 61 antibody-based clinical programs ( continued ) : 2015 and 2016 events to date 2016 plans regn2222 ( rsv-f antibody ) completed phase 1 study continue patient enrollment in phase 3 nursery pre-term study initiated phase 3 nursery pre-term study received fast track designation from the fda for the prevention of serious lower respiratory tract disease caused by rsv fasinumab ( ngf antibody ) initiated sixteen-week phase 2b/3 study in osteoarthritis report results from phase 2b/3 study in osteoarthritis completed patient enrollment in a phase 2b/3 study in osteoarthritis initiate longer duration phase 3 trial evinacumab ( angptl-3 antibody ) initiated phase 2 study complete patient enrollment in phase 1 and phase 2 studies partial clinical hold lifted by the fda regn1033 ( gdf8 antibody ) phase 2 proof-of-concept study in elderly men and women with sarcopenia met its primary endpoint , while secondary , functional endpoints were mixed . develop combination therapy plans sanofi elected not to continue co-development regn1908-1909 ( feld1 antibody ) completed patient enrollment in phase 1/phase 2 study regn2176-3 ( pdgfr-beta antibody co-formulated with aflibercept ) received fast track designation from the fda for the treatment of patients with wet amd continue patient enrollment in phase 2 study initiated phase 2 study regn1979 ( cd20 and cd3 antibody ) continued patient enrollment in phase 1 study complete patient enrollment in phase 1 study nesvacumab/aflibercept ( ang2 antibody co-formulated with aflibercept ) completed patient enrollment in phase 1 study initiate phase 2 study regn2810 ( pd-1 antibody ) initiated phase 1 study continue patient enrollment in phase 1 study initiate later-stage pivotal studies 62 developing and commercializing new medicines entails significant risk and expense . before significant revenues from the commercialization of our antibody candidates or new indications for our marketed products can be realized , we ( or our collaborators ) must overcome a number of hurdles which include successfully completing research and development and obtaining regulatory approval from the fda and regulatory authorities in other countries . in addition , the biotechnology and pharmaceutical industries are rapidly evolving and highly competitive , and new developments may render our products and technologies uncompetitive or obsolete . our ability to continue to generate profits and to generate positive cash flow from operations over the next several years depends significantly on our continued success in commercializing eylea . we expect to continue to incur substantial expenses related to our research and development activities , a significant portion of which we expect to be reimbursed by our collaborators . also , our research and development activities outside our collaborations , the costs of which are not reimbursed , are expected to expand and require additional resources . we also expect to incur substantial costs related to the commercialization of praluent and preparation for potential commercialization of our late-stage antibody product candidates , approximately half of which we expect to be reimbursed by sanofi under the companies ' collaboration agreement . our financial results may fluctuate from quarter to quarter and will depend on , among other factors , the net sales of our marketed products , the scope and progress of our research and development efforts , the timing of certain expenses , the continuation of our collaborations , in particular with sanofi and bayer healthcare , including our share of collaboration profits or losses from sales of commercialized products and the amount of reimbursement of our research and development expenses that we receive from collaborators , and the amount of income tax expense we incur , which is partly dependent on the profits or losses we earn in each of the countries in which we operate . we can not predict whether or when new products or new indications for marketed products will receive regulatory approval or , if any such approval is received , whether we will be able to successfully commercialize such product ( s ) and whether or when they may become profitable . critical accounting policies and use of estimates a summary of the significant accounting policies that impact us is provided in note 1 to our consolidated financial statements . the preparation of financial statements in accordance with accounting principles generally accepted in the united states of america ( gaap ) requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements . management considers an accounting estimate to be critical if : it requires an assumption ( or assumptions ) regarding a future outcome ; and changes in the estimate or the use of different assumptions to prepare the estimate could have a material effect on our results of operations or financial condition . management believes the current assumptions used to estimate amounts reflected in our consolidated financial statements are appropriate . however , if actual experience differs from the assumptions used in estimating amounts reflected in our consolidated financial statements , the resulting changes could have a material adverse effect on our results of operations , and in certain situations , could have a material adverse effect on our liquidity and financial condition . the critical accounting estimates that impact our consolidated financial statements are described below . revenue recognition product revenue product sales consist of u.s. sales of eylea and arcalyst . story_separator_special_tag as of december 31 , 2015 , $ 600.0 million of the up-front payments was deferred and will be recognized ratably as revenue in future periods . in september 2003 , we and sanofi entered into a zaltrap collaboration agreement to jointly develop and commercialize zaltrap . under the terms of the zaltrap collaboration agreement , we and sanofi shared profits and losses on sales of 68 zaltrap outside of japan , and we were entitled to receive a percentage of sales of zaltrap in japan . our share of the loss in connection with the commercialization of zaltrap in 2014 represents our share of the costs of commercializing zaltrap , partly offset by net product sales . as described above in part i , item 1 . `` collaboration agreements - collaborations with sanofi - zaltrap `` , in february 2015 , we entered into an amended zaltrap agreement with sanofi which amended and restated the zaltrap collaboration agreement . as a result , in the first quarter of 2015 we recognized $ 14.9 million of previously deferred revenue under the zaltrap collaboration agreement , related to ( i ) amounts that were previously reimbursed by sanofi for manufacturing commercial supplies of zaltrap since our risk of inventory loss under the collaboration no longer existed , and ( ii ) the unamortized portion of up-front payments from sanofi as we had no further performance obligations . bayer healthcare collaboration revenue the collaboration revenue we earned from bayer healthcare , as detailed below , primarily consisted of recognition of our share of profits in connection with commercialization of eylea outside the united states , and recognition of sales milestones achieved . replace_table_token_8_th bayer healthcare commenced sales of eylea outside the united states for the treatment of wet amd in 2012 , macular edema secondary to crvo in 2013 , visual impairment due to dme in the third quarter of 2014 , mcnv ( in japan ) in the fourth quarter of 2014 , and macular edema following brvo in the second quarter of 2015. regeneron 's net profit in connection with commercialization of eylea outside the united states is summarized below . regeneron 's net profit from eylea sales outside the united states year ended december 31 , ( in millions ) 2015 2014 net product sales outside the united states $ 1,413.3 $ 1,038.5 regeneron 's share of collaboration profit from sales outside the united states 521.8 358.3 reimbursement of eylea development expenses incurred by bayer healthcare in accordance with regeneron 's payment obligation ( 55.1 ) ( 57.0 ) regeneron 's net profit in connection with commercialization of eylea outside the united states $ 466.7 $ 301.3 bayer healthcare records revenue from sales of eylea outside the united states . in 2015 and 2014 , our share of the profit we earned from commercialization of eylea outside the united states was partly offset by our contractual obligation to reimburse bayer healthcare for a portion of the agreed-upon development expenses previously incurred by bayer healthcare . 69 in 2015 , we earned our final $ 15.0 million sales milestone from bayer healthcare , upon total aggregate net sales of specific commercial supplies of eylea outside the united states exceeding $ 200 million over a twelve-month period . in 2014 , we earned seven $ 15.0 million sales milestones from bayer healthcare upon total aggregate net sales of eylea outside the united states achieving certain specified levels . cost-sharing of our global eylea development expenses with bayer healthcare decreased in 2015 compared to 2014. in january 2014 , bayer healthcare decided to participate in the global development and commercialization of eylea outside the united states for the treatment of macular edema following brvo . in connection with this decision , bayer healthcare reimbursed us $ 15.7 million for a defined share of the eylea global development costs that we had incurred prior to february 2014 for the brvo indication , which was recognized as bayer healthcare collaboration revenue in the first quarter of 2014. in addition , all future agreed-upon global eylea development expenses incurred in connection with brvo are shared equally , and any future profits or losses on sales of eylea outside of the united states for the treatment of macular edema following brvo are also shared ( for countries other than japan ; we are entitled to receive a tiered percentage of eylea net sales in japan ) . other eylea revenue primarily consists of reimbursement of other regeneron eylea expenses , principally related to bayer healthcare 's share of royalties payable to genentech pursuant to a license and settlement agreement in connection with sales of eylea outside the united states and reimbursements for producing eylea commercial supplies for bayer healthcare . in addition , other eylea revenue includes recognition of deferred revenue related to eylea up-front and 2007 non-substantive milestone payments from bayer healthcare . as of december 31 , 2015 , $ 11.1 million of the eylea up-front and 2007 milestone payments was deferred and will be recognized ratably as revenue in future periods . cost-sharing of regn2176-3 development expenses with bayer healthcare commenced in the first quarter of 2014 following the execution of the companies ' pdgfr-beta antibody collaboration agreement . other pdgfr-beta antibody revenue consists of recognition of deferred revenue related to the pdgfr-beta up-front payment and non-substantive milestones received in the first quarter of 2014. as of december 31 , 2015 , $ 9.5 million of the pdgfr-beta up-front and 2014 milestone payments was deferred and will be recognized ratably as revenue in future periods . other revenue in connection with the amendment and extension of our velocimmune license agreement with astellas , in august 2010 , we received a $ 165.0 million up-front payment , which was deferred upon receipt and is being recognized as revenue ratably over a seven-year period beginning in june 2011. in both 2015 and 2014 , we recognized $ 23.6 million of revenue related to this
| cash flows the following discussion of changes in cash flows includes the results of the company and the predecessor collectively for the periods presented . comparison of the years ended december 31 , 2018 and 2017 and the period from march 30 , 2016 ( commencement of operations ) to december 31 , 2016 as of december 31 , 2018 , we had $ 4.2 million of cash and cash equivalents and $ 12.0 million of restricted cash as compared to $ 7.3 million and $ 12.2 million , respectively , as of december 31 , 2017 and $ 1.8 million and $ 10.1 million , respectively , as of december 31 , 2016. cash flows for the year ended december 31 , 2018 during the year ended december 31 , 2018 , net cash provided by operating activities was $ 45.9 million . our cash flows from operating activities are primarily dependent upon the occupancy level of our portfolio , the rental rates specified in our leases , the collectability of rent and the level of our operating expenses and other general and administrative costs . cash inflows related to a net income adjusted for non-cash items of $ 48.3 million ( net income of $ 20.6 million adjusted for non-cash items , including depreciation and amortization of tangible and intangible real estate assets , amortization of deferred financing costs , provision for impairment of real estate , gains on dispositions of investments , net , straight-line rent receivable , equity-based compensation and allowance for doubtful accounts , of $ 27.7 million ) . these cash inflows were partially offset by a decrease of $ 1.6 million in accrued liabilities and other payables and an increase of $ 0.8 million in prepaid expenses and other assets . net cash used in investing activities during the year ended december 31 , 2018 was $ 461.9 million .
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initiated phase 3 study in asthma report results from phase 3 atopic dermatitis pivotal trials presented positive pivotal phase 2b data in asthma at the american thoracic society 2015 international conference complete rolling bla submission for atopic dermatitis in the united states completed patient enrollment in phase 3 atopic dermatitis pivotal trials initiate efficacy and safety studies in pediatric patients in both atopic dermatitis and asthma fda granted breakthrough therapy designation to dupilumab in atopic dermatitis uk mhra granted pim designation to dupilumab in atopic dermatitis 61 antibody-based clinical programs ( continued ) : 2015 and 2016 events to date 2016 plans regn2222 ( rsv-f antibody ) completed phase 1 study continue patient enrollment in phase 3 nursery pre-term study initiated phase 3 nursery pre-term study received fast track designation from the fda for the prevention of serious lower respiratory tract disease caused by rsv fasinumab ( ngf antibody ) initiated sixteen-week phase 2b/3 study in osteoarthritis report results from phase 2b/3 study in osteoarthritis completed patient enrollment in a phase 2b/3 study in osteoarthritis initiate longer duration phase 3 trial evinacumab ( angptl-3 antibody ) initiated phase 2 study complete patient enrollment in phase 1 and phase 2 studies partial clinical hold lifted by the fda regn1033 ( gdf8 antibody ) phase 2 proof-of-concept study in elderly men and women with sarcopenia met its primary endpoint , while secondary , functional endpoints were mixed . develop combination therapy plans sanofi elected not to continue co-development regn1908-1909 ( feld1 antibody ) completed patient enrollment in phase 1/phase 2 study regn2176-3 ( pdgfr-beta antibody co-formulated with aflibercept ) received fast track designation from the fda for the treatment of patients with wet amd continue patient enrollment in phase 2 study initiated phase 2 study regn1979 ( cd20 and cd3 antibody ) continued patient enrollment in phase 1 study complete patient enrollment in phase 1 study nesvacumab/aflibercept ( ang2 antibody co-formulated with aflibercept ) completed patient enrollment in phase 1 study initiate phase 2 study regn2810 ( pd-1 antibody ) initiated phase 1 study continue patient enrollment in phase 1 study initiate later-stage pivotal studies 62 developing and commercializing new medicines entails significant risk and expense . before significant revenues from the commercialization of our antibody candidates or new indications for our marketed products can be realized , we ( or our collaborators ) must overcome a number of hurdles which include successfully completing research and development and obtaining regulatory approval from the fda and regulatory authorities in other countries . in addition , the biotechnology and pharmaceutical industries are rapidly evolving and highly competitive , and new developments may render our products and technologies uncompetitive or obsolete . our ability to continue to generate profits and to generate positive cash flow from operations over the next several years depends significantly on our continued success in commercializing eylea . we expect to continue to incur substantial expenses related to our research and development activities , a significant portion of which we expect to be reimbursed by our collaborators . also , our research and development activities outside our collaborations , the costs of which are not reimbursed , are expected to expand and require additional resources . we also expect to incur substantial costs related to the commercialization of praluent and preparation for potential commercialization of our late-stage antibody product candidates , approximately half of which we expect to be reimbursed by sanofi under the companies ' collaboration agreement . our financial results may fluctuate from quarter to quarter and will depend on , among other factors , the net sales of our marketed products , the scope and progress of our research and development efforts , the timing of certain expenses , the continuation of our collaborations , in particular with sanofi and bayer healthcare , including our share of collaboration profits or losses from sales of commercialized products and the amount of reimbursement of our research and development expenses that we receive from collaborators , and the amount of income tax expense we incur , which is partly dependent on the profits or losses we earn in each of the countries in which we operate . we can not predict whether or when new products or new indications for marketed products will receive regulatory approval or , if any such approval is received , whether we will be able to successfully commercialize such product ( s ) and whether or when they may become profitable . critical accounting policies and use of estimates a summary of the significant accounting policies that impact us is provided in note 1 to our consolidated financial statements . the preparation of financial statements in accordance with accounting principles generally accepted in the united states of america ( gaap ) requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements . management considers an accounting estimate to be critical if : it requires an assumption ( or assumptions ) regarding a future outcome ; and changes in the estimate or the use of different assumptions to prepare the estimate could have a material effect on our results of operations or financial condition . management believes the current assumptions used to estimate amounts reflected in our consolidated financial statements are appropriate . however , if actual experience differs from the assumptions used in estimating amounts reflected in our consolidated financial statements , the resulting changes could have a material adverse effect on our results of operations , and in certain situations , could have a material adverse effect on our liquidity and financial condition . the critical accounting estimates that impact our consolidated financial statements are described below . revenue recognition product revenue product sales consist of u.s. sales of eylea and arcalyst . story_separator_special_tag as of december 31 , 2015 , $ 600.0 million of the up-front payments was deferred and will be recognized ratably as revenue in future periods . in september 2003 , we and sanofi entered into a zaltrap collaboration agreement to jointly develop and commercialize zaltrap . under the terms of the zaltrap collaboration agreement , we and sanofi shared profits and losses on sales of 68 zaltrap outside of japan , and we were entitled to receive a percentage of sales of zaltrap in japan . our share of the loss in connection with the commercialization of zaltrap in 2014 represents our share of the costs of commercializing zaltrap , partly offset by net product sales . as described above in part i , item 1 . `` collaboration agreements - collaborations with sanofi - zaltrap `` , in february 2015 , we entered into an amended zaltrap agreement with sanofi which amended and restated the zaltrap collaboration agreement . as a result , in the first quarter of 2015 we recognized $ 14.9 million of previously deferred revenue under the zaltrap collaboration agreement , related to ( i ) amounts that were previously reimbursed by sanofi for manufacturing commercial supplies of zaltrap since our risk of inventory loss under the collaboration no longer existed , and ( ii ) the unamortized portion of up-front payments from sanofi as we had no further performance obligations . bayer healthcare collaboration revenue the collaboration revenue we earned from bayer healthcare , as detailed below , primarily consisted of recognition of our share of profits in connection with commercialization of eylea outside the united states , and recognition of sales milestones achieved . replace_table_token_8_th bayer healthcare commenced sales of eylea outside the united states for the treatment of wet amd in 2012 , macular edema secondary to crvo in 2013 , visual impairment due to dme in the third quarter of 2014 , mcnv ( in japan ) in the fourth quarter of 2014 , and macular edema following brvo in the second quarter of 2015. regeneron 's net profit in connection with commercialization of eylea outside the united states is summarized below . regeneron 's net profit from eylea sales outside the united states year ended december 31 , ( in millions ) 2015 2014 net product sales outside the united states $ 1,413.3 $ 1,038.5 regeneron 's share of collaboration profit from sales outside the united states 521.8 358.3 reimbursement of eylea development expenses incurred by bayer healthcare in accordance with regeneron 's payment obligation ( 55.1 ) ( 57.0 ) regeneron 's net profit in connection with commercialization of eylea outside the united states $ 466.7 $ 301.3 bayer healthcare records revenue from sales of eylea outside the united states . in 2015 and 2014 , our share of the profit we earned from commercialization of eylea outside the united states was partly offset by our contractual obligation to reimburse bayer healthcare for a portion of the agreed-upon development expenses previously incurred by bayer healthcare . 69 in 2015 , we earned our final $ 15.0 million sales milestone from bayer healthcare , upon total aggregate net sales of specific commercial supplies of eylea outside the united states exceeding $ 200 million over a twelve-month period . in 2014 , we earned seven $ 15.0 million sales milestones from bayer healthcare upon total aggregate net sales of eylea outside the united states achieving certain specified levels . cost-sharing of our global eylea development expenses with bayer healthcare decreased in 2015 compared to 2014. in january 2014 , bayer healthcare decided to participate in the global development and commercialization of eylea outside the united states for the treatment of macular edema following brvo . in connection with this decision , bayer healthcare reimbursed us $ 15.7 million for a defined share of the eylea global development costs that we had incurred prior to february 2014 for the brvo indication , which was recognized as bayer healthcare collaboration revenue in the first quarter of 2014. in addition , all future agreed-upon global eylea development expenses incurred in connection with brvo are shared equally , and any future profits or losses on sales of eylea outside of the united states for the treatment of macular edema following brvo are also shared ( for countries other than japan ; we are entitled to receive a tiered percentage of eylea net sales in japan ) . other eylea revenue primarily consists of reimbursement of other regeneron eylea expenses , principally related to bayer healthcare 's share of royalties payable to genentech pursuant to a license and settlement agreement in connection with sales of eylea outside the united states and reimbursements for producing eylea commercial supplies for bayer healthcare . in addition , other eylea revenue includes recognition of deferred revenue related to eylea up-front and 2007 non-substantive milestone payments from bayer healthcare . as of december 31 , 2015 , $ 11.1 million of the eylea up-front and 2007 milestone payments was deferred and will be recognized ratably as revenue in future periods . cost-sharing of regn2176-3 development expenses with bayer healthcare commenced in the first quarter of 2014 following the execution of the companies ' pdgfr-beta antibody collaboration agreement . other pdgfr-beta antibody revenue consists of recognition of deferred revenue related to the pdgfr-beta up-front payment and non-substantive milestones received in the first quarter of 2014. as of december 31 , 2015 , $ 9.5 million of the pdgfr-beta up-front and 2014 milestone payments was deferred and will be recognized ratably as revenue in future periods . other revenue in connection with the amendment and extension of our velocimmune license agreement with astellas , in august 2010 , we received a $ 165.0 million up-front payment , which was deferred upon receipt and is being recognized as revenue ratably over a seven-year period beginning in june 2011. in both 2015 and 2014 , we recognized $ 23.6 million of revenue related to this
| net cash provided by operating activities was $ 1,330.8 million in 2015. our net income of $ 636.1 million in 2015 included non-cash compensation expense of $ 459.0 million and depreciation and amortization of $ 74.9 million . in addition , deferred tax assets as of december 31 , 2015 increased by $ 121.6 million , compared to december 31 , 2014 , primarily due to an increase in non-cash compensation expense , partly offset by a reduction in our deferred tax assets related to fixed assets and deferred revenue . as of december 31 , 2015 , sanofi , bayer healthcare , and trade accounts receivable increased by $ 491.4 million , compared to december 31 , 2014 , primarily due to higher u.s. eylea sales . inventories as of december 31 , 2015 increased by $ 111.8 million , compared to december 31 , 2014 , primarily due to increased production of eylea commercial supplies as well as capitalization of inventory in connection with praluent production . prepaid expenses and other assets increased by $ 79.5 million as of december 31 , 2015 , compared to december 31 , 2014 , primarily due to an increase in prepaid income taxes .
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certain factors affecting our business overall factors affecting our business and results of operations . the most significant factors include national , regional and local economic conditions , our clients ' profitability , mergers and acquisitions of our clients , changes in top management of our clients and our ability to retain and attract key employees . new business wins and client losses occur due to a variety of factors . the two most significant factors are ; clients ' desire to change marketing communication firms , and the creative product our firms are offering . a client may choose to change marketing communication firms for a number of reasons , such as a 15 change in top management and the new management wants to retain an agency that it may have previously worked with . in addition , if the client is merged or acquired by another company , the marketing communication firm is often changed . further , global clients are trending to consolidate the use of numerous marketing communication firms to just one or two . another factor in a client changing firms is the agency 's campaign or work product is not providing results and they feel a change is in order to generate additional revenues . clients will generally reduce or increase their spending or outsourcing needs based on their current business trends and profitability . these types of changes impact the performance marketing services group more than the strategic marketing services group due to the performance marketing services group having clients who require project-based work as opposed to the strategic marketing services group who primarily have retainer-based relationships . acquisitions and dispositions . our strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry . we engaged in a number of acquisition and disposal transactions during the 2010 to 2014 period , which affected revenues , expenses , operating income and net income . additional information regarding material acquisitions is provided in note 4 “ acquisitions ” and information on dispositions is provided in note 10 “ discontinued operations ” in the notes to the consolidated financial statements included herein . foreign exchange fluctuation . our financial results and competitive position are affected by fluctuations in the exchange rate between the u.s. dollar and non-u.s. dollars , primarily the canadian dollar . see also item 7a , “ quantitative and qualitative disclosures about market risk — foreign exchange . ” seasonality . historically , with some exceptions , we generate the highest quarterly revenues during the fourth quarter in each year . the fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur . fourth quarter results . revenues for the fourth quarter of 2014 increased to $ 339.9 million , compared to 2013 fourth quarter revenues of $ 289.2 million . the increase consisted of organic growth of $ 36.2 million , acquisition revenue of $ 18.2 million and a decrease of $ 3.7 million due to foreign currency fluctuations . the strategic marketing services segment had revenue growth of $ 42.9 million in 2014 , of which $ 33.0 million was organic , acquisition revenue of $ 12.7 million , offset by a decrease of $ 2.8 million due to foreign currency fluctuations . the performance marketing services segment had increased revenue of $ 7.8 million in 2014 , which consisted of organic growth of $ 3.2 million , acquisition revenue of $ 5.5 million , offset by a decrease of $ 0.9 million related to foreign currency fluctuations . operating results for the fourth quarter of 2014 resulted in a profit of $ 25.7 million , compared to a loss of $ 70.1 million in 2013. the increase in operating profits was primarily related to two compensation related items from 2013 : a stock based compensation charge of $ 55.8 million relating to the company 's settlement of its outstanding sar 's in cash , and a one-time contractual bonus to the company 's ceo of $ 9.6 million for the company 's stock price achieving specified targets and to a reduction of $ 28.8 million relating to the estimated deferred acquisition consideration expense . loss from continuing operations for the fourth quarter of 2014 was $ 6.4 million , compared to $ 90.1 million in 2013. other expense net increased to $ 9.1 million in 2014 , compared to $ 4.6 million in 2013 due to unrealized losses due to foreign currency fluctuations . interest expense was higher in 2014 by $ 2.9 million , income tax expense was also higher by $ 5.8 million and equity in earnings of non-consolidated affiliates was $ 1.2 million in 2014 , compared to $ 0.1 million in 2013. interest expense increased due to the company 's additional issuance of $ 75 million aggregate principal 6.75 % notes in april 2014. summary of key transactions year ended december 31 , 2014 the company completed several key acquisitions in 2014. mdc acquired a 60 % equity interest in luntz global partners llc , a 65 % equity interest in kingsdale partners lp , a 100 % equity interest in the house worldwide ltd , an additional 82 % equity interest in trapeze media limited , a 65 % equity interest in hunter pr llc , a 75 % equity interest in albion brand communications limited and two additional non-material acquisitions . the total aggregate purchase price for these 2014 transactions was $ 151.2 million , which included closing cash payments equal to $ 67.2 million , plus additional estimated contingent purchase payments in future years of approximately $ 84.0 million . see note 4 of the notes to the consolidated financial statements included herein for additional information on these and other acquisitions . on april 2 , 2014 , the company issued an additional $ 75 million aggregate principal amount of its 6.75 % notes . story_separator_special_tag these amounts were also impacted by an increase in foreign exchange losses of $ 4.4 million in 2013 and an increase in other income , net of $ 2.1 million . marketing communications group revenues attributable to the marketing communications group , which consists of two segments — strategic marketing services and performance marketing services , were $ 1.1 billion in the aggregate in 2013 , compared to $ 1.0 billion in 2012 , representing a year-over-year increase of 9.2 % . the components of the change in revenue for 2013 are shown in the following table : replace_table_token_9_th the geographic mix in revenues was relatively consistent between 2013 and 2012 and is demonstrated in the following table : replace_table_token_10_th the operating profit of the marketing communications group increased by $ 71.3 million to $ 93.5 million from $ 22.2 million . operating margins increased by 6.5 % and were 8.8 % for 2013 , compared to 2.3 % for 2012. the increase in operating profit and operating margin was primarily due to increases in revenue and decreases in direct costs , office and general expenses , and depreciation and amortization . total staff costs were consistent at approximately 58 % . direct costs ( excluding staff costs ) decreased as a percentage of revenues from 18.2 % in 2012 , to 14.4 % in 2013. direct costs decreased as there were fewer pass-through costs incurred on the clients ' behalf during 2013 where the company was acting as principal versus agent for certain client contracts . office and general expenses decreased as a percentage of revenue from 24.9 % in 2012 , to 21.6 % in 2013. this decrease was primarily due to a reduction of $ 17.1 million in expense relating to estimated deferred acquisition consideration and the increase in revenue on relatively fixed costs . depreciation and amortization as a percentage of revenue decreased from 4.2 % in 2012 to 3.3 % in 2013 due to the increase in revenue . 23 marketing communications businesses strategic marketing services revenues attributable to strategic marketing services in 2013 were $ 836.9 million , compared to $ 751.5 million in 2012. the year-over-year increase of $ 85.5 million , or 11.4 % , was attributable primarily to organic growth of $ 91.4 million or 12.2 % ; these increases were offset by a foreign exchange translation decrease due to the strengthening of the u.s. dollar compared to the canadian dollar . this organic revenue growth was driven by net new business wins . the operating profit of strategic marketing services increased by $ 61.4 million from $ 25.5 million in 2012 to $ 86.9 million in 2013. operating margins increased from 3.4 % in 2012 to 10.4 % in 2013. the increase in operating profits and operating margins were primarily due to increases in revenues and decreases in direct costs , office and general costs and depreciation and amortization . total staff costs were relatively consistent at 59 % . direct costs ( excluding staff labor ) decreased as a percentage of revenue from 14.5 % 2012 to 10.1 % in 2013. direct costs decreased as there were fewer pass-through costs incurred on the clients ' behalf during 2013 where the company was acting as principal versus agent for certain client contracts . office and general expenses decreased as a percentage of revenue from 25.8 % in 2012 to 22.8 % in 2013. the decrease was due to a reduction of $ 12.4 million in expense relating to estimated deferred acquisition consideration and the increased revenue on relatively fixed costs . depreciation and amortization as a percentage of revenue decreased from 3.7 % in 2012 to 2.9 % in 2013 , due to the increase in revenue . performance marketing services performance marketing services generated revenues of $ 225.5 million for 2013 , an increase of $ 4.0 million , or 1.8 % , compared to revenues of $ 221.5 million in 2012. the year-over-year increase was attributable primarily to acquisition growth of $ 5.8 million and foreign translation decrease of $ 1.7 million . the operating profit of performance marketing services increased by $ 9.8 million , from a loss of $ 3.3 million in 2012 to income of $ 6.6 million in 2013. operating margins increased from a loss of 1.5 % in 2012 to income of 2.9 % in 2013. the increase in operating profits and operating margins were primarily due to increased revenue and decreases in total staff costs , direct costs ( excluding staff labor ) , office and general expenses , and depreciation and amortization . total staff costs decreased from 52.6 % in 2012 to 51.8 % in 2013. direct costs decreased from 30.7 % in 2012 to 30.1 % in 2013 due to decreased pass-through costs incurred on the clients ' behalf during 2013 where the agency was acting as principal versus agent for certain client contracts . office and general costs decreased as a percentage of revenue from 21.9 % in 2012 to 17.1 % in 2013 primarily due to decreased expenses relating to estimated deferred acquisition consideration and increased revenue on relatively fixed costs . depreciation and amortization decreased from 6.0 % in 2012 to 4.7 % in 2013 , due to the increase in revenue . corporate operating costs related to the company 's corporate operations increased by $ 87.9 million to $ 128.1 million in 2013 , compared to $ 40.2 million in 2012. this increase was primarily related to increased compensation and related costs of $ 89.0 million . the increase in compensation and related costs is due to the company 's settlement of its sar 's in cash resulting in a stock based compensation charge of $ 78.0 million and a one-time bonus payment of $ 9.6 million to our ceo for the company 's stock price achieving specified targets . increases in benefits and severance costs accounted for the remaining increase . additional advertising and
| net cash provided by operating activities was $ 1,330.8 million in 2015. our net income of $ 636.1 million in 2015 included non-cash compensation expense of $ 459.0 million and depreciation and amortization of $ 74.9 million . in addition , deferred tax assets as of december 31 , 2015 increased by $ 121.6 million , compared to december 31 , 2014 , primarily due to an increase in non-cash compensation expense , partly offset by a reduction in our deferred tax assets related to fixed assets and deferred revenue . as of december 31 , 2015 , sanofi , bayer healthcare , and trade accounts receivable increased by $ 491.4 million , compared to december 31 , 2014 , primarily due to higher u.s. eylea sales . inventories as of december 31 , 2015 increased by $ 111.8 million , compared to december 31 , 2014 , primarily due to increased production of eylea commercial supplies as well as capitalization of inventory in connection with praluent production . prepaid expenses and other assets increased by $ 79.5 million as of december 31 , 2015 , compared to december 31 , 2014 , primarily due to an increase in prepaid income taxes .
| 0 |
certain factors affecting our business overall factors affecting our business and results of operations . the most significant factors include national , regional and local economic conditions , our clients ' profitability , mergers and acquisitions of our clients , changes in top management of our clients and our ability to retain and attract key employees . new business wins and client losses occur due to a variety of factors . the two most significant factors are ; clients ' desire to change marketing communication firms , and the creative product our firms are offering . a client may choose to change marketing communication firms for a number of reasons , such as a 15 change in top management and the new management wants to retain an agency that it may have previously worked with . in addition , if the client is merged or acquired by another company , the marketing communication firm is often changed . further , global clients are trending to consolidate the use of numerous marketing communication firms to just one or two . another factor in a client changing firms is the agency 's campaign or work product is not providing results and they feel a change is in order to generate additional revenues . clients will generally reduce or increase their spending or outsourcing needs based on their current business trends and profitability . these types of changes impact the performance marketing services group more than the strategic marketing services group due to the performance marketing services group having clients who require project-based work as opposed to the strategic marketing services group who primarily have retainer-based relationships . acquisitions and dispositions . our strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry . we engaged in a number of acquisition and disposal transactions during the 2010 to 2014 period , which affected revenues , expenses , operating income and net income . additional information regarding material acquisitions is provided in note 4 “ acquisitions ” and information on dispositions is provided in note 10 “ discontinued operations ” in the notes to the consolidated financial statements included herein . foreign exchange fluctuation . our financial results and competitive position are affected by fluctuations in the exchange rate between the u.s. dollar and non-u.s. dollars , primarily the canadian dollar . see also item 7a , “ quantitative and qualitative disclosures about market risk — foreign exchange . ” seasonality . historically , with some exceptions , we generate the highest quarterly revenues during the fourth quarter in each year . the fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur . fourth quarter results . revenues for the fourth quarter of 2014 increased to $ 339.9 million , compared to 2013 fourth quarter revenues of $ 289.2 million . the increase consisted of organic growth of $ 36.2 million , acquisition revenue of $ 18.2 million and a decrease of $ 3.7 million due to foreign currency fluctuations . the strategic marketing services segment had revenue growth of $ 42.9 million in 2014 , of which $ 33.0 million was organic , acquisition revenue of $ 12.7 million , offset by a decrease of $ 2.8 million due to foreign currency fluctuations . the performance marketing services segment had increased revenue of $ 7.8 million in 2014 , which consisted of organic growth of $ 3.2 million , acquisition revenue of $ 5.5 million , offset by a decrease of $ 0.9 million related to foreign currency fluctuations . operating results for the fourth quarter of 2014 resulted in a profit of $ 25.7 million , compared to a loss of $ 70.1 million in 2013. the increase in operating profits was primarily related to two compensation related items from 2013 : a stock based compensation charge of $ 55.8 million relating to the company 's settlement of its outstanding sar 's in cash , and a one-time contractual bonus to the company 's ceo of $ 9.6 million for the company 's stock price achieving specified targets and to a reduction of $ 28.8 million relating to the estimated deferred acquisition consideration expense . loss from continuing operations for the fourth quarter of 2014 was $ 6.4 million , compared to $ 90.1 million in 2013. other expense net increased to $ 9.1 million in 2014 , compared to $ 4.6 million in 2013 due to unrealized losses due to foreign currency fluctuations . interest expense was higher in 2014 by $ 2.9 million , income tax expense was also higher by $ 5.8 million and equity in earnings of non-consolidated affiliates was $ 1.2 million in 2014 , compared to $ 0.1 million in 2013. interest expense increased due to the company 's additional issuance of $ 75 million aggregate principal 6.75 % notes in april 2014. summary of key transactions year ended december 31 , 2014 the company completed several key acquisitions in 2014. mdc acquired a 60 % equity interest in luntz global partners llc , a 65 % equity interest in kingsdale partners lp , a 100 % equity interest in the house worldwide ltd , an additional 82 % equity interest in trapeze media limited , a 65 % equity interest in hunter pr llc , a 75 % equity interest in albion brand communications limited and two additional non-material acquisitions . the total aggregate purchase price for these 2014 transactions was $ 151.2 million , which included closing cash payments equal to $ 67.2 million , plus additional estimated contingent purchase payments in future years of approximately $ 84.0 million . see note 4 of the notes to the consolidated financial statements included herein for additional information on these and other acquisitions . on april 2 , 2014 , the company issued an additional $ 75 million aggregate principal amount of its 6.75 % notes . story_separator_special_tag these amounts were also impacted by an increase in foreign exchange losses of $ 4.4 million in 2013 and an increase in other income , net of $ 2.1 million . marketing communications group revenues attributable to the marketing communications group , which consists of two segments — strategic marketing services and performance marketing services , were $ 1.1 billion in the aggregate in 2013 , compared to $ 1.0 billion in 2012 , representing a year-over-year increase of 9.2 % . the components of the change in revenue for 2013 are shown in the following table : replace_table_token_9_th the geographic mix in revenues was relatively consistent between 2013 and 2012 and is demonstrated in the following table : replace_table_token_10_th the operating profit of the marketing communications group increased by $ 71.3 million to $ 93.5 million from $ 22.2 million . operating margins increased by 6.5 % and were 8.8 % for 2013 , compared to 2.3 % for 2012. the increase in operating profit and operating margin was primarily due to increases in revenue and decreases in direct costs , office and general expenses , and depreciation and amortization . total staff costs were consistent at approximately 58 % . direct costs ( excluding staff costs ) decreased as a percentage of revenues from 18.2 % in 2012 , to 14.4 % in 2013. direct costs decreased as there were fewer pass-through costs incurred on the clients ' behalf during 2013 where the company was acting as principal versus agent for certain client contracts . office and general expenses decreased as a percentage of revenue from 24.9 % in 2012 , to 21.6 % in 2013. this decrease was primarily due to a reduction of $ 17.1 million in expense relating to estimated deferred acquisition consideration and the increase in revenue on relatively fixed costs . depreciation and amortization as a percentage of revenue decreased from 4.2 % in 2012 to 3.3 % in 2013 due to the increase in revenue . 23 marketing communications businesses strategic marketing services revenues attributable to strategic marketing services in 2013 were $ 836.9 million , compared to $ 751.5 million in 2012. the year-over-year increase of $ 85.5 million , or 11.4 % , was attributable primarily to organic growth of $ 91.4 million or 12.2 % ; these increases were offset by a foreign exchange translation decrease due to the strengthening of the u.s. dollar compared to the canadian dollar . this organic revenue growth was driven by net new business wins . the operating profit of strategic marketing services increased by $ 61.4 million from $ 25.5 million in 2012 to $ 86.9 million in 2013. operating margins increased from 3.4 % in 2012 to 10.4 % in 2013. the increase in operating profits and operating margins were primarily due to increases in revenues and decreases in direct costs , office and general costs and depreciation and amortization . total staff costs were relatively consistent at 59 % . direct costs ( excluding staff labor ) decreased as a percentage of revenue from 14.5 % 2012 to 10.1 % in 2013. direct costs decreased as there were fewer pass-through costs incurred on the clients ' behalf during 2013 where the company was acting as principal versus agent for certain client contracts . office and general expenses decreased as a percentage of revenue from 25.8 % in 2012 to 22.8 % in 2013. the decrease was due to a reduction of $ 12.4 million in expense relating to estimated deferred acquisition consideration and the increased revenue on relatively fixed costs . depreciation and amortization as a percentage of revenue decreased from 3.7 % in 2012 to 2.9 % in 2013 , due to the increase in revenue . performance marketing services performance marketing services generated revenues of $ 225.5 million for 2013 , an increase of $ 4.0 million , or 1.8 % , compared to revenues of $ 221.5 million in 2012. the year-over-year increase was attributable primarily to acquisition growth of $ 5.8 million and foreign translation decrease of $ 1.7 million . the operating profit of performance marketing services increased by $ 9.8 million , from a loss of $ 3.3 million in 2012 to income of $ 6.6 million in 2013. operating margins increased from a loss of 1.5 % in 2012 to income of 2.9 % in 2013. the increase in operating profits and operating margins were primarily due to increased revenue and decreases in total staff costs , direct costs ( excluding staff labor ) , office and general expenses , and depreciation and amortization . total staff costs decreased from 52.6 % in 2012 to 51.8 % in 2013. direct costs decreased from 30.7 % in 2012 to 30.1 % in 2013 due to decreased pass-through costs incurred on the clients ' behalf during 2013 where the agency was acting as principal versus agent for certain client contracts . office and general costs decreased as a percentage of revenue from 21.9 % in 2012 to 17.1 % in 2013 primarily due to decreased expenses relating to estimated deferred acquisition consideration and increased revenue on relatively fixed costs . depreciation and amortization decreased from 6.0 % in 2012 to 4.7 % in 2013 , due to the increase in revenue . corporate operating costs related to the company 's corporate operations increased by $ 87.9 million to $ 128.1 million in 2013 , compared to $ 40.2 million in 2012. this increase was primarily related to increased compensation and related costs of $ 89.0 million . the increase in compensation and related costs is due to the company 's settlement of its sar 's in cash resulting in a stock based compensation charge of $ 78.0 million and a one-time bonus payment of $ 9.6 million to our ceo for the company 's stock price achieving specified targets . increases in benefits and severance costs accounted for the remaining increase . additional advertising and
| liquidity and capital resources the following table provides information about the company 's liquidity position : replace_table_token_11_th as of december 31 , 2014 , 2013 , and 2012 , $ 6.5 million , $ 0.7 million and $ 2.5 million , respectively , of the company 's consolidated cash position was held by subsidiaries . although this amount is available for the subsidiaries ' use , it does not represent cash that is distributable as earnings to mdc for use to reduce its indebtedness . it is the company 's intent through its cash management system to reduce outstanding borrowings under the credit agreement by using available cash . working capital at december 31 , 2014 , the company had a working capital deficit of $ 269.3 million compared to a deficit of $ 189.8 million at december 31 , 2013. working capital deficit increased by $ 79.5 million primarily related to a $ 37.8 million increase in short term deferred acquisition consideration . the increase in deficit was primarily due to timing in the amounts collected from clients , and when paid to suppliers , primarily media outlets . at december 31 , 2014 , the company had no borrowings under its credit agreement . the company includes amounts due to noncontrolling interest holders , for their share of profits , in accrued and other liabilities . during 2014 , 2013 and 2012 , the company made distributions to these noncontrolling interest holders of $ 6.5 million , $ 5.5 million and $ 7.7 million , respectively . at december 31 , 2014 , $ 6.0 million remains outstanding to be distributed to noncontrolling interest holders over the next twelve months .
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with regard to additional potential clinical activity , we submitted in october 2017 a request for clinical trial authorization ( “ cta ” ) in poland which , if allowed , will enable a phase i/ii clinical trial to study annamycin for the treatment of relapsed or refractory aml in poland . this will be in addition to the previously announced allowance of our ind in the united states . in december 2017 , the ethics committee in poland approved our phase i/ii clinical trial of annamycin . the cta remains subject to final approval by the polish national office . furthermore , in september 2017 we engaged a contract research organization ( “ cro ” ) to prepare for a proof-of-concept clinical trial in poland to study our drug candidate wp1220 , a part of the wp1066 portfolio , for the treatment of cutaneous t-cell lymphoma ( “ ctcl ” ) . our drug candidates annamycin 44 our lead product candidate is annamycin , for which fda has allowed an ind for a phase i/ii trial for the treatment of relapsed or refractory aml and granted orphan drug designation for the treatment of aml . we intend to conduct phase i/ii clinical trials for annamycin as a monotherapy for the treatment of relapsed or refractory aml in the united states and in poland . planned clinical trials for annamycin in october 2016 , we adjusted our clinical strategy for annamycin by adding in a phase i arm to our trial , which will add expense to our development effort . we believe this change in strategy will add several months to the eventual final approval of the drug , if the drug is approved . because the prior developer of annamycin allowed their ind to lapse , we were required to submit a new ind for continued clinical trials with annamycin . we filed our ind application for annamycin , with the clinical strategy of increasing the mtd mentioned above , on february 10 , 2017. in subsequent discussions with us , fda requested certain revisions to the protocol , additional information , and additional data related to chemistry , manufacturing and controls ( “ cmc ” ) . we made the requested revisions to the protocol and included the cmc data in our re-submission of the ind in august 2017 and the fda allowed this ind in september 2017. in august 2017 , we met with the european medicines agency ( “ ema ” ) to discuss a cta in europe for the study of annamycin for the treatment of aml . as a result of that meeting , we decided to proceed with an application in october 2017 for a cta for annamycin in poland . unlike in the united states , the process for beginning a clinical trial in poland requires a hospital contract before a request for cta can be made . we obtained the required hospital contract , which allowed the formal request for polish approval . in december 2017 , the ethics committee in poland approved our phase i/ii trial of annamycin for the treatment of relapsed or refractory aml . a final approval is required by the polish national office . in march we received requests for and provided additional information to the polish national office . we expect a response from the polish national office in the first half of 2018 and at the earliest mid-april 2018. the start of clinical trials in poland remains subject to confirmation and approval of the cta by the polish national office . we can provide no assurance that we will receive such confirmation on a timely basis , if at all . we have appointed a cro in both the united states and poland . in addition , we continue to recruit and contract clinics both in the united states and poland . in the us , we have one site - university hospitals cleveland medical center ( “ uhcmc ” ) - recruiting patients and active with drug ready to provide treatments . a patient has been enrolled with anticipated treatment to occur in the near term . we can provide no assurance treatment will occur on a timely basis , if at all . one of the key dose-limiting toxicities associated with currently available anthracyclines is their propensity to induce life-threatening heart damage . in our current phase i/ii trial for annamycin , we will collect data to further validate the design intent of annamycin to have little or no cardiotoxicity . unless otherwise noted , all of our references to annamycin refer to the liposomal form ( l-annamycin ) . on march 21 , 2017 , we received notice that fda had granted orphan drug designation for annamycin for the treatment of aml , effective march 20 , 2017. the wp1066 portfolio we have a license agreement with md anderson pursuant to which we have been granted a royalty-bearing , worldwide , exclusive license for the patent and technology rights related to our wp1066 portfolio and its close analogs , molecules targeting the modulation of key oncogenic transcription factors . planned clinical testing of wp1066 portfolio in vitro testing has shown a high level of activity for wp1066 against a wide range of solid tumors , and in vivo testing has shown significant activity against head and neck , pancreatic , stomach , and renal cancers , as well as metastatic melanoma and glioblastoma , among others . in vivo testing in mouse tumor models has shown that wp1066 inhibits tumor growth , blocks angiogenesis ( a process that leads to the formation of blood vasculature needed for tumor growth ) and increases survival . with respect to our wp1066 portfolio , we collaborated with a clinician at md anderson who submitted an ind for wp1066 treatment of brain tumors to the fda . story_separator_special_tag 50 we estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services . we make significant judgments and estimates in determining the accrued balance in each reporting period . as actual costs become known , we adjust our accrued estimates . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period . our accrued expenses are dependent , in part , upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers . to date , there have been no material differences from our accrued expenses to actual expenses . impairment of long-lived assets management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year . if an evaluation is required , the estimated future undiscounted cash flows associated with the asset are compared to the asset 's carrying value to determine if an impairment of such asset is necessary . the effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value . components of our results of operations and financial condition operating expenses we classify our operating expenses into three categories : research and development , general and administrative and depreciation . research and development . research and development expenses consist primarily of : costs incurred to conduct research , such as the discovery and development of our product candidates ; costs related to production of clinical supplies , including fees paid to contract manufacturers ; fees paid to clinical consultants , clinical trial sites and vendors , including clinical research organizations , in preparation for clinical trials and our ind and orphan drug applications with the fda ; and costs related to compliance with drug development regulatory requirements . we recognize all research and development costs as they are incurred . pre-clinical costs , contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed . we expect our research and development expenses to increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates in the united states and europe . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming . the actual probability of success for our product candidates may be affected by a variety of factors including : the quality of our product candidates , early clinical data , investment in our clinical program , competition , manufacturing capability and commercial viability . we may never succeed in achieving regulatory approval for any of our product candidates . as a result of the uncertainties discussed above , we are unable to determine the duration and completion costs of our research and development projects or when and to what extent , if any , we will generate revenue from the commercialization and sale of our product candidates . general and administrative general and administrative expense consists of personnel related costs , which include salaries , as well as the costs of professional services , such as accounting and legal , facilities , information technology and other administrative expenses . we expect our general and administrative expense to increase due to the anticipated growth of our business and related infrastructure as well as accounting , insurance , investor relations and other costs associated with becoming a public company . depreciation . depreciation expense consists of depreciation on our property and equipment . we depreciate our assets over their estimated useful life . we estimate leasehold improvements to have a 1-year life ; computer equipment to have a 2-year life ; machinery and equipment to have a 5-year life and furniture and office equipment to have a 7-year life . property and 51 equipment assets acquired as a result of the acquisition of moleculin , llc were given a 2-year life given the assessment at acquisition of their age and condition and expected useful remaining life . other income ( expense ) , net other income ( expense ) , net consists of interest expense associated with our notes payable and interest income . accounting for warrants we issued warrants to purchase shares of common stock related to equity transactions in 2016. we account for our warrants issued in accordance with accounting standards codification ( asc ) topic 815 , derivatives and hedging , guidance applicable to derivative instruments , which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value , with changes in fair value recognized in earnings for liability classified warrants . based on this guidance , we determined that our warrants meet the criteria for classification as equity . accordingly , the warrants were classified as equity and are not subject to remeasurement at each balance sheet date . the fair value was estimated using the black-scholes option pricing model , based on the market value of the underlying common stock at the measurement date , the contractual term of the warrant , risk-free interest rates , expected dividends and expected volatility of the price of the underlying common stock . the warrants issued in the february 2017 offering generated a warrant liability . our financial instruments consist primarily of account payables , accrued expenses , and a warrant liability . the carrying amount of accounts payables and accrued expenses approximates their fair value because of the short-term maturity
| liquidity and capital resources the following table provides information about the company 's liquidity position : replace_table_token_11_th as of december 31 , 2014 , 2013 , and 2012 , $ 6.5 million , $ 0.7 million and $ 2.5 million , respectively , of the company 's consolidated cash position was held by subsidiaries . although this amount is available for the subsidiaries ' use , it does not represent cash that is distributable as earnings to mdc for use to reduce its indebtedness . it is the company 's intent through its cash management system to reduce outstanding borrowings under the credit agreement by using available cash . working capital at december 31 , 2014 , the company had a working capital deficit of $ 269.3 million compared to a deficit of $ 189.8 million at december 31 , 2013. working capital deficit increased by $ 79.5 million primarily related to a $ 37.8 million increase in short term deferred acquisition consideration . the increase in deficit was primarily due to timing in the amounts collected from clients , and when paid to suppliers , primarily media outlets . at december 31 , 2014 , the company had no borrowings under its credit agreement . the company includes amounts due to noncontrolling interest holders , for their share of profits , in accrued and other liabilities . during 2014 , 2013 and 2012 , the company made distributions to these noncontrolling interest holders of $ 6.5 million , $ 5.5 million and $ 7.7 million , respectively . at december 31 , 2014 , $ 6.0 million remains outstanding to be distributed to noncontrolling interest holders over the next twelve months .
| 0 |
with regard to additional potential clinical activity , we submitted in october 2017 a request for clinical trial authorization ( “ cta ” ) in poland which , if allowed , will enable a phase i/ii clinical trial to study annamycin for the treatment of relapsed or refractory aml in poland . this will be in addition to the previously announced allowance of our ind in the united states . in december 2017 , the ethics committee in poland approved our phase i/ii clinical trial of annamycin . the cta remains subject to final approval by the polish national office . furthermore , in september 2017 we engaged a contract research organization ( “ cro ” ) to prepare for a proof-of-concept clinical trial in poland to study our drug candidate wp1220 , a part of the wp1066 portfolio , for the treatment of cutaneous t-cell lymphoma ( “ ctcl ” ) . our drug candidates annamycin 44 our lead product candidate is annamycin , for which fda has allowed an ind for a phase i/ii trial for the treatment of relapsed or refractory aml and granted orphan drug designation for the treatment of aml . we intend to conduct phase i/ii clinical trials for annamycin as a monotherapy for the treatment of relapsed or refractory aml in the united states and in poland . planned clinical trials for annamycin in october 2016 , we adjusted our clinical strategy for annamycin by adding in a phase i arm to our trial , which will add expense to our development effort . we believe this change in strategy will add several months to the eventual final approval of the drug , if the drug is approved . because the prior developer of annamycin allowed their ind to lapse , we were required to submit a new ind for continued clinical trials with annamycin . we filed our ind application for annamycin , with the clinical strategy of increasing the mtd mentioned above , on february 10 , 2017. in subsequent discussions with us , fda requested certain revisions to the protocol , additional information , and additional data related to chemistry , manufacturing and controls ( “ cmc ” ) . we made the requested revisions to the protocol and included the cmc data in our re-submission of the ind in august 2017 and the fda allowed this ind in september 2017. in august 2017 , we met with the european medicines agency ( “ ema ” ) to discuss a cta in europe for the study of annamycin for the treatment of aml . as a result of that meeting , we decided to proceed with an application in october 2017 for a cta for annamycin in poland . unlike in the united states , the process for beginning a clinical trial in poland requires a hospital contract before a request for cta can be made . we obtained the required hospital contract , which allowed the formal request for polish approval . in december 2017 , the ethics committee in poland approved our phase i/ii trial of annamycin for the treatment of relapsed or refractory aml . a final approval is required by the polish national office . in march we received requests for and provided additional information to the polish national office . we expect a response from the polish national office in the first half of 2018 and at the earliest mid-april 2018. the start of clinical trials in poland remains subject to confirmation and approval of the cta by the polish national office . we can provide no assurance that we will receive such confirmation on a timely basis , if at all . we have appointed a cro in both the united states and poland . in addition , we continue to recruit and contract clinics both in the united states and poland . in the us , we have one site - university hospitals cleveland medical center ( “ uhcmc ” ) - recruiting patients and active with drug ready to provide treatments . a patient has been enrolled with anticipated treatment to occur in the near term . we can provide no assurance treatment will occur on a timely basis , if at all . one of the key dose-limiting toxicities associated with currently available anthracyclines is their propensity to induce life-threatening heart damage . in our current phase i/ii trial for annamycin , we will collect data to further validate the design intent of annamycin to have little or no cardiotoxicity . unless otherwise noted , all of our references to annamycin refer to the liposomal form ( l-annamycin ) . on march 21 , 2017 , we received notice that fda had granted orphan drug designation for annamycin for the treatment of aml , effective march 20 , 2017. the wp1066 portfolio we have a license agreement with md anderson pursuant to which we have been granted a royalty-bearing , worldwide , exclusive license for the patent and technology rights related to our wp1066 portfolio and its close analogs , molecules targeting the modulation of key oncogenic transcription factors . planned clinical testing of wp1066 portfolio in vitro testing has shown a high level of activity for wp1066 against a wide range of solid tumors , and in vivo testing has shown significant activity against head and neck , pancreatic , stomach , and renal cancers , as well as metastatic melanoma and glioblastoma , among others . in vivo testing in mouse tumor models has shown that wp1066 inhibits tumor growth , blocks angiogenesis ( a process that leads to the formation of blood vasculature needed for tumor growth ) and increases survival . with respect to our wp1066 portfolio , we collaborated with a clinician at md anderson who submitted an ind for wp1066 treatment of brain tumors to the fda . story_separator_special_tag 50 we estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services . we make significant judgments and estimates in determining the accrued balance in each reporting period . as actual costs become known , we adjust our accrued estimates . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period . our accrued expenses are dependent , in part , upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers . to date , there have been no material differences from our accrued expenses to actual expenses . impairment of long-lived assets management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year . if an evaluation is required , the estimated future undiscounted cash flows associated with the asset are compared to the asset 's carrying value to determine if an impairment of such asset is necessary . the effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value . components of our results of operations and financial condition operating expenses we classify our operating expenses into three categories : research and development , general and administrative and depreciation . research and development . research and development expenses consist primarily of : costs incurred to conduct research , such as the discovery and development of our product candidates ; costs related to production of clinical supplies , including fees paid to contract manufacturers ; fees paid to clinical consultants , clinical trial sites and vendors , including clinical research organizations , in preparation for clinical trials and our ind and orphan drug applications with the fda ; and costs related to compliance with drug development regulatory requirements . we recognize all research and development costs as they are incurred . pre-clinical costs , contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed . we expect our research and development expenses to increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates in the united states and europe . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming . the actual probability of success for our product candidates may be affected by a variety of factors including : the quality of our product candidates , early clinical data , investment in our clinical program , competition , manufacturing capability and commercial viability . we may never succeed in achieving regulatory approval for any of our product candidates . as a result of the uncertainties discussed above , we are unable to determine the duration and completion costs of our research and development projects or when and to what extent , if any , we will generate revenue from the commercialization and sale of our product candidates . general and administrative general and administrative expense consists of personnel related costs , which include salaries , as well as the costs of professional services , such as accounting and legal , facilities , information technology and other administrative expenses . we expect our general and administrative expense to increase due to the anticipated growth of our business and related infrastructure as well as accounting , insurance , investor relations and other costs associated with becoming a public company . depreciation . depreciation expense consists of depreciation on our property and equipment . we depreciate our assets over their estimated useful life . we estimate leasehold improvements to have a 1-year life ; computer equipment to have a 2-year life ; machinery and equipment to have a 5-year life and furniture and office equipment to have a 7-year life . property and 51 equipment assets acquired as a result of the acquisition of moleculin , llc were given a 2-year life given the assessment at acquisition of their age and condition and expected useful remaining life . other income ( expense ) , net other income ( expense ) , net consists of interest expense associated with our notes payable and interest income . accounting for warrants we issued warrants to purchase shares of common stock related to equity transactions in 2016. we account for our warrants issued in accordance with accounting standards codification ( asc ) topic 815 , derivatives and hedging , guidance applicable to derivative instruments , which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value , with changes in fair value recognized in earnings for liability classified warrants . based on this guidance , we determined that our warrants meet the criteria for classification as equity . accordingly , the warrants were classified as equity and are not subject to remeasurement at each balance sheet date . the fair value was estimated using the black-scholes option pricing model , based on the market value of the underlying common stock at the measurement date , the contractual term of the warrant , risk-free interest rates , expected dividends and expected volatility of the price of the underlying common stock . the warrants issued in the february 2017 offering generated a warrant liability . our financial instruments consist primarily of account payables , accrued expenses , and a warrant liability . the carrying amount of accounts payables and accrued expenses approximates their fair value because of the short-term maturity
| liquidity and capital resources as of december 31 , 2017 , we had $ 7.7 million in cash . during 2017 , via the february 2017 offering , our at-the- market issuance agreement ( “ atm ” ) , and the exercise of warrants associated with the february 2017 offering , we issued 7.2 million shares of common stock and received $ 10.1 million in net proceeds . as mentioned above , subsequent to year-end in february 2018 we entered into the purchase agreement with certain investors for the sale of 4,290,000 shares of our common stock , at a purchase price of $ 2.10 per share . concurrently with the sale of the common shares , pursuant to the purchase agreement , we also sold warrants to purchase 2,145,000 shares of common stock , which have an exercise price of $ 2.80 per share . we sold the common shares and warrants for aggregate gross proceeds of approximately $ 9.0 million with net proceeds approximating $ 8.3 million ( the “ february 2018 offering ” ) . we believe that our existing cash and cash equivalents as of december 31 , 2017 along with the cash generated by the february 2018 offering , will be sufficient to fund our planned operations into the first quarter of 2019. such plans are subject to change depending on clinical enrollment and regulatory progress and the use and supply of drug product . 48 we will not generate revenue from product sales unless and until we successfully complete development of , obtain regulatory approval for and begin to commercialize one or more of our product candidates , which we expect will take a number of years and is subject to significant uncertainty . accordingly , we will need to raise additional capital to fund our future operations .
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emerging markets and developing economies are forecast to grow at a 5.5 % rate in 2013 , a gradual improvement from 2012. according to the world steel association and other published reports , global steel production is expected to increase 3.2 percent in 2013. however , steel customer confidence and profitability remains low due to the continued economic uncertainty , particularly in europe . overall , we expect higher volumes in our industrial materials segment 43 in 2013 due to a restocking of inventory and an improvement in steel production levels across our global customer base . the graphite electrode market has become increasingly competitive with the addition of approximately 100,000 metric tons of capacity coming on line over the past year , of which approximately 65,000 metric tons are located in china . an estimated 130,000 metric tons of additional graphite electrode capacity expansions have also been announced , of which approximately 100,000 metric tons are located in china , and are projected to be operational in 2013/2014 , although several of these announced projects may be postponed . these new additions have further exacerbated a challenging global graphite electrode industry , which already had excess capacity . in the needle coke market , additional supply has come on line with the restart of a major asian producer whose operations had been suspended for several months in 2012. this producer appears to be currently fully operational , resulting in additional available capacity in 2013 the graphite electrode and needle coke capacity additions described above are compounded further by a still recovering global economy and challenging steel market , in which many steel producers continue to struggle to achieve acceptable profitability levels . the modest improvement in the global economies and our steel end market , while encouraging , is not substantial enough to offset the negative impact of the graphite electrode and needle coke capacity additions . as a result , these factors are contributing to downward pricing pressure on both graphite electrodes and needle coke for 2013. looking forward , we believe that the excess graphite electrode capacity will be partially absorbed over time by growth in eaf steel production . based on cru international ( an independent market research firm ) and other estimates , it is anticipated that approximately 100 million metrics tons of new eaf capacity will come on line over the next five years . in light of current economic conditions , we are further reducing overhead expense by means of additional rightsizing initiatives , hiring restrictions , suspension of 2013 salary merit increases and reductions in travel and other discretionary expenses . we have also reduced targeted capital expenditures from 2012 levels given the difficult operating environment . in our industrial materials segment , at the mid-point of our guidance range , capital expenditures are expected to be approximately $ 60 million , $ 5 million of which will be invested in product innovation to grow our competitive advantages . in our engineered solutions segment , we plan to invest approximately $ 45 million , of which $ 35 million will be growth capital to support increasing demand for products used in the advanced consumer electronics ( oled/led/lcd displays , tablets , smartphones , ereaders ) and energy ( lithium ion batteries , leds , oil and gas ) industries . these investments position our company for future growth and support our target of double-digit revenue growth and operating income margin expansion for the segment in 2013. on a stand alone basis ( excluding shared corporate allocations , interest and taxes ) , we expect the engineered solutions business will generate sufficient cash to fund its capital and other business investments in 2013. the diversification that our engineered solutions business provides is expected to partially mitigate the challenging cyclical steel environment that we face . we anticipate solid top line growth and an improved margin profile in this segment as our engineered solutions product portfolio shifts to higher margin businesses . the first quarter of 2013 however will be negatively impacted by seasonally slower advanced consumer electronics sales and start up costs associated with investments to support future growth . as a result , operating income for the segment is anticipated to be comparable to the first quarter of 2012. for this segment , we expect double-digit revenue growth for the full year and operating income margins to be in the range of 13 percent to 15 percent in the second half of 2013. we are targeting full year e arnings before interest , taxes , depreciation and amortization and other ( income ) expense to be in the range of $ 175 million to $ 205 million . we expect that the first quarter will be our weakest , with e arnings before interest , taxes , depreciation and amortization and other ( income ) expense targeted to be in the range of $ 30 million to $ 40 million . the first quarter of 2013 will be negatively impacted by seasonally lower graphite electrode volumes and higher cost inventory due to the carryover of third party needle coke acquired in 2012 and higher fixed cost absorption associated with lower graphite electrode utilization rates in the fourth quarter of 2012. in the second half of 2013 , we expect improved profitability due to higher sales in both business segments and lower costs in our industrial materials segment as we work off higher cost inventory and reflect lower fixed cost per unit of production as operating rates improve . we expect to exit the year with fourth quarter 2013 e arnings before interest , taxes , depreciation and amortization and other ( income ) expense targeted to be in the range of $ 60 million to $ 70 million . story_separator_special_tag million in 2012 compared to net sales of $ 1,132.2 million in 2011 . this decrease was primarily the result of lower sales volumes for both graphite electrodes and needle coke in the face of a difficult economic environment , particularly in european markets . these volume decreases were partially offset by higher realized prices in 2012 compared to 2011 . the weighted average selling price , excluding currency impacts , of our melter and non-melter electrodes for the year ended december 31 , 2012 increased approximately 10 % as compared to the average price in 2011 . we continue to focus on maximizing 48 the profitability of our global production platform ; however we are experiencing downward pricing pressure on both graphite electrodes and needle coke for 2013. net sales for our engineered solutions segment in creased to $ 222.7 million in 2012 , compared to net sales of $ 188.0 million in 2011 . this increase was primarily driven by continued growth in sales of our advanced consumer electronics products and a more favorable product mix , as we continue to penetrate high-growth end markets with attractive margin profiles . this increase was partially offset by the decline in sales of our advanced graphite material products to the solar market . cost of sales . during 2012 , we experienced decreases in cost of sales of $ 63.2 million as a result of lower sales volumes in our industrial materials segment , primarily related to graphite electrodes . further decreasing cost of sales in 2012 was the favorable impact of foreign currency compared to 2011 and a reduction in the year-over-year mtm adjustment of $ 6.3 million ( $ 11.0 million in 2011 ; $ 6.3 million in 2012 ) . the mtm adjustment in both 2011 and 2012 was driven by a decline in discount rates used in the valuation of net pension and post-retirement obligations . costs of sales in 2012 also benefited from the consumption during the first half for 2012 of inventories on hand at 2011 year-end . that inventory carried lower raw material costs and overhead absorption rates . the impact of this benefit was partially offset by the flow through of inventory carrying higher raw material costs and absorption rates in the third and fourth quarters of 2012. we anticipate that the impact of higher raw material costs and overhead absorption rates will continue to negatively impact our costs into 2013. these net decreases in cost of sales for our industrial materials segment were partially offset by higher costs associated with volume increases in our engineered solutions segment . selling and administrative expenses . selling and administrative expenses remained relatively flat ( a $ 1.0 million increase ) in 2012 compared to 2011. increases in incentive compensation expense and selling and administrative costs resulting from acquisitions was largely offset by the reduction in pension mark-to-market charges in 2012 compared to 2011. the mtm adjustment in both 2011 and 2012 was driven by a decline in discount rates used in the valuation of net pension and post-retirement obligations . other expense ( income ) , net . during 2012 , we received $ 4.0 million of insurance reimbursements for claims made related to flood damages incurred at our clarksburg , west virginia facility during 2011. additionally , as a result of the remeasurement of intercompany loans and the effect of transaction gains and losses on intercompany activities , there was a $ 0.6 million gain during 2012 , compared to a $ 2.6 million loss during 2011. interest expense . interest expense in creased $ 4.9 million in 2012 as a result of higher debt levels compared to 2011. the higher debt levels were incurred to principally support the share repurchase program , capital expenditures and working capital increases . we expect interest expense in 2013 to be approximately $ 12.0 - $ 17.0 million higher than 2012 primarily as a result of the issuance of the senior notes during the fourth quarter of 2012. segment operating income . corporate expenses are allocated to segments based on each segment 's percentage of consolidated sales . the following table represents our operating income by segment for 2011 and 2012 : replace_table_token_9_th the percentage relationship of cost of operations to sales for industrial materials and engineered solutions is set forth in the following table : replace_table_token_10_th 49 segment operating costs and expenses as a percentage of sales for industrial materials remained flat at 86 % in 2012. favorable foreign currency impacts decreased operating expenses in 2012 compared to 2011 , although these decreases were largely offset by the flow through , principally during the second half of 2012 , of higher raw material costs and overhead absorption rates in 2012 compared to 2011. we expect operating expenses in 2013 to continue to be negatively impacted by the flow through of higher raw material costs and lower overhead absorption rates as we consume higher cost raw materials inventories remaining on hand . segment operating costs and expenses as a percentage of sales for engineered solutions decreased from 96 % in 2011 to 94 % in 2012. operating expenses decreased as a percentage of sales due primarily to a favorable change in product mix , as advanced composite materials and advanced electronics technologies contributed a larger percentage of overall engineered solutions sales . provision for income taxes . the following table summarizes the expense for income taxes in 2011 and 2012 : replace_table_token_11_th our net unrecognized tax benefits decreased by $ 8.1 million during 2012 , primarily related to the resolution of uncertain tax positions from prior years , which had a favorable impact on our effective tax rate . we also recorded tax credits relating to prior years in support of our research and development efforts of high-tech engineered solutions products , which positively impacted the tax rate for the year . in addition , the year to date effective tax rate differs from the u.s
| liquidity and capital resources as of december 31 , 2017 , we had $ 7.7 million in cash . during 2017 , via the february 2017 offering , our at-the- market issuance agreement ( “ atm ” ) , and the exercise of warrants associated with the february 2017 offering , we issued 7.2 million shares of common stock and received $ 10.1 million in net proceeds . as mentioned above , subsequent to year-end in february 2018 we entered into the purchase agreement with certain investors for the sale of 4,290,000 shares of our common stock , at a purchase price of $ 2.10 per share . concurrently with the sale of the common shares , pursuant to the purchase agreement , we also sold warrants to purchase 2,145,000 shares of common stock , which have an exercise price of $ 2.80 per share . we sold the common shares and warrants for aggregate gross proceeds of approximately $ 9.0 million with net proceeds approximating $ 8.3 million ( the “ february 2018 offering ” ) . we believe that our existing cash and cash equivalents as of december 31 , 2017 along with the cash generated by the february 2018 offering , will be sufficient to fund our planned operations into the first quarter of 2019. such plans are subject to change depending on clinical enrollment and regulatory progress and the use and supply of drug product . 48 we will not generate revenue from product sales unless and until we successfully complete development of , obtain regulatory approval for and begin to commercialize one or more of our product candidates , which we expect will take a number of years and is subject to significant uncertainty . accordingly , we will need to raise additional capital to fund our future operations .
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emerging markets and developing economies are forecast to grow at a 5.5 % rate in 2013 , a gradual improvement from 2012. according to the world steel association and other published reports , global steel production is expected to increase 3.2 percent in 2013. however , steel customer confidence and profitability remains low due to the continued economic uncertainty , particularly in europe . overall , we expect higher volumes in our industrial materials segment 43 in 2013 due to a restocking of inventory and an improvement in steel production levels across our global customer base . the graphite electrode market has become increasingly competitive with the addition of approximately 100,000 metric tons of capacity coming on line over the past year , of which approximately 65,000 metric tons are located in china . an estimated 130,000 metric tons of additional graphite electrode capacity expansions have also been announced , of which approximately 100,000 metric tons are located in china , and are projected to be operational in 2013/2014 , although several of these announced projects may be postponed . these new additions have further exacerbated a challenging global graphite electrode industry , which already had excess capacity . in the needle coke market , additional supply has come on line with the restart of a major asian producer whose operations had been suspended for several months in 2012. this producer appears to be currently fully operational , resulting in additional available capacity in 2013 the graphite electrode and needle coke capacity additions described above are compounded further by a still recovering global economy and challenging steel market , in which many steel producers continue to struggle to achieve acceptable profitability levels . the modest improvement in the global economies and our steel end market , while encouraging , is not substantial enough to offset the negative impact of the graphite electrode and needle coke capacity additions . as a result , these factors are contributing to downward pricing pressure on both graphite electrodes and needle coke for 2013. looking forward , we believe that the excess graphite electrode capacity will be partially absorbed over time by growth in eaf steel production . based on cru international ( an independent market research firm ) and other estimates , it is anticipated that approximately 100 million metrics tons of new eaf capacity will come on line over the next five years . in light of current economic conditions , we are further reducing overhead expense by means of additional rightsizing initiatives , hiring restrictions , suspension of 2013 salary merit increases and reductions in travel and other discretionary expenses . we have also reduced targeted capital expenditures from 2012 levels given the difficult operating environment . in our industrial materials segment , at the mid-point of our guidance range , capital expenditures are expected to be approximately $ 60 million , $ 5 million of which will be invested in product innovation to grow our competitive advantages . in our engineered solutions segment , we plan to invest approximately $ 45 million , of which $ 35 million will be growth capital to support increasing demand for products used in the advanced consumer electronics ( oled/led/lcd displays , tablets , smartphones , ereaders ) and energy ( lithium ion batteries , leds , oil and gas ) industries . these investments position our company for future growth and support our target of double-digit revenue growth and operating income margin expansion for the segment in 2013. on a stand alone basis ( excluding shared corporate allocations , interest and taxes ) , we expect the engineered solutions business will generate sufficient cash to fund its capital and other business investments in 2013. the diversification that our engineered solutions business provides is expected to partially mitigate the challenging cyclical steel environment that we face . we anticipate solid top line growth and an improved margin profile in this segment as our engineered solutions product portfolio shifts to higher margin businesses . the first quarter of 2013 however will be negatively impacted by seasonally slower advanced consumer electronics sales and start up costs associated with investments to support future growth . as a result , operating income for the segment is anticipated to be comparable to the first quarter of 2012. for this segment , we expect double-digit revenue growth for the full year and operating income margins to be in the range of 13 percent to 15 percent in the second half of 2013. we are targeting full year e arnings before interest , taxes , depreciation and amortization and other ( income ) expense to be in the range of $ 175 million to $ 205 million . we expect that the first quarter will be our weakest , with e arnings before interest , taxes , depreciation and amortization and other ( income ) expense targeted to be in the range of $ 30 million to $ 40 million . the first quarter of 2013 will be negatively impacted by seasonally lower graphite electrode volumes and higher cost inventory due to the carryover of third party needle coke acquired in 2012 and higher fixed cost absorption associated with lower graphite electrode utilization rates in the fourth quarter of 2012. in the second half of 2013 , we expect improved profitability due to higher sales in both business segments and lower costs in our industrial materials segment as we work off higher cost inventory and reflect lower fixed cost per unit of production as operating rates improve . we expect to exit the year with fourth quarter 2013 e arnings before interest , taxes , depreciation and amortization and other ( income ) expense targeted to be in the range of $ 60 million to $ 70 million . story_separator_special_tag million in 2012 compared to net sales of $ 1,132.2 million in 2011 . this decrease was primarily the result of lower sales volumes for both graphite electrodes and needle coke in the face of a difficult economic environment , particularly in european markets . these volume decreases were partially offset by higher realized prices in 2012 compared to 2011 . the weighted average selling price , excluding currency impacts , of our melter and non-melter electrodes for the year ended december 31 , 2012 increased approximately 10 % as compared to the average price in 2011 . we continue to focus on maximizing 48 the profitability of our global production platform ; however we are experiencing downward pricing pressure on both graphite electrodes and needle coke for 2013. net sales for our engineered solutions segment in creased to $ 222.7 million in 2012 , compared to net sales of $ 188.0 million in 2011 . this increase was primarily driven by continued growth in sales of our advanced consumer electronics products and a more favorable product mix , as we continue to penetrate high-growth end markets with attractive margin profiles . this increase was partially offset by the decline in sales of our advanced graphite material products to the solar market . cost of sales . during 2012 , we experienced decreases in cost of sales of $ 63.2 million as a result of lower sales volumes in our industrial materials segment , primarily related to graphite electrodes . further decreasing cost of sales in 2012 was the favorable impact of foreign currency compared to 2011 and a reduction in the year-over-year mtm adjustment of $ 6.3 million ( $ 11.0 million in 2011 ; $ 6.3 million in 2012 ) . the mtm adjustment in both 2011 and 2012 was driven by a decline in discount rates used in the valuation of net pension and post-retirement obligations . costs of sales in 2012 also benefited from the consumption during the first half for 2012 of inventories on hand at 2011 year-end . that inventory carried lower raw material costs and overhead absorption rates . the impact of this benefit was partially offset by the flow through of inventory carrying higher raw material costs and absorption rates in the third and fourth quarters of 2012. we anticipate that the impact of higher raw material costs and overhead absorption rates will continue to negatively impact our costs into 2013. these net decreases in cost of sales for our industrial materials segment were partially offset by higher costs associated with volume increases in our engineered solutions segment . selling and administrative expenses . selling and administrative expenses remained relatively flat ( a $ 1.0 million increase ) in 2012 compared to 2011. increases in incentive compensation expense and selling and administrative costs resulting from acquisitions was largely offset by the reduction in pension mark-to-market charges in 2012 compared to 2011. the mtm adjustment in both 2011 and 2012 was driven by a decline in discount rates used in the valuation of net pension and post-retirement obligations . other expense ( income ) , net . during 2012 , we received $ 4.0 million of insurance reimbursements for claims made related to flood damages incurred at our clarksburg , west virginia facility during 2011. additionally , as a result of the remeasurement of intercompany loans and the effect of transaction gains and losses on intercompany activities , there was a $ 0.6 million gain during 2012 , compared to a $ 2.6 million loss during 2011. interest expense . interest expense in creased $ 4.9 million in 2012 as a result of higher debt levels compared to 2011. the higher debt levels were incurred to principally support the share repurchase program , capital expenditures and working capital increases . we expect interest expense in 2013 to be approximately $ 12.0 - $ 17.0 million higher than 2012 primarily as a result of the issuance of the senior notes during the fourth quarter of 2012. segment operating income . corporate expenses are allocated to segments based on each segment 's percentage of consolidated sales . the following table represents our operating income by segment for 2011 and 2012 : replace_table_token_9_th the percentage relationship of cost of operations to sales for industrial materials and engineered solutions is set forth in the following table : replace_table_token_10_th 49 segment operating costs and expenses as a percentage of sales for industrial materials remained flat at 86 % in 2012. favorable foreign currency impacts decreased operating expenses in 2012 compared to 2011 , although these decreases were largely offset by the flow through , principally during the second half of 2012 , of higher raw material costs and overhead absorption rates in 2012 compared to 2011. we expect operating expenses in 2013 to continue to be negatively impacted by the flow through of higher raw material costs and lower overhead absorption rates as we consume higher cost raw materials inventories remaining on hand . segment operating costs and expenses as a percentage of sales for engineered solutions decreased from 96 % in 2011 to 94 % in 2012. operating expenses decreased as a percentage of sales due primarily to a favorable change in product mix , as advanced composite materials and advanced electronics technologies contributed a larger percentage of overall engineered solutions sales . provision for income taxes . the following table summarizes the expense for income taxes in 2011 and 2012 : replace_table_token_11_th our net unrecognized tax benefits decreased by $ 8.1 million during 2012 , primarily related to the resolution of uncertain tax positions from prior years , which had a favorable impact on our effective tax rate . we also recorded tax credits relating to prior years in support of our research and development efforts of high-tech engineered solutions products , which positively impacted the tax rate for the year . in addition , the year to date effective tax rate differs from the u.s
| liquidity and capital resources we believe that we have adequate liquidity to meet all of our present needs . disruptions in the u.s. and international financial markets , however , could adversely affect our liquidity and the cost and availability of financing to us in the future . as of december 31 , 2012 we had cash and cash equivalents of $ 17.3 million , long-term debt of $ 535.7 million , short-term debt of $ 8.4 million and stockholder 's equity of $ 1,350 million . we also had $ 468 million of unused borrowing capacity under the revolving facility ( after considering financial covenants restrictions and the outstanding letters of credit of approximately $ 8.8 million ) . as a part of our cash management activities , we manage accounts receivable credit risk , collections , and accounts payable vendor terms to maximize our free cash at any given time and minimize accounts receivable losses . our sources of funds have consisted principally of cash flow from operations and debt including our revolving facility . our uses of those funds ( other than for operations ) have consisted principally of capital expenditures , the repurchase of common shares outstanding , cash paid for acquisitions and associated expenses and debt reduction payments and other obligations . we have a supply chain financing arrangement with a financing party that provides additional working capital liquidity of up to $ 50 million . under this arrangement , we essentially assigned our rights to purchase needle coke from a third-party supplier to the financing party . the financing party purchases the product from our supplier under the standard payment terms and then immediately resells it to us under longer payment terms . the financing party pays the supplier the purchase price for the product and then we pay the financing party . our payment to the financing party for this needle coke includes a mark-up ( the “ mark-up ” ) . the mark-up is subject to quarterly reviews .
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from cios and senior information technology ( it ) leaders in corporations and government agencies , to business leaders in high-tech and telecom enterprises and professional services firms , to supply chain professionals , marketing professionals and technology investors , we are the valuable partner to clients in 11,122 distinct enterprises . we work with clients to research , analyze , and interpret the business of it within the context of their individual roles . gartner is headquartered in stamford , connecticut , u.s.a. , and as of december 31 , 2016 , we had 8,813 employees , including 1,922 research analysts and consultants , and clients in over 90 countries . the foundation for all gartner products and services is our independent research on it , supply chain , and digital marketing initiatives . the findings from this research are delivered through our three business segments – research , consulting and events : research provides objective insight on critical and timely technology and supply chain initiatives for cios , other it professionals , supply chain leaders , marketing and other professionals , as well as technology companies and the institutional investment community , through reports , briefings , proprietary tools , access to our analysts , peer networking services and membership programs that enable our clients to make better decisions about their it , supply chain and marketing investments . consulting provides customized solutions to unique client needs through on-site , day-to-day support , as well as proprietary tools for measuring and improving it performance with a focus on cost , performance , efficiency , and quality . events provides it , supply chain , marketing and business professionals the opportunity to attend various symposia , conferences and exhibitions to learn , contribute and network with their peers . from our flagship event symposium/itxpo , to summits focused on specific technologies and industries , to experimental workshop-style seminars , our events distill the latest gartner research into applicable insight and advice . for more information regarding gartner and our products and services , visit gartner.com . 18 19 business measurements we believe the following business measurements are important performance indicators for our business segments : business segment business measurements research total contract value represents the value attributable to all of our subscription-related contracts . it is calculated as the annualized value of all contracts in effect at a specific point in time , without regard to the duration of the contract . total contract value primarily includes research deliverables for which revenue is recognized on a ratable basis , as well as other deliverables ( primarily events tickets ) for which revenue is recognized when the deliverable is utilized . research contract value represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis . contract value is calculated as the annualized value of all subscription research contracts in effect at a specific point in time , without regard to the duration of the contract . client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time . client retention is calculated on a percentage basis by dividing our current clients , who were also clients a year ago , by all clients from a year ago . client retention is calculated at an enterprise level , which represents a single company or customer . wallet retention rate represents a measure of the amount of contract value we have retained with clients over a 12-month period . wallet retention is calculated on a percentage basis by dividing the contract value of clients , who were clients one year ago , by the total contract value from a year ago , excluding the impact of foreign currency exchange . when wallet retention exceeds client retention , it is an indication of retention of higher-spending clients , or increased spending by retained clients , or both . wallet retention is calculated at an enterprise level , which represents a single company or customer . consulting consulting backlog represents future revenue to be derived from in-process consulting , measurement and strategic advisory services engagements . utilization rate represents a measure of productivity of our consultants . utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill . billing rate represents earned billable revenue divided by total billable hours . average annualized revenue per billable headcount represents a measure of the revenue generating ability of an average billable consultant and is calculated periodically by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year . events number of events represents the total number of hosted events completed during the period . number of attendees represents the total number of people who attend events . 20 executive summary of operations and financial position we have executed a consistent growth strategy since 2005 to drive double-digit annual revenue and earnings growth . the fundamentals of our strategy include a focus on creating extraordinary research insight , delivering innovative and highly differentiated product offerings , building a strong sales capability , providing world class client service with a focus on client engagement and retention , and continuously improving our operational effectiveness . we had total revenues of $ 2.4 billion in 2016 , an increase of 13 % over 2015 on a reported basis and 14 % adjusted for the impact of foreign currency exchange . diluted earnings per share was $ 2.31 in 2016 compared to $ 2.06 in 2015 , a 12 % increase , primarily driven by higher net income , which increased 10 % in 2016 , and to a lesser extent , a lower weighted-average share count , which declined 1 % . story_separator_special_tag amortization of intangibles increased to $ 24.8 million in 2016 from $ 13.3 million in 2015 due to the additional intangibles resulting from our acquisitions . acquisition and integration charges was $ 42.6 million in 2016 compared to $ 26.2 million in 2015. these charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions , legal , consulting and severance costs . operating income increased 6 % in 2016 compared to 2015 , to $ 305.1 million in 2016 from $ 288.0 million in 2015. operating income as a percentage of revenues was 12 % in 2016 and 13 % in 2015 with the decline due to a number of factors , to include lower gross contribution margins in our consulting and events segments and higher charges from acquisitions . interest expense , net increased 21 % year-over-year due to higher average borrowings in the 2016 period . other income ( expense ) , net was $ 8.4 million in 2016 , which included a gain of $ 2.5 million from the extinguishment of a portion of an economic development loan from the state of connecticut , the sale of certain state tax credits and the recognition of other tax incentives , and the net impact of gains and losses from our foreign currency hedging activities . other income ( expense ) , net was $ 5.0 million in 2015 , which consisted of a $ 6.8 million gain from the sale of certain state tax credits partially offset by a net loss from foreign currency hedging activities . provision for income taxes was $ 94.8 million in 2016 compared to $ 96.6 million in 2015 and the effective tax rate was 32.9 % in 2016 compared to 35.5 % in 2015. the decrease in the effective income tax rate was primarily attributable to the early adoption of asu no . 2016-09 in 2016 , partially offset by increases in non-deductible expenses relating to acquisitions . net income was $ 193.6 million in 2016 and $ 175.6 million in 2015 , an increase of 10 % . diluted earnings per share increased 12 % year-over-year , to $ 2.31 in 2016 compared to $ 2.06 in 2015 due to the higher net income and to a lesser extent , a decrease in the number of weighted-average shares in the 2016 period . 25 2015 versus 2014 the following table presents the changes in selected line items in our consolidated statements of operations for the two years ended december 31 , 2015 ( in thousands ) : replace_table_token_7_th total revenues for the year ended december 31 , 2015 increased $ 141.6 million , or 7 % , compared to the year ended december 31 , 2014. revenues increased by double-digits in our research and events businesses but declined 6 % in consulting . excluding the impact of foreign currency exchange , total revenues increased 13 % in 2015 compared to 2014. the following table presents total revenues by geographic region for the years ended ( in thousands ) : replace_table_token_8_th the following table presents our revenues by segment for the years ended ( in thousands ) : replace_table_token_9_th please refer to the section of this md & a below entitled “ segment results ” for a further discussion of revenues and results by segment . cost of services and product development ( “ cos `` ) expense increased $ 41.1 million , or 5 % , in 2015 compared to 2014 , to $ 839.1 million compared to $ 797.9 million in 2014. foreign exchange had a favorable impact on cos expense during 2015 , and adjusted for this impact , cos expense increased 11 % in 2015 when compared to 2014. the year-over-year increase in cos expense was due to $ 56.0 million in higher payroll and related benefits costs from additional headcount and merit salary increases , and $ 31.0 million in higher charges in 2015 for events costs , travel , and other corporate expenses . partially offsetting these increased expenses was approximately $ 46.0 million in favorable foreign exchange impact . the additional headcount was 26 primarily in our research business which includes the additional employees resulting from our 2015 acquisitions , and to a lesser extent , an increase in headcount in our consulting business . cos as a percentage of revenues was 39 % in both the 2015 and 2014 periods . selling , general and administrative ( “ sg & a ” ) expense increased by $ 86.6 million in 2015 , or 10 % , to $ 962.7 million compared to $ 876.1 million in 2014. excluding the impact of foreign currency exchange , sg & a expense increased 16 % year-over-year . the increase was primarily due to $ 111.0 million in higher payroll and related benefits costs from additional headcount , higher sales commissions , and merit salary increases , and we also had $ 27.0 million in additional travel and training , recruiting , and other costs . partially offsetting these additional charges was $ 51.0 million in foreign exchange impact . sg & a headcount increased 17 % overall , with the majority of the increase in additional quota-bearing sales associates and related support staff . quota-bearing sales associates increased 15 % year-over-year , to 2,171 at december 31 , 2015 from 1,881 at year-end 2014. depreciation expense increased 8 % in 2015 compared to 2014 , which reflects our additional investment in fixed assets . amortization of intangibles increased to $ 13.3 million in 2015 from $ 8.2 million 2014 , an increase of 62 % year-over-year due to the additional intangibles resulting from our acquisitions . acquisition and integration charges was $ 26.2 million in 2015 compared to $ 21.9 million in 2014. these charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions ,
| liquidity and capital resources we believe that we have adequate liquidity to meet all of our present needs . disruptions in the u.s. and international financial markets , however , could adversely affect our liquidity and the cost and availability of financing to us in the future . as of december 31 , 2012 we had cash and cash equivalents of $ 17.3 million , long-term debt of $ 535.7 million , short-term debt of $ 8.4 million and stockholder 's equity of $ 1,350 million . we also had $ 468 million of unused borrowing capacity under the revolving facility ( after considering financial covenants restrictions and the outstanding letters of credit of approximately $ 8.8 million ) . as a part of our cash management activities , we manage accounts receivable credit risk , collections , and accounts payable vendor terms to maximize our free cash at any given time and minimize accounts receivable losses . our sources of funds have consisted principally of cash flow from operations and debt including our revolving facility . our uses of those funds ( other than for operations ) have consisted principally of capital expenditures , the repurchase of common shares outstanding , cash paid for acquisitions and associated expenses and debt reduction payments and other obligations . we have a supply chain financing arrangement with a financing party that provides additional working capital liquidity of up to $ 50 million . under this arrangement , we essentially assigned our rights to purchase needle coke from a third-party supplier to the financing party . the financing party purchases the product from our supplier under the standard payment terms and then immediately resells it to us under longer payment terms . the financing party pays the supplier the purchase price for the product and then we pay the financing party . our payment to the financing party for this needle coke includes a mark-up ( the “ mark-up ” ) . the mark-up is subject to quarterly reviews .
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from cios and senior information technology ( it ) leaders in corporations and government agencies , to business leaders in high-tech and telecom enterprises and professional services firms , to supply chain professionals , marketing professionals and technology investors , we are the valuable partner to clients in 11,122 distinct enterprises . we work with clients to research , analyze , and interpret the business of it within the context of their individual roles . gartner is headquartered in stamford , connecticut , u.s.a. , and as of december 31 , 2016 , we had 8,813 employees , including 1,922 research analysts and consultants , and clients in over 90 countries . the foundation for all gartner products and services is our independent research on it , supply chain , and digital marketing initiatives . the findings from this research are delivered through our three business segments – research , consulting and events : research provides objective insight on critical and timely technology and supply chain initiatives for cios , other it professionals , supply chain leaders , marketing and other professionals , as well as technology companies and the institutional investment community , through reports , briefings , proprietary tools , access to our analysts , peer networking services and membership programs that enable our clients to make better decisions about their it , supply chain and marketing investments . consulting provides customized solutions to unique client needs through on-site , day-to-day support , as well as proprietary tools for measuring and improving it performance with a focus on cost , performance , efficiency , and quality . events provides it , supply chain , marketing and business professionals the opportunity to attend various symposia , conferences and exhibitions to learn , contribute and network with their peers . from our flagship event symposium/itxpo , to summits focused on specific technologies and industries , to experimental workshop-style seminars , our events distill the latest gartner research into applicable insight and advice . for more information regarding gartner and our products and services , visit gartner.com . 18 19 business measurements we believe the following business measurements are important performance indicators for our business segments : business segment business measurements research total contract value represents the value attributable to all of our subscription-related contracts . it is calculated as the annualized value of all contracts in effect at a specific point in time , without regard to the duration of the contract . total contract value primarily includes research deliverables for which revenue is recognized on a ratable basis , as well as other deliverables ( primarily events tickets ) for which revenue is recognized when the deliverable is utilized . research contract value represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis . contract value is calculated as the annualized value of all subscription research contracts in effect at a specific point in time , without regard to the duration of the contract . client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time . client retention is calculated on a percentage basis by dividing our current clients , who were also clients a year ago , by all clients from a year ago . client retention is calculated at an enterprise level , which represents a single company or customer . wallet retention rate represents a measure of the amount of contract value we have retained with clients over a 12-month period . wallet retention is calculated on a percentage basis by dividing the contract value of clients , who were clients one year ago , by the total contract value from a year ago , excluding the impact of foreign currency exchange . when wallet retention exceeds client retention , it is an indication of retention of higher-spending clients , or increased spending by retained clients , or both . wallet retention is calculated at an enterprise level , which represents a single company or customer . consulting consulting backlog represents future revenue to be derived from in-process consulting , measurement and strategic advisory services engagements . utilization rate represents a measure of productivity of our consultants . utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill . billing rate represents earned billable revenue divided by total billable hours . average annualized revenue per billable headcount represents a measure of the revenue generating ability of an average billable consultant and is calculated periodically by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year . events number of events represents the total number of hosted events completed during the period . number of attendees represents the total number of people who attend events . 20 executive summary of operations and financial position we have executed a consistent growth strategy since 2005 to drive double-digit annual revenue and earnings growth . the fundamentals of our strategy include a focus on creating extraordinary research insight , delivering innovative and highly differentiated product offerings , building a strong sales capability , providing world class client service with a focus on client engagement and retention , and continuously improving our operational effectiveness . we had total revenues of $ 2.4 billion in 2016 , an increase of 13 % over 2015 on a reported basis and 14 % adjusted for the impact of foreign currency exchange . diluted earnings per share was $ 2.31 in 2016 compared to $ 2.06 in 2015 , a 12 % increase , primarily driven by higher net income , which increased 10 % in 2016 , and to a lesser extent , a lower weighted-average share count , which declined 1 % . story_separator_special_tag amortization of intangibles increased to $ 24.8 million in 2016 from $ 13.3 million in 2015 due to the additional intangibles resulting from our acquisitions . acquisition and integration charges was $ 42.6 million in 2016 compared to $ 26.2 million in 2015. these charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions , legal , consulting and severance costs . operating income increased 6 % in 2016 compared to 2015 , to $ 305.1 million in 2016 from $ 288.0 million in 2015. operating income as a percentage of revenues was 12 % in 2016 and 13 % in 2015 with the decline due to a number of factors , to include lower gross contribution margins in our consulting and events segments and higher charges from acquisitions . interest expense , net increased 21 % year-over-year due to higher average borrowings in the 2016 period . other income ( expense ) , net was $ 8.4 million in 2016 , which included a gain of $ 2.5 million from the extinguishment of a portion of an economic development loan from the state of connecticut , the sale of certain state tax credits and the recognition of other tax incentives , and the net impact of gains and losses from our foreign currency hedging activities . other income ( expense ) , net was $ 5.0 million in 2015 , which consisted of a $ 6.8 million gain from the sale of certain state tax credits partially offset by a net loss from foreign currency hedging activities . provision for income taxes was $ 94.8 million in 2016 compared to $ 96.6 million in 2015 and the effective tax rate was 32.9 % in 2016 compared to 35.5 % in 2015. the decrease in the effective income tax rate was primarily attributable to the early adoption of asu no . 2016-09 in 2016 , partially offset by increases in non-deductible expenses relating to acquisitions . net income was $ 193.6 million in 2016 and $ 175.6 million in 2015 , an increase of 10 % . diluted earnings per share increased 12 % year-over-year , to $ 2.31 in 2016 compared to $ 2.06 in 2015 due to the higher net income and to a lesser extent , a decrease in the number of weighted-average shares in the 2016 period . 25 2015 versus 2014 the following table presents the changes in selected line items in our consolidated statements of operations for the two years ended december 31 , 2015 ( in thousands ) : replace_table_token_7_th total revenues for the year ended december 31 , 2015 increased $ 141.6 million , or 7 % , compared to the year ended december 31 , 2014. revenues increased by double-digits in our research and events businesses but declined 6 % in consulting . excluding the impact of foreign currency exchange , total revenues increased 13 % in 2015 compared to 2014. the following table presents total revenues by geographic region for the years ended ( in thousands ) : replace_table_token_8_th the following table presents our revenues by segment for the years ended ( in thousands ) : replace_table_token_9_th please refer to the section of this md & a below entitled “ segment results ” for a further discussion of revenues and results by segment . cost of services and product development ( “ cos `` ) expense increased $ 41.1 million , or 5 % , in 2015 compared to 2014 , to $ 839.1 million compared to $ 797.9 million in 2014. foreign exchange had a favorable impact on cos expense during 2015 , and adjusted for this impact , cos expense increased 11 % in 2015 when compared to 2014. the year-over-year increase in cos expense was due to $ 56.0 million in higher payroll and related benefits costs from additional headcount and merit salary increases , and $ 31.0 million in higher charges in 2015 for events costs , travel , and other corporate expenses . partially offsetting these increased expenses was approximately $ 46.0 million in favorable foreign exchange impact . the additional headcount was 26 primarily in our research business which includes the additional employees resulting from our 2015 acquisitions , and to a lesser extent , an increase in headcount in our consulting business . cos as a percentage of revenues was 39 % in both the 2015 and 2014 periods . selling , general and administrative ( “ sg & a ” ) expense increased by $ 86.6 million in 2015 , or 10 % , to $ 962.7 million compared to $ 876.1 million in 2014. excluding the impact of foreign currency exchange , sg & a expense increased 16 % year-over-year . the increase was primarily due to $ 111.0 million in higher payroll and related benefits costs from additional headcount , higher sales commissions , and merit salary increases , and we also had $ 27.0 million in additional travel and training , recruiting , and other costs . partially offsetting these additional charges was $ 51.0 million in foreign exchange impact . sg & a headcount increased 17 % overall , with the majority of the increase in additional quota-bearing sales associates and related support staff . quota-bearing sales associates increased 15 % year-over-year , to 2,171 at december 31 , 2015 from 1,881 at year-end 2014. depreciation expense increased 8 % in 2015 compared to 2014 , which reflects our additional investment in fixed assets . amortization of intangibles increased to $ 13.3 million in 2015 from $ 8.2 million 2014 , an increase of 62 % year-over-year due to the additional intangibles resulting from our acquisitions . acquisition and integration charges was $ 26.2 million in 2015 compared to $ 21.9 million in 2014. these charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions ,
| liquidity and capital resources the company has a five-year credit arrangement that it entered into in june 2016 that provides for a $ 600.0 million term loan and a $ 1.2 billion revolving credit facility ( the “ 2016 credit agreement ” ) . as of december 31 , 2016 , the company had $ 585.0 million outstanding under the term loan and $ 115.0 million under the revolver and $ 1.1 billion of available revolver borrowing capacity under the 2016 credit agreement . we had $ 474.2 million of cash and cash equivalents at december 31 , 2016. the 2016 credit agreement was amended on january 20 , 2017 to permit the acquisition of ceb and the incurrence of an additional $ 1.375 billion senior secured term loan b facility , a $ 300.0 million 364-day senior unsecured bridge facility and a senior unsecured high-yield bridge facility of up to $ 600.0 million ( or the issuance of a corresponding amount of debt securities ) to finance , in part , the acquisition and repay certain debt of ceb and to modify certain covenants . we have historically generated significant cash flows from our operating activities . our operating cash flow has been continuously maintained and enhanced by the leverage characteristics of our subscription-based business model in our research segment , which is our largest business segment . revenues in our research segment increased 16 % in 2016 compared to 2015 , and constituted 75 % and 73 % of our total revenues in 2016 and 2015 , respectively . the majority of our research customer contracts are paid in advance , and combined with a strong customer retention rate and high incremental margins , has resulted in continuously strong operating cash flow . our cash flow generation has also benefited from our continuing efforts to improve the operating efficiencies of our businesses as well as a focus on the optimal management of our working capital as we increase our sales volume .
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beyond through a combination of stock repurchases and cash dividends . our board of directors intends to continue to review the capital return plan , considering our financial performance , economic outlook , regulatory changes and any other relevant factors . there can be no guarantee that we will achieve our announced capital return plan in the amounts or on the expected time frame that we have indicated , or at all . _ 1 non-gaap operating margin is not a measurement of financial performance prepared in accordance with gaap . see “ non-gaap financial measures ” for more information and a reconciliation to the most directly comparable gaap financial measures . 35 the following table sets forth a summary of our financial results for the years ended december 31 , 2016 and 2015 : replace_table_token_7_th the key drivers of our revenue growth in 2016 as compared to 2015 were as follows : solid performance in our manufacturing/retail/logistics and other business segments with both business segments reporting revenue growth of 13.5 % ; revenues in our financial services business segment grew 7.3 % as demand from our banking customers was negatively affected by the current macroeconomic conditions ; revenues in our healthcare business segment grew 5.5 % as demand was affected by uncertainty in the regulatory environment as well as potential consolidation within the healthcare industry ; sustained strength in the north american market where revenues grew 8.1 % ; continued penetration of the european and rest of world ( primarily the asia pacific ) markets . revenues from our customers outside the united states were negatively affected by the recent strength of the u.s. dollar against the british pound : ◦ in europe , we experienced revenue growth of 6.8 % , after a negative currency impact of 6.5 % . our revenues from customers in the united kingdom declined 1.0 % , af ter a negative currency impact of 10.0 % , and was negatively affected by the weakening of the british pound due to the result of the june 2016 united kingdom referendum to exit the european union , or brexit refe rendum . revenues from our rest of europe customers increased 18.2 % after a negative currency impact of 1.4 % ; ◦ revenues from our rest of world customers increased 22.7 % , after a negative currency impact of 2.5 % ; increased customer spending on discretionary projects ; expansion of our service offerings , including consulting and digital services , next-generation it solutions and platform-based solutions ; continued expansion of the market for global delivery of technology and business process services ; and increased penetration at existing customers , including strategic customers . our customers seek to meet a dual mandate of achieving more efficient and effective operations , while investing in digital technologies that are reshaping their business models . increasingly , the relative emphasis among our customers is shifting towards investment and innovation , as reflected in accelerated demand for our digital services . we also saw an increase in demand for larger , more complex projects that are transformational for our customers , including managed services contracts . such contracts may have longer sales cycles and ramp-up periods and could lead to greater variability in our period to period operating results . we increased the number of strategic customers by 29 during the year , bringing the total number of our strategic customers to 329 . we define a strategic customer as one offering the potential to generate at least $ 5 million to $ 50 million or more in annual revenues at maturity . _ 2 non-gaap income from operations and non-gaap diluted earnings per share are not measurements of financial performance prepared in accordance with gaap . see “ non-gaap financial measures ” for more information and a reconciliation to the most directly comparable gaap financial measures . 36 in 2016 , our operating margin decreased to 17.0 % from 17.3 % in 2015 , while our non-gaap operating margin decreased to 19.5 % 3 from 19.7 % 3 in 2015 . the decreases in both our gaap and non-gaap operating margins were due to increases in compensation and benefit costs ( excluding incentive-based compensation ) and increases in certain professional service costs , partially offset by the impact of lower incentive-based compensation in 2016 , the depreciation of the indian rupee against the u.s. dollar , and realized gains on settlement of cash flow hedges in 2016 as compared to losses in 2015. in may 2016 , india enacted the finance bill 2016 that , among other things , expanded the applicability of india 's buyback distribution tax to certain share buyback transactions occurring after june 1 , 2016. in mid-may , prior to the june 1 effective date of the enactment , our principal operating subsidiary in india repurchased shares from its shareholders , which are non-indian cognizant entities , valued at $ 2.8 billion . this transaction , or the india cash remittance , was undertaken pursuant to a plan approved by the high court of madras and simplified the shareholding structure of our principal operating subsidiary in india . pursuant to the transaction , our principal indian operating subsidiary repurchased approximately $ 1.2 billion of the total $ 2.8 billion of shares from its u.s. shareholders , resulting in incremental tax expense , while the remaining $ 1.6 billion was repurchased from its shareholder outside the united states . net of taxes , the transaction resulted in a remittance of cash to the united states in the amount of $ 1.0 billion . as a result of this transaction , we incurred an incremental 2016 income tax expense of $ 238 million . story_separator_special_tag revenue growth in this segment was strong among our technology customers , where revenues increased by $ 90 million , and our telecommunications customers , where revenues increased by $ 71 million . revenues from customers added during 2016 were $ 35 million and represented 18.5 % of the year over year revenues increase in this segment . revenues from our other segment grew 17.4 % or $ 207 million in 2015 , as compared to 2014 . in 2015 , growth within other was due primarily to increased demand for digital services and was strong among our information , media and entertainment and technology customers , where revenues increased by $ 85 million , and our technology customers , where revenues increased by $ 89 million . in 2015 , revenues from customers added during that year was $ 23 million and represented 11.3 % of the year over year revenues increase in this segment . revenues - geographic locations . revenues by geographic market , as determined by customer location , were as follows : replace_table_token_11_th north america continues to be our largest market representing 78.2 % of total 2016 revenues and accounting for $ 787 million of the $ 1,071 million revenue increase in 2016 . revenue growth among our north america customers for 2015 included $ 644 million year over year growth in trizetto revenues . in 2016 , revenue growth in europe and rest of world markets was driven by an increase in demand for an expanded range of services , such as business process services and customer adoption and integration of digital technologies that are reshaping our customers ' business and operating models . in 2016 , revenues from our customers in europe grew 6.8 % , after a negative currency impact of 6.5 % . specifically , within the united kingdom , we experienced a decline in revenues of 1.0 % , after a negative currency impact of 10.0 % while revenues from our rest of europe customers increased 18.2 % after a negative currency impact of 1.4 % . revenue growth from our united kingdom and rest of europe customers has been and may continue to be negatively affected by the current macroeconomic conditions , including the weakening of the british pound and uncertainty in the markets due to the result of the brexit referendum . in 2015 , revenues from our customers in europe grew 6.6 % , after a negative currency impact of 10.2 % , driven by the increasing acceptance of our global delivery model , partially offset by the strength of the u.s. dollar against the british pound , the euro , and other currencies . in 2016 , revenues from our rest of world customers grew 22.7 % , after a negative currency impact of 2.5 % . in 2015 , revenues from our rest of world customers grew 29.9 % . in 2016 and 2015 , rest of world revenue growth was primarily driven by the india , singapore , australia , japan and hong kong markets . we believe that europe , the middle east , the asia pacific region and latin america will continue to be areas of significant investment for us as we see these regions as long term growth opportunities . 41 cost of revenues ( exclusive of depreciation and amortization expense ) . our cost of revenues consists primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration and project-related travel for technical personnel and subcontracting related to revenues . our cost of revenues increased by 9.0 % or $ 668 million during 2016 as compared to an increase of 21.2 % or $ 1,299 million during 2015 . in 2016 , the increase was due primarily to an increase in compensation and benefits costs ( partially offset by the impact of lower incentive-based compensation costs ) and increases in certain professional service costs , partially offset by the favorable impact of the depreciation of the indian rupee against the u.s. dollar and realized gains on settlement of cash flow hedges in 2016 as compared to losses in 2015. in 2015 , the increase was due primarily to an increase in compensation and benefits costs ( inclusive of the impact of higher incentive-based compensation costs ) , partially offset by the impact of the depreciation of the indian rupee versus the u.s. dollar , and lower realized losses on our cash flow hedges in 2015 compared to 2014. in 2016 , compensation and benefit costs increased by $ 508 million as a result of the increase in the number of our service delivery personnel partially offset by lower incentive-based compensation costs in 2016 as compared to 2015 . in 2015 , the increase in compensation and benefit costs was $ 1,112 million as a result of the increase in the number of our service delivery personnel , including new trizetto employees , and higher incentive-based compensation costs in 2015 as compared to 2014. selling , general and administrative expenses . selling , general and administrative expenses consist primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration , travel , marketing , communications , management , finance , administrative and occupancy costs . selling , general and administrative expenses , including depreciation and amortization , increased by 9.0 % or $ 256 million during 2016 as compared to an increase of 26.7 % or $ 597 million during 2015 . selling , general and administrative expenses , including depreciation and amortization , increased slightly as a percentage of revenues to 22.9 % in 2016 as compared to 22.8 % in 2015 and 21.8 % in 2014 . in 2016 , the increase as a percentage of revenues was due primarily to an increase in compensation and benefit costs ( excluding incentive-based compensation ) , certain professional service costs and increases in depreciation and amortization due
| liquidity and capital resources the company has a five-year credit arrangement that it entered into in june 2016 that provides for a $ 600.0 million term loan and a $ 1.2 billion revolving credit facility ( the “ 2016 credit agreement ” ) . as of december 31 , 2016 , the company had $ 585.0 million outstanding under the term loan and $ 115.0 million under the revolver and $ 1.1 billion of available revolver borrowing capacity under the 2016 credit agreement . we had $ 474.2 million of cash and cash equivalents at december 31 , 2016. the 2016 credit agreement was amended on january 20 , 2017 to permit the acquisition of ceb and the incurrence of an additional $ 1.375 billion senior secured term loan b facility , a $ 300.0 million 364-day senior unsecured bridge facility and a senior unsecured high-yield bridge facility of up to $ 600.0 million ( or the issuance of a corresponding amount of debt securities ) to finance , in part , the acquisition and repay certain debt of ceb and to modify certain covenants . we have historically generated significant cash flows from our operating activities . our operating cash flow has been continuously maintained and enhanced by the leverage characteristics of our subscription-based business model in our research segment , which is our largest business segment . revenues in our research segment increased 16 % in 2016 compared to 2015 , and constituted 75 % and 73 % of our total revenues in 2016 and 2015 , respectively . the majority of our research customer contracts are paid in advance , and combined with a strong customer retention rate and high incremental margins , has resulted in continuously strong operating cash flow . our cash flow generation has also benefited from our continuing efforts to improve the operating efficiencies of our businesses as well as a focus on the optimal management of our working capital as we increase our sales volume .
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beyond through a combination of stock repurchases and cash dividends . our board of directors intends to continue to review the capital return plan , considering our financial performance , economic outlook , regulatory changes and any other relevant factors . there can be no guarantee that we will achieve our announced capital return plan in the amounts or on the expected time frame that we have indicated , or at all . _ 1 non-gaap operating margin is not a measurement of financial performance prepared in accordance with gaap . see “ non-gaap financial measures ” for more information and a reconciliation to the most directly comparable gaap financial measures . 35 the following table sets forth a summary of our financial results for the years ended december 31 , 2016 and 2015 : replace_table_token_7_th the key drivers of our revenue growth in 2016 as compared to 2015 were as follows : solid performance in our manufacturing/retail/logistics and other business segments with both business segments reporting revenue growth of 13.5 % ; revenues in our financial services business segment grew 7.3 % as demand from our banking customers was negatively affected by the current macroeconomic conditions ; revenues in our healthcare business segment grew 5.5 % as demand was affected by uncertainty in the regulatory environment as well as potential consolidation within the healthcare industry ; sustained strength in the north american market where revenues grew 8.1 % ; continued penetration of the european and rest of world ( primarily the asia pacific ) markets . revenues from our customers outside the united states were negatively affected by the recent strength of the u.s. dollar against the british pound : ◦ in europe , we experienced revenue growth of 6.8 % , after a negative currency impact of 6.5 % . our revenues from customers in the united kingdom declined 1.0 % , af ter a negative currency impact of 10.0 % , and was negatively affected by the weakening of the british pound due to the result of the june 2016 united kingdom referendum to exit the european union , or brexit refe rendum . revenues from our rest of europe customers increased 18.2 % after a negative currency impact of 1.4 % ; ◦ revenues from our rest of world customers increased 22.7 % , after a negative currency impact of 2.5 % ; increased customer spending on discretionary projects ; expansion of our service offerings , including consulting and digital services , next-generation it solutions and platform-based solutions ; continued expansion of the market for global delivery of technology and business process services ; and increased penetration at existing customers , including strategic customers . our customers seek to meet a dual mandate of achieving more efficient and effective operations , while investing in digital technologies that are reshaping their business models . increasingly , the relative emphasis among our customers is shifting towards investment and innovation , as reflected in accelerated demand for our digital services . we also saw an increase in demand for larger , more complex projects that are transformational for our customers , including managed services contracts . such contracts may have longer sales cycles and ramp-up periods and could lead to greater variability in our period to period operating results . we increased the number of strategic customers by 29 during the year , bringing the total number of our strategic customers to 329 . we define a strategic customer as one offering the potential to generate at least $ 5 million to $ 50 million or more in annual revenues at maturity . _ 2 non-gaap income from operations and non-gaap diluted earnings per share are not measurements of financial performance prepared in accordance with gaap . see “ non-gaap financial measures ” for more information and a reconciliation to the most directly comparable gaap financial measures . 36 in 2016 , our operating margin decreased to 17.0 % from 17.3 % in 2015 , while our non-gaap operating margin decreased to 19.5 % 3 from 19.7 % 3 in 2015 . the decreases in both our gaap and non-gaap operating margins were due to increases in compensation and benefit costs ( excluding incentive-based compensation ) and increases in certain professional service costs , partially offset by the impact of lower incentive-based compensation in 2016 , the depreciation of the indian rupee against the u.s. dollar , and realized gains on settlement of cash flow hedges in 2016 as compared to losses in 2015. in may 2016 , india enacted the finance bill 2016 that , among other things , expanded the applicability of india 's buyback distribution tax to certain share buyback transactions occurring after june 1 , 2016. in mid-may , prior to the june 1 effective date of the enactment , our principal operating subsidiary in india repurchased shares from its shareholders , which are non-indian cognizant entities , valued at $ 2.8 billion . this transaction , or the india cash remittance , was undertaken pursuant to a plan approved by the high court of madras and simplified the shareholding structure of our principal operating subsidiary in india . pursuant to the transaction , our principal indian operating subsidiary repurchased approximately $ 1.2 billion of the total $ 2.8 billion of shares from its u.s. shareholders , resulting in incremental tax expense , while the remaining $ 1.6 billion was repurchased from its shareholder outside the united states . net of taxes , the transaction resulted in a remittance of cash to the united states in the amount of $ 1.0 billion . as a result of this transaction , we incurred an incremental 2016 income tax expense of $ 238 million . story_separator_special_tag revenue growth in this segment was strong among our technology customers , where revenues increased by $ 90 million , and our telecommunications customers , where revenues increased by $ 71 million . revenues from customers added during 2016 were $ 35 million and represented 18.5 % of the year over year revenues increase in this segment . revenues from our other segment grew 17.4 % or $ 207 million in 2015 , as compared to 2014 . in 2015 , growth within other was due primarily to increased demand for digital services and was strong among our information , media and entertainment and technology customers , where revenues increased by $ 85 million , and our technology customers , where revenues increased by $ 89 million . in 2015 , revenues from customers added during that year was $ 23 million and represented 11.3 % of the year over year revenues increase in this segment . revenues - geographic locations . revenues by geographic market , as determined by customer location , were as follows : replace_table_token_11_th north america continues to be our largest market representing 78.2 % of total 2016 revenues and accounting for $ 787 million of the $ 1,071 million revenue increase in 2016 . revenue growth among our north america customers for 2015 included $ 644 million year over year growth in trizetto revenues . in 2016 , revenue growth in europe and rest of world markets was driven by an increase in demand for an expanded range of services , such as business process services and customer adoption and integration of digital technologies that are reshaping our customers ' business and operating models . in 2016 , revenues from our customers in europe grew 6.8 % , after a negative currency impact of 6.5 % . specifically , within the united kingdom , we experienced a decline in revenues of 1.0 % , after a negative currency impact of 10.0 % while revenues from our rest of europe customers increased 18.2 % after a negative currency impact of 1.4 % . revenue growth from our united kingdom and rest of europe customers has been and may continue to be negatively affected by the current macroeconomic conditions , including the weakening of the british pound and uncertainty in the markets due to the result of the brexit referendum . in 2015 , revenues from our customers in europe grew 6.6 % , after a negative currency impact of 10.2 % , driven by the increasing acceptance of our global delivery model , partially offset by the strength of the u.s. dollar against the british pound , the euro , and other currencies . in 2016 , revenues from our rest of world customers grew 22.7 % , after a negative currency impact of 2.5 % . in 2015 , revenues from our rest of world customers grew 29.9 % . in 2016 and 2015 , rest of world revenue growth was primarily driven by the india , singapore , australia , japan and hong kong markets . we believe that europe , the middle east , the asia pacific region and latin america will continue to be areas of significant investment for us as we see these regions as long term growth opportunities . 41 cost of revenues ( exclusive of depreciation and amortization expense ) . our cost of revenues consists primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration and project-related travel for technical personnel and subcontracting related to revenues . our cost of revenues increased by 9.0 % or $ 668 million during 2016 as compared to an increase of 21.2 % or $ 1,299 million during 2015 . in 2016 , the increase was due primarily to an increase in compensation and benefits costs ( partially offset by the impact of lower incentive-based compensation costs ) and increases in certain professional service costs , partially offset by the favorable impact of the depreciation of the indian rupee against the u.s. dollar and realized gains on settlement of cash flow hedges in 2016 as compared to losses in 2015. in 2015 , the increase was due primarily to an increase in compensation and benefits costs ( inclusive of the impact of higher incentive-based compensation costs ) , partially offset by the impact of the depreciation of the indian rupee versus the u.s. dollar , and lower realized losses on our cash flow hedges in 2015 compared to 2014. in 2016 , compensation and benefit costs increased by $ 508 million as a result of the increase in the number of our service delivery personnel partially offset by lower incentive-based compensation costs in 2016 as compared to 2015 . in 2015 , the increase in compensation and benefit costs was $ 1,112 million as a result of the increase in the number of our service delivery personnel , including new trizetto employees , and higher incentive-based compensation costs in 2015 as compared to 2014. selling , general and administrative expenses . selling , general and administrative expenses consist primarily of salaries , incentive-based compensation , stock-based compensation expense , payroll taxes , employee benefits , immigration , travel , marketing , communications , management , finance , administrative and occupancy costs . selling , general and administrative expenses , including depreciation and amortization , increased by 9.0 % or $ 256 million during 2016 as compared to an increase of 26.7 % or $ 597 million during 2015 . selling , general and administrative expenses , including depreciation and amortization , increased slightly as a percentage of revenues to 22.9 % in 2016 as compared to 22.8 % in 2015 and 21.8 % in 2014 . in 2016 , the increase as a percentage of revenues was due primarily to an increase in compensation and benefit costs ( excluding incentive-based compensation ) , certain professional service costs and increases in depreciation and amortization due
| liquidity and capital resources our cash generated from operations has historically been our primary source of liquidity to fund operations and investments to grow our business . in addition , as of december 31 , 2016 , we had cash , cash equivalents and short-term investments of $ 5,169 million and additional available capacity under our revolving credit facility of approximately $ 750 million . the following table provides a summary of our cash flows for the three years ended december 31 : replace_table_token_15_th operating activities . the decrease in operating cash flow for 2016 compared to 2015 was primarily attributable to the decrease in net income , which includes the impact of incremental taxes paid in connection with the india cash remittance , and higher incentive based compensation payments in 2016 as compared to 2015. the increase in operating cash flow for 2015 was primarily attributed to the increase in net income , further impacted by the increase in non-cash expenses and higher incentive-based compensation accruals that were paid in the first quarter of 2016. trade accounts receivable increased to $ 2,556 million at december 31 , 2016 as compared to $ 2,253 million at december 31 , 2015 and $ 1,969 million at december 31 , 2014 . unbilled accounts receivable were $ 349 million at december 31 , 2016 , $ 369 million at december 31 , 2015 and $ 325 million at december 31 , 2014 . the increase in trade accounts receivable during 2016 was primarily due to increased revenues . we monitor turnover , aging and the collection of accounts receivable by customer .
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within our foundry services group , net sales are driven by customers ' decisions on which manufacturing services provider to use for a particular product . most of our foundry services group customers are fabless , while some are idm customers . a customer will often have more than one supplier of manufacturing services . in any given period , our net sales depend heavily upon the end-market demand for the goods in which the products we manufacture for customers are used , the inventory levels maintained by our customers and in some cases , allocation of demand for manufacturing services among selected qualified suppliers . within our standard products group , net sales are driven by design wins in which we are selected by an electronics original equipment manufacturer ( oem ) or other potential customer to supply its demand for a particular product . a customer will often have more than one supplier designed in to multi-source components for a particular product line . once we have design wins and the products enter into mass production , we often specify the pricing of a particular product for a set period of time , with periodic discussions and renegotiations of pricing with our customers . in any given period , our net sales depend heavily upon the end-market demand for the goods in which our products are used , the inventory levels maintained by our customers and in some cases , allocation of demand for components for a particular product among selected qualified suppliers . in contrast to completely fabless semiconductor companies , our internal manufacturing capacity provides us with greater control over manufacturing costs and the ability to implement process and production improvements for our internally manufactured products , which can favorably impact gross profit margins . our internal manufacturing capacity also allows for better control over delivery schedules , improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these products . however , having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins , particularly during downturns in the semiconductor industry . our products and services require investments in capital equipment . analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment . many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs . for example , some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years , if at all . as a result , our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products , allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments . in addition , we are less likely to experience significant industry overcapacity , which can cause product prices to decline significantly . in general , we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an 43 extended period of time . in addition , we outsource manufacturing of those products which do require advanced technology and 12-inch wafer capacity , such as organic light emitting diodes ( oled ) . we believe this balanced capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings . since 2007 , we have designed and manufactured oled display driver ics in our internal manufacturing facilities . as we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities , we began outsourcing manufacturing of certain oled display driver ics to an external 12-inch foundry from the second half of 2015. this additional source of manufacturing is an increasingly important part of our supply chain management . by outsourcing manufacturing of advanced oled products to external 12-inch foundries , we are able to dynamically adapt to the changing customer requirements and address growing markets without substantial capital investments by us . both at the internal 8-inch manufacturing facilities and external 12-inch foundries , we apply our unique oled process patents as well as other intellectual property , proprietary process design kits and custom design-flow methodologies . our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors . additionally , we must innovate to remain ahead of , or at least rapidly adapt to , technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services . we believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities , market and technology trends and improve our ability to adapt and grow successfully . in our foundry services group , we strive to maintain competitiveness by offering high-value added processes , high-flexibility and excellent service by tailoring existing standard processes to meet customers ' design needs and porting customers ' own process technologies into our fabrication facilities . recent developments public health risks in december 2019 , a strain of coronavirus causing a disease known as covid-19 surfaced in wuhan , china , resulting in significant disruptions among chinese manufacturing and other facilities and travel throughout china . while our manufacturing supply chain resides largely outside china , some of the test and packaging services for our power solutions business line are outsourced to independent subcontractors located in china . story_separator_special_tag we present adjusted net income for a number of reasons , including : we use adjusted net income in communications with our board of directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period ; and we believe that reporting adjusted net income is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below , such as foreign currency gains and losses , which are out of our control and can vary significantly from period to period . adjusted net income is not a measure defined in accordance with us gaap and should not be construed as an alternative to income from continuing operations , cash flows from operating activities or net income , as determined in accordance with us gaap . we encourage you to evaluate each adjustment and the reasons we consider them appropriate . other companies in our industry may calculate adjusted net income differently than we do , limiting its usefulness as a comparative measure . in addition , in evaluating adjusted net income , you should be aware that in the future we may incur expenses similar to the adjustments in this presentation . we define adjusted net income for the periods indicated as net income ( loss ) , adjusted to exclude ( i ) restructuring and other charges ( gains ) , net , ( ii ) early termination charges , ( iii ) equity-based compensation expense , ( iv ) foreign currency loss ( gain ) , net , ( v ) derivative valuation loss ( gain ) , net , ( vi ) restatement related expenses ( gain ) , ( vii ) secondary offering expense , ( viii ) loss on early extinguishment of long-term borrowings , net and ( ix ) others . the following table summarizes the adjustments to net income ( loss ) that we make in order to calculate adjusted net income for the periods indicated : replace_table_token_5_th ( a ) for the year ended december 31 , 2019 , this adjustment eliminates the impact of a $ 2.2 million restructuring related charge to our fab employees , and a $ 7.0 million in professional fees and other charges incurred in connection with the strategic evaluation . for the year ended december 31 , 2017 , this adjustment eliminates 49 the $ 16.6 million restructuring gain on sale of a building in connection with the closure of our 6-inch fab and the $ 0.4 million gain on sale of our sensor business . as these expenses meaningfully impacted our operating results and are not expected to represent an ongoing operating expense to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( b ) this adjustment eliminates the charges related to the reduction of workforce through the headcount reduction plan in the first half of 2017. as these termination related charges are recorded as a result of implementing the company-wide headcount reduction and are not expected to represent ongoing operating expenses to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( c ) this adjustment eliminates the impact of non-cash equity-based compensation expenses . although we expect to incur non-cash equity-based compensation expenses in the future , these expenses do not generally require cash settlement , and , therefore , are not used by us to assess the profitability of our operations . we believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information . ( d ) this adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables , as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables . although we expect to incur foreign currency translation gains or losses in the future , we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses , which we can not control . additionally , we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results . ( e ) this adjustment eliminates the impact of gain or loss recognized in income on derivatives . for the year ended december 31 , 2019 , this adjustment represents derivatives value changes excluded from the risk being hedged . for the years ended december 31 , 2018 and 2017 , this adjustment represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged . we enter into derivative transactions to mitigate foreign exchange risks . as our derivative transactions are limited to a certain portion of our expected cash flows denominated in us dollars , and we do not enter into derivative transactions for trading or speculative purposes , we do not believe that these charges or gains are indicative of our core operating performance . ( f ) this adjustment eliminates expenses in connection with the audit committee 's independent investigation and related restatement and litigation , primarily comprised of legal , audit and consulting fees , and certain other expenses . for the year ended december 31 , 2018 , this adjustment eliminates the reversal of a $ 0.8 million accrual related to certain legal fees incurred in prior periods and reimbursed by insurers in the first quarter of 2018. for the year ended december 31 , 2017 , this adjustment includes the $ 3.0 million civil penalty imposed by the sec and the $
| liquidity and capital resources our cash generated from operations has historically been our primary source of liquidity to fund operations and investments to grow our business . in addition , as of december 31 , 2016 , we had cash , cash equivalents and short-term investments of $ 5,169 million and additional available capacity under our revolving credit facility of approximately $ 750 million . the following table provides a summary of our cash flows for the three years ended december 31 : replace_table_token_15_th operating activities . the decrease in operating cash flow for 2016 compared to 2015 was primarily attributable to the decrease in net income , which includes the impact of incremental taxes paid in connection with the india cash remittance , and higher incentive based compensation payments in 2016 as compared to 2015. the increase in operating cash flow for 2015 was primarily attributed to the increase in net income , further impacted by the increase in non-cash expenses and higher incentive-based compensation accruals that were paid in the first quarter of 2016. trade accounts receivable increased to $ 2,556 million at december 31 , 2016 as compared to $ 2,253 million at december 31 , 2015 and $ 1,969 million at december 31 , 2014 . unbilled accounts receivable were $ 349 million at december 31 , 2016 , $ 369 million at december 31 , 2015 and $ 325 million at december 31 , 2014 . the increase in trade accounts receivable during 2016 was primarily due to increased revenues . we monitor turnover , aging and the collection of accounts receivable by customer .
| 0 |
within our foundry services group , net sales are driven by customers ' decisions on which manufacturing services provider to use for a particular product . most of our foundry services group customers are fabless , while some are idm customers . a customer will often have more than one supplier of manufacturing services . in any given period , our net sales depend heavily upon the end-market demand for the goods in which the products we manufacture for customers are used , the inventory levels maintained by our customers and in some cases , allocation of demand for manufacturing services among selected qualified suppliers . within our standard products group , net sales are driven by design wins in which we are selected by an electronics original equipment manufacturer ( oem ) or other potential customer to supply its demand for a particular product . a customer will often have more than one supplier designed in to multi-source components for a particular product line . once we have design wins and the products enter into mass production , we often specify the pricing of a particular product for a set period of time , with periodic discussions and renegotiations of pricing with our customers . in any given period , our net sales depend heavily upon the end-market demand for the goods in which our products are used , the inventory levels maintained by our customers and in some cases , allocation of demand for components for a particular product among selected qualified suppliers . in contrast to completely fabless semiconductor companies , our internal manufacturing capacity provides us with greater control over manufacturing costs and the ability to implement process and production improvements for our internally manufactured products , which can favorably impact gross profit margins . our internal manufacturing capacity also allows for better control over delivery schedules , improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these products . however , having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins , particularly during downturns in the semiconductor industry . our products and services require investments in capital equipment . analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment . many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs . for example , some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years , if at all . as a result , our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products , allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments . in addition , we are less likely to experience significant industry overcapacity , which can cause product prices to decline significantly . in general , we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an 43 extended period of time . in addition , we outsource manufacturing of those products which do require advanced technology and 12-inch wafer capacity , such as organic light emitting diodes ( oled ) . we believe this balanced capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings . since 2007 , we have designed and manufactured oled display driver ics in our internal manufacturing facilities . as we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities , we began outsourcing manufacturing of certain oled display driver ics to an external 12-inch foundry from the second half of 2015. this additional source of manufacturing is an increasingly important part of our supply chain management . by outsourcing manufacturing of advanced oled products to external 12-inch foundries , we are able to dynamically adapt to the changing customer requirements and address growing markets without substantial capital investments by us . both at the internal 8-inch manufacturing facilities and external 12-inch foundries , we apply our unique oled process patents as well as other intellectual property , proprietary process design kits and custom design-flow methodologies . our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors . additionally , we must innovate to remain ahead of , or at least rapidly adapt to , technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services . we believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities , market and technology trends and improve our ability to adapt and grow successfully . in our foundry services group , we strive to maintain competitiveness by offering high-value added processes , high-flexibility and excellent service by tailoring existing standard processes to meet customers ' design needs and porting customers ' own process technologies into our fabrication facilities . recent developments public health risks in december 2019 , a strain of coronavirus causing a disease known as covid-19 surfaced in wuhan , china , resulting in significant disruptions among chinese manufacturing and other facilities and travel throughout china . while our manufacturing supply chain resides largely outside china , some of the test and packaging services for our power solutions business line are outsourced to independent subcontractors located in china . story_separator_special_tag we present adjusted net income for a number of reasons , including : we use adjusted net income in communications with our board of directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period ; and we believe that reporting adjusted net income is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below , such as foreign currency gains and losses , which are out of our control and can vary significantly from period to period . adjusted net income is not a measure defined in accordance with us gaap and should not be construed as an alternative to income from continuing operations , cash flows from operating activities or net income , as determined in accordance with us gaap . we encourage you to evaluate each adjustment and the reasons we consider them appropriate . other companies in our industry may calculate adjusted net income differently than we do , limiting its usefulness as a comparative measure . in addition , in evaluating adjusted net income , you should be aware that in the future we may incur expenses similar to the adjustments in this presentation . we define adjusted net income for the periods indicated as net income ( loss ) , adjusted to exclude ( i ) restructuring and other charges ( gains ) , net , ( ii ) early termination charges , ( iii ) equity-based compensation expense , ( iv ) foreign currency loss ( gain ) , net , ( v ) derivative valuation loss ( gain ) , net , ( vi ) restatement related expenses ( gain ) , ( vii ) secondary offering expense , ( viii ) loss on early extinguishment of long-term borrowings , net and ( ix ) others . the following table summarizes the adjustments to net income ( loss ) that we make in order to calculate adjusted net income for the periods indicated : replace_table_token_5_th ( a ) for the year ended december 31 , 2019 , this adjustment eliminates the impact of a $ 2.2 million restructuring related charge to our fab employees , and a $ 7.0 million in professional fees and other charges incurred in connection with the strategic evaluation . for the year ended december 31 , 2017 , this adjustment eliminates 49 the $ 16.6 million restructuring gain on sale of a building in connection with the closure of our 6-inch fab and the $ 0.4 million gain on sale of our sensor business . as these expenses meaningfully impacted our operating results and are not expected to represent an ongoing operating expense to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( b ) this adjustment eliminates the charges related to the reduction of workforce through the headcount reduction plan in the first half of 2017. as these termination related charges are recorded as a result of implementing the company-wide headcount reduction and are not expected to represent ongoing operating expenses to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( c ) this adjustment eliminates the impact of non-cash equity-based compensation expenses . although we expect to incur non-cash equity-based compensation expenses in the future , these expenses do not generally require cash settlement , and , therefore , are not used by us to assess the profitability of our operations . we believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information . ( d ) this adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables , as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables . although we expect to incur foreign currency translation gains or losses in the future , we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses , which we can not control . additionally , we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results . ( e ) this adjustment eliminates the impact of gain or loss recognized in income on derivatives . for the year ended december 31 , 2019 , this adjustment represents derivatives value changes excluded from the risk being hedged . for the years ended december 31 , 2018 and 2017 , this adjustment represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged . we enter into derivative transactions to mitigate foreign exchange risks . as our derivative transactions are limited to a certain portion of our expected cash flows denominated in us dollars , and we do not enter into derivative transactions for trading or speculative purposes , we do not believe that these charges or gains are indicative of our core operating performance . ( f ) this adjustment eliminates expenses in connection with the audit committee 's independent investigation and related restatement and litigation , primarily comprised of legal , audit and consulting fees , and certain other expenses . for the year ended december 31 , 2018 , this adjustment eliminates the reversal of a $ 0.8 million accrual related to certain legal fees incurred in prior periods and reimbursed by insurers in the first quarter of 2018. for the year ended december 31 , 2017 , this adjustment includes the $ 3.0 million civil penalty imposed by the sec and the $
| liquidity and capital resources our principal capital requirements are to fund sales and marketing , invest in research and development and capital equipment , to make debt service payments and to fund working capital needs . we calculate working capital as current assets less current liabilities . our principal sources of liquidity are our cash , cash equivalents , our cash flows from operations and our financing activities . our ability to manage cash and cash equivalents may be limited , as our primary cash flows are dictated by the terms of our sales and supply agreements , contractual obligations , debt instruments and legal and regulatory requirements . from time to time , we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash . for a description of our factoring arrangements and accounts receivable discounting , please see item 8. financial statements and supplementary datanotes to consolidated financial statementsnote 3. accounts receivable included elsewhere in this report . in addition , from time to time , we may make payments to our vendors on extended terms with their consent . as of december 31 , 2019 , we do not have any accounts payable on extended terms or payment deferment with our vendors . we currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next twelve months and the foreseeable future . 65 as of december 31 , 2019 , cash and cash equivalents held by our korean subsidiary were $ 147.8 million , which represents 97 % of our total cash and cash equivalents of $ 151.7 million on a consolidated basis . we , as a holding company resident in the united states , issued our 2021 notes .
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in june 2013 , following the clinical hold , we extended the development period for which we received funds from united from 6.5 years to 11.5 years . the license fee will be recognized on a straight line basis as revenue over the estimated development period . cost of revenues cost of revenues decreased by 45 % from $ 20,000 for the year ended june 30 , 2013 to $ 11,000 for the year ended june 30 , 2014. cost of revenues decreased by 5 % from $ 21,000 for the year ended june 30 , 2012 to $ 20,000 for the year ended june 30 , 2013. all such cost of revenues is derived from the united agreement and reflects the royalties we are obligated to pay the ocs . the reductions in the years ended june 30 , 2013 and 2014 are a result of the re-evaluation we did for the development period under the united agreement . as described above , following the clinical hold we extended the development period for which we received funds from united from 6.5 years to 11.5 years . research and development net research and development net costs ( costs less participation and grants by the ocs and other parties ) , for the year ended june 30 , 2014 increased by 13 % to $ 19,542,000 from $ 17,233,000 for the year ended june 30 , 2013. this increase is attributed to the material increase in our in-house research and development activity , increase in our salaries due to , among other things , an increase of 45 employees as compared to the average number of employees in the year ended june 2013 , an increase in our depreciation expenses and an increase in our rent and maintenance expenses , offset by an increase in ocs participation . this increase in ocs participation is attributable to the fact that due to a delay in the approval of the ocs grant for 2013 , we recognized $ 5,396,000 in fiscal year 2014 compared to $ 2,673,000 in fiscal year 2013. research and development net costs ( costs less participation and grants by the ocs and other parties ) , for the year ended june 30 , 2013 increased by 88 % to $ 17,233,000 from $ 9,158,000 for the year ended june 30 , 2012. this increase is mainly due to the increase in our research and development activities during the fiscal year 2013 , and more specifically is attributed to the increase in our clinical trials expenses , salaries , lab materials expenses and consultants and subcontractor expenses , including hiring 46 new employees since june 30 , 2012 . 27 general and administrative general and administrative expenses increased by 54 % from $ 5,649,000 for the year ended june 30 , 2013 to $ 8,676,000 for the year ended june 30 , 2014. this is primarily driven by an increase in stock-based compensation expenses related to our employees and directors , due to timing of grants made to directors , and an increase in our salaries due to , among other things , an increase of 6 employees as compared to the average number of employees in the year ended june 2013. general and administrative expenses decreased by 14 % from $ 6,568,000 for the year ended june 30 , 2012 to $ 5,649,000 for the year ended june 30 , 2013. this decrease is mainly due to a decrease in stock-based compensation expenses related to our employees and consultants . financial income , net financial income decreased from $ 1,068,000 for the year ended june 30 , 2013 to $ 918,000 for the year ended june 30 , 2014. the decrease is mainly due to a decrease in gains from hedging instruments and interest income on deposits over the past fiscal year , offset by an increase in our gain from marketable securities . financial income increased from $ 237,000 for the year ended june 30 , 2012 to $ 1,068,000 for the year ended june 30 , 2013. the increase is mainly due to an increase in gains from hedging instruments and changes in exchange rates over the past fiscal year . net loss net loss for the year ended june 30 , 2014 was $ 26,932,000 as compared to a net loss of $ 21,155,000 for the year ended june 30 , 2013. net loss per share for the year ended june 30 , 2014 was $ 0.42 , as compared to $ 0.38 for the year ended june 30 , 2013. the net loss per share increased as a result of the increase in our net loss , offset by the increase in our weighted average number of shares due to the issuance of additional shares , mainly the shares issued to cha in december 2013 and the shares issued under an at market issuance sales agreement ( atm agreement ) . net loss for the year ended june 30 , 2013 was $ 21,155,000 as compared to net loss of $ 14,794,000 for the year ended june 30 , 2012. net loss per share for the year ended june 30 , 2013 was $ 0.38 , as compared to $ 0.34 for the year ended june 30 , 2012. the net loss per share increased as a result of the increase in our net loss , offset by the increase in our weighted average number of shares due to the issuance of additional shares , mainly as part of a public offering we consummated in september 2012. story_separator_special_tag 0pt ; margin-right : 0pt `` > during the years that ended june 30 , 2014 , 2013 and 2012 we received approximately $ 3,243,000 , $ 1,452,000 and $ 3,156,000 , respectively , from the ocs towards our research and development expenses . story_separator_special_tag the grant will be used to cover research and development expenses for the period january 1 , 2014 to december 31 , 2014. in addition , the european authorities approved a research grant under the fp7 in the amount of approximately 92,955 for a period of 5 years which began on january 1 , 2011. we believe that we have sufficient cash to fund our operations for at least the next 12 months . application of critical accounting policies our significant accounting policies are more fully described in note 2 to our consolidated financial statements appearing in this annual report . we believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations . the discussion and analysis of our financial condition and results of operations is based on our financial statements , which we prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , as well as the reported revenues and expenses during the reporting periods . on an ongoing basis , we evaluate such estimates and judgments , including those described in greater detail below . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . revenue recognition from the united agreement we recognize revenue pursuant to the license agreement with united in accordance with asc 605-25 , `` revenue recognition , multiple-element arrangements `` . pursuant to asc 605-25 , each deliverable is evaluated to determine whether it qualifies as a separate unit of accounting based on whether the deliverable has “ stand-alone value ” to the customer . the arrangement 's consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable . in general , the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered , limited to the consideration that is not contingent upon future deliverables . we received an up-front , non-refundable license payment of $ 5,000,000. additional payments totaling $ 37,500,000 are subject to the achievement of certain regulatory milestones by united . since the deliverables in the united agreement do not have stand-alone value , none of them qualifies as a separate unit of accounting . accordingly , the non-refundable upfront license fee of $ 5,000,000 is deferred and recognized on a straight line basis over the related performance period which is the development period in accordance with staff accounting bulletin ( “ sab ” ) no . 104 , `` revenue recognition `` . we assessed the remaining performance period under the united agreement at 8.5 years as of june 30 , 2014. the additional regulatory milestones payments will be recognized upon the achievement of futures events by united , in accordance with asc 450-30-25 , “ gain contingencies `` . as of june 30 , 2014 , no regulatory milestones were achieved . we also received an advance payment for the development of $ 2,000,000 that will be deductible against development expenses as it accrued . the upfront payment which was received and has not yet fully recognized in the statement of operations , is included in the balance sheet as advance payment . part of the expenses related to the development , on a cost basis , shall be repaid to the company by united according to the applicable license agreement . we are deducting the payments from research and development expenses in accordance with asc 730-20 , `` research and development agreements `` . as of june 30 , 2014 , we deducted an amount of approximately $ 1,753,000 . 31 stock-based compensation stock-based compensation is considered critical accounting policy due to the significant expenses of restricted stock units which were granted to our employees , directors and consultants . in fiscal year 2014 , we recorded stock-based compensation expenses related to restricted stock units in the amount of $ 5,840,000. in accordance with asc 718 , `` compensation-stock compensation `` ( asc 718 ) , restricted shares units to employees and directors are measured at their fair value on the grant date . all restricted shares units granted in 2014 and 2013 were granted for no consideration ; therefore their fair value was equal to the share price at the date of grant , based on the close trading price of our shares known at the grant date . the restricted shares units to non-employees consultants are remeasured in any future vesting period for the unvested portion of the grants . the value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our consolidated statements of operations . we have graded vesting based on the accelerated method over the requisite service period of each of the awards . the expected pre-vesting forfeiture rate affects the number of the shares . based on our historical experience , the pre-vesting forfeiture rate per grant is 7 % for the shares granted to employees and 0 % for the shares granted to our directors , officers and non-employees consultants . marketable securities marketable securities consist of corporate bonds , government bonds and stocks . we determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such designation at each balance sheet date . in accordance with asc no . 320 , `` investment debt and equity securities , `` we classify marketable securities as available-for-sale . available-for-sale securities are stated at fair value , with unrealized gains and losses reported in accumulated other comprehensive income ( loss ) , a separate component of stockholders ' equity . realized gains and losses on
| liquidity and capital resources our principal capital requirements are to fund sales and marketing , invest in research and development and capital equipment , to make debt service payments and to fund working capital needs . we calculate working capital as current assets less current liabilities . our principal sources of liquidity are our cash , cash equivalents , our cash flows from operations and our financing activities . our ability to manage cash and cash equivalents may be limited , as our primary cash flows are dictated by the terms of our sales and supply agreements , contractual obligations , debt instruments and legal and regulatory requirements . from time to time , we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash . for a description of our factoring arrangements and accounts receivable discounting , please see item 8. financial statements and supplementary datanotes to consolidated financial statementsnote 3. accounts receivable included elsewhere in this report . in addition , from time to time , we may make payments to our vendors on extended terms with their consent . as of december 31 , 2019 , we do not have any accounts payable on extended terms or payment deferment with our vendors . we currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next twelve months and the foreseeable future . 65 as of december 31 , 2019 , cash and cash equivalents held by our korean subsidiary were $ 147.8 million , which represents 97 % of our total cash and cash equivalents of $ 151.7 million on a consolidated basis . we , as a holding company resident in the united states , issued our 2021 notes .
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in june 2013 , following the clinical hold , we extended the development period for which we received funds from united from 6.5 years to 11.5 years . the license fee will be recognized on a straight line basis as revenue over the estimated development period . cost of revenues cost of revenues decreased by 45 % from $ 20,000 for the year ended june 30 , 2013 to $ 11,000 for the year ended june 30 , 2014. cost of revenues decreased by 5 % from $ 21,000 for the year ended june 30 , 2012 to $ 20,000 for the year ended june 30 , 2013. all such cost of revenues is derived from the united agreement and reflects the royalties we are obligated to pay the ocs . the reductions in the years ended june 30 , 2013 and 2014 are a result of the re-evaluation we did for the development period under the united agreement . as described above , following the clinical hold we extended the development period for which we received funds from united from 6.5 years to 11.5 years . research and development net research and development net costs ( costs less participation and grants by the ocs and other parties ) , for the year ended june 30 , 2014 increased by 13 % to $ 19,542,000 from $ 17,233,000 for the year ended june 30 , 2013. this increase is attributed to the material increase in our in-house research and development activity , increase in our salaries due to , among other things , an increase of 45 employees as compared to the average number of employees in the year ended june 2013 , an increase in our depreciation expenses and an increase in our rent and maintenance expenses , offset by an increase in ocs participation . this increase in ocs participation is attributable to the fact that due to a delay in the approval of the ocs grant for 2013 , we recognized $ 5,396,000 in fiscal year 2014 compared to $ 2,673,000 in fiscal year 2013. research and development net costs ( costs less participation and grants by the ocs and other parties ) , for the year ended june 30 , 2013 increased by 88 % to $ 17,233,000 from $ 9,158,000 for the year ended june 30 , 2012. this increase is mainly due to the increase in our research and development activities during the fiscal year 2013 , and more specifically is attributed to the increase in our clinical trials expenses , salaries , lab materials expenses and consultants and subcontractor expenses , including hiring 46 new employees since june 30 , 2012 . 27 general and administrative general and administrative expenses increased by 54 % from $ 5,649,000 for the year ended june 30 , 2013 to $ 8,676,000 for the year ended june 30 , 2014. this is primarily driven by an increase in stock-based compensation expenses related to our employees and directors , due to timing of grants made to directors , and an increase in our salaries due to , among other things , an increase of 6 employees as compared to the average number of employees in the year ended june 2013. general and administrative expenses decreased by 14 % from $ 6,568,000 for the year ended june 30 , 2012 to $ 5,649,000 for the year ended june 30 , 2013. this decrease is mainly due to a decrease in stock-based compensation expenses related to our employees and consultants . financial income , net financial income decreased from $ 1,068,000 for the year ended june 30 , 2013 to $ 918,000 for the year ended june 30 , 2014. the decrease is mainly due to a decrease in gains from hedging instruments and interest income on deposits over the past fiscal year , offset by an increase in our gain from marketable securities . financial income increased from $ 237,000 for the year ended june 30 , 2012 to $ 1,068,000 for the year ended june 30 , 2013. the increase is mainly due to an increase in gains from hedging instruments and changes in exchange rates over the past fiscal year . net loss net loss for the year ended june 30 , 2014 was $ 26,932,000 as compared to a net loss of $ 21,155,000 for the year ended june 30 , 2013. net loss per share for the year ended june 30 , 2014 was $ 0.42 , as compared to $ 0.38 for the year ended june 30 , 2013. the net loss per share increased as a result of the increase in our net loss , offset by the increase in our weighted average number of shares due to the issuance of additional shares , mainly the shares issued to cha in december 2013 and the shares issued under an at market issuance sales agreement ( atm agreement ) . net loss for the year ended june 30 , 2013 was $ 21,155,000 as compared to net loss of $ 14,794,000 for the year ended june 30 , 2012. net loss per share for the year ended june 30 , 2013 was $ 0.38 , as compared to $ 0.34 for the year ended june 30 , 2012. the net loss per share increased as a result of the increase in our net loss , offset by the increase in our weighted average number of shares due to the issuance of additional shares , mainly as part of a public offering we consummated in september 2012. story_separator_special_tag 0pt ; margin-right : 0pt `` > during the years that ended june 30 , 2014 , 2013 and 2012 we received approximately $ 3,243,000 , $ 1,452,000 and $ 3,156,000 , respectively , from the ocs towards our research and development expenses . story_separator_special_tag the grant will be used to cover research and development expenses for the period january 1 , 2014 to december 31 , 2014. in addition , the european authorities approved a research grant under the fp7 in the amount of approximately 92,955 for a period of 5 years which began on january 1 , 2011. we believe that we have sufficient cash to fund our operations for at least the next 12 months . application of critical accounting policies our significant accounting policies are more fully described in note 2 to our consolidated financial statements appearing in this annual report . we believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations . the discussion and analysis of our financial condition and results of operations is based on our financial statements , which we prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , as well as the reported revenues and expenses during the reporting periods . on an ongoing basis , we evaluate such estimates and judgments , including those described in greater detail below . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions . revenue recognition from the united agreement we recognize revenue pursuant to the license agreement with united in accordance with asc 605-25 , `` revenue recognition , multiple-element arrangements `` . pursuant to asc 605-25 , each deliverable is evaluated to determine whether it qualifies as a separate unit of accounting based on whether the deliverable has “ stand-alone value ” to the customer . the arrangement 's consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable . in general , the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered , limited to the consideration that is not contingent upon future deliverables . we received an up-front , non-refundable license payment of $ 5,000,000. additional payments totaling $ 37,500,000 are subject to the achievement of certain regulatory milestones by united . since the deliverables in the united agreement do not have stand-alone value , none of them qualifies as a separate unit of accounting . accordingly , the non-refundable upfront license fee of $ 5,000,000 is deferred and recognized on a straight line basis over the related performance period which is the development period in accordance with staff accounting bulletin ( “ sab ” ) no . 104 , `` revenue recognition `` . we assessed the remaining performance period under the united agreement at 8.5 years as of june 30 , 2014. the additional regulatory milestones payments will be recognized upon the achievement of futures events by united , in accordance with asc 450-30-25 , “ gain contingencies `` . as of june 30 , 2014 , no regulatory milestones were achieved . we also received an advance payment for the development of $ 2,000,000 that will be deductible against development expenses as it accrued . the upfront payment which was received and has not yet fully recognized in the statement of operations , is included in the balance sheet as advance payment . part of the expenses related to the development , on a cost basis , shall be repaid to the company by united according to the applicable license agreement . we are deducting the payments from research and development expenses in accordance with asc 730-20 , `` research and development agreements `` . as of june 30 , 2014 , we deducted an amount of approximately $ 1,753,000 . 31 stock-based compensation stock-based compensation is considered critical accounting policy due to the significant expenses of restricted stock units which were granted to our employees , directors and consultants . in fiscal year 2014 , we recorded stock-based compensation expenses related to restricted stock units in the amount of $ 5,840,000. in accordance with asc 718 , `` compensation-stock compensation `` ( asc 718 ) , restricted shares units to employees and directors are measured at their fair value on the grant date . all restricted shares units granted in 2014 and 2013 were granted for no consideration ; therefore their fair value was equal to the share price at the date of grant , based on the close trading price of our shares known at the grant date . the restricted shares units to non-employees consultants are remeasured in any future vesting period for the unvested portion of the grants . the value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our consolidated statements of operations . we have graded vesting based on the accelerated method over the requisite service period of each of the awards . the expected pre-vesting forfeiture rate affects the number of the shares . based on our historical experience , the pre-vesting forfeiture rate per grant is 7 % for the shares granted to employees and 0 % for the shares granted to our directors , officers and non-employees consultants . marketable securities marketable securities consist of corporate bonds , government bonds and stocks . we determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such designation at each balance sheet date . in accordance with asc no . 320 , `` investment debt and equity securities , `` we classify marketable securities as available-for-sale . available-for-sale securities are stated at fair value , with unrealized gains and losses reported in accumulated other comprehensive income ( loss ) , a separate component of stockholders ' equity . realized gains and losses on
| liquidity and capital resources as of june 30 , 2014 , our total current assets were $ 61,987,000 and our total current liabilities were $ 7,397,000. on june 30 , 2014 , we had a working capital surplus of $ 54,590,000 and an accumulated deficit of $ 113,834,000. as of june 30 , 2013 , our total current assets were $ 55,085,000 and our total current liabilities were $ 5,921,000. on june 30 , 2013 , we had a working capital surplus of $ 49,164,000 and an accumulated deficit of $ 86,902,000. our cash and cash equivalents as of june 30 , 2014 amounted to $ 4,493,000. this is a decrease of $ 4,514,000 from the $ 9,007,000 reported as of june 30 , 2013. cash balances decreased in the year ended june 30 , 2014 for the reasons presented below : operating activities used cash of $ 19,121,000 in the year ended june 30 , 2014. cash used by operating activities in the year ended june 30 , 2014 primarily consisted of payments of salaries to our employees , and payments of fees to our consultants , suppliers , subcontractors , and professional services providers including the costs of clinical studies , offset by an ocs grant . 28 investing activities provided cash of $ 1,983,000 in the year ended june 30 , 2014. the investing activities consisted primarily of withdrawal of $ 7,421,000 of short-term deposits and proceeds of $ 6,867,000 from the sale and redemption of marketable securities , offset by investing $ 10,851,000 in marketable securities and the purchase of property and equipment for $ 1,573,000. financing activities generated cash in the amount of $ 12,624,000 during the year ended june 30 , 2014. the financing activities are primarily attributable to net proceeds of $ 10,644,000 from issuing shares of our common stock under the atm agreement as described below , and from exercises of warrants by shareholders .
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customers on a global basis international – delivers staffing and direct-hire services in fifteen countries in europe , as well as mexico in addition , we provide staffing services to customers in the asia-pacific region through persolkelly pte . ltd. , our joint venture with persol asia pacific pte . ltd , a wholly owned subsidiary of persol holdings , a leading provider of hr solutions in japan . we earn revenues from customers that procure the services of our temporary employees on a time and materials basis , that use us to recruit permanent employees , and that rely on our talent advisory and outsourcing services . our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable . the nature of our business is such that trade accounts receivable are our most significant asset . average days sales outstanding varies within and outside the u.s. and was 64 days on a global basis as of the end of 2020 and 58 days as of the end of 2019. since receipts from customers generally lag temporary employee payroll , working capital requirements increase substantially in periods of growth and decline in periods of economic contraction . our perspective short term while far from certain , the impacts of covid-19 on the global economy , the talent solutions industry , our customers and our talent have become more clear since the beginning of the pandemic . year-over-year revenue declines have been substantial and recent trends have pointed to a gradual recovery in demand . in response to the crisis , in april 2020 we took a series of proactive actions . these actions were designed to reduce spending , minimize layoffs , and bolster the strength and flexibility of kelly 's finances . these actions included : a 10 % pay cut for full-time salaried employees in the u.s. , puerto rico and canada , in addition to certain actions in europe and asia-pacific ; substantially reduced ceo compensation and reduced compensation of 10 % or more for senior leaders ; temporary furloughing and or redeployment of some employees until business conditions improve ; suspension of the company match to certain retirement accounts in the u.s. and puerto rico ; reduction of discretionary expenses and projects , including capital expenditures ; and a hiring freeze with the exception of critical revenue-generating positions . the actions have generated substantial cost savings and have allowed us the time necessary to assess the variety of impacts the crisis has had on our business . these initial actions were intentionally broad in scope and as we have moved forward our actions are becoming more targeted to the areas of business where demand declines have been more significant and persistent . actions such as the 10 % pay cut , compensation adjustments for senior leaders and temporary furloughs were ended early in the fourth quarter of 2020. the suspension of the company match to retirement accounts ended in january 2021 and others such as reductions in discretionary spending , capital expenditures and carefully managing staffing levels in non-revenue generating positions will continue . in addition , we benefited from cares act provisions allowing deferral of employer social security tax payments . in the fourth quarter of 2020 , management reduced staffing levels to align with expected revenue levels and incurred restructuring charges of $ 4.4 million for severance and related benefits to be paid to impacted employees , and are included in our fourth quarter results . given the level of uncertainty surrounding the duration of the covid-19 crisis , kelly 's board also voted to suspend the quarterly dividend effective may , 2020 until conditions improve and continues to assess future actions with respect to our dividend policy . the impact of the pandemic began in march 2020 with the limitations on public life in the u.s. and the european markets we serve and continued through the end of 2020 as the effect of the pandemic response slowed global economic activity . we do expect that there will continue to be a material decline in our year-over-year revenues through the first quarter of 2021 as 23 demand for our services gradually recovers from the economic slowdown and the effects of customer and talent concerns related to operating safely during a pandemic . the impact on the revenues of each segment will vary given the differences in pandemic-related measures enacted in each geography , the customer industries served and the skill sets of the talent provided to our customers and their ability to work remotely . we currently expect a gradual return to pre-crisis levels of customer demand , however , the pace of such a return may be delayed by repeated cycles of increased economic activity and subsequent disruption caused by a resurgence in infection leading to additional containment measures . in the first quarter of 2021 , while our cost reduction efforts are expected to reduce year-over-year expenses , they will not be enough to completely offset declines in revenue and gross profit . as a result , we expect our first quarter 2021 earnings to decline year-over-year . for the full year of 2021 , we expect that our revenue will reflect a continued gradual improvement in demand and result in improvements in year-over-year gross profit and earnings from operations . in addition , negative market reaction to the covid-19 crisis in march 2020 , including declines in our common stock price , caused our market capitalization to decline significantly . this triggered an interim goodwill impairment test and resulted in a $ 147.7 million non-cash goodwill impairment charge in the first quarter of 2020. moving forward while the severity of the economic impacts and their duration can not be precisely predicted , we believe that the mid-term impacts on how people view , find and conduct work will continue to align with our strategic path . story_separator_special_tag 2019 vs. 2018 professional & industrial revenue from services decreased as a result of lower staffing revenues . this decrease was due to the disruption resulting from the restructure of the u.s. branch-based staffing in the first quarter of 2019 and slower achievement of the related benefits . the reduction in staffing revenue was partially offset by increases in our kellyconnect and outcome-based services revenues as a result of program expansions and new customer contracts . science , engineering & technology revenue from services increased due to higher staffing services revenue as a result of the acquisitions of global technology associates and nextgen in the first quarter of 2019. revenues also increased in our outcome-based services due to both adding new customers and existing customer program expansions . education revenue from services increased as a result of continued sales growth from new contracts with additional school districts coupled with year-over-year revenue increases in existing school districts . 29 outsourcing & consulting revenue from services was flat year over year . revenue increases in our msp product were offset by decreases in our ppo and rpo products . international revenue decreased 7.3 % on a reported basis and 3.4 % on a cc basis . the decline was primarily due to a decrease in hours volume reflecting softening market conditions in europe , particularly france and germany . these decreases were partially offset by increased revenue in russia , due to higher hours volume . 30 operating results by segment ( continued ) ( dollars in millions ) replace_table_token_4_th 2020 vs. 2019 gross profit for the professional & industrial segment declined as the result of lower revenue volume , partially offset by an improved gross profit rate . the gross profit rate increased 30 basis points due to lower employee-related costs coupled with improved product mix , as a greater proportion of the segment revenue came from outcome-based services with higher margins . the science , engineering & technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate . the gross profit rate increased 50 basis points due to lower employee-related costs , partially offset by specialty and customer mix . gross profit for the education segment declined as a result of lower revenue volume , combined with a lower gross profit rate . the education gross profit rate decreased 130 basis points due to increased pricing pressures , partially offset by lower employee-related costs . the outsourcing & consulting gross profit declined on lower revenue volume , partially offset by an improved gross profit rate . the outsourcing & consulting gross profit rate increased 60 basis points due to improved customer mix in the rpo product , coupled with lower employee-related costs in the ppo product . international gross profit declined as a result of lower revenue volume and a decline in the gross profit rate . the international gross profit rate decreased primarily due to lower permanent placement revenue . 2019 vs. 2018 gross profit for the professional & industrial segment declined as the result of lower revenue volume , partially offset by an improved gross profit rate . the gross profit rate increased 20 basis points due to customer and specialty mix . the science , engineering & technology gross profit increased as the result of higher revenue volume from the gta and nextgen acquisitions mentioned previously , combined with a higher gross profit rate . the gross profit rate increased 150 basis points due primarily to the impact of these acquisitions coupled with improved specialty mix . 31 gross profit for the education segment increased as a result of higher revenue volume , partially offset by a lower gross profit rate . the education gross profit rate decreased 50 basis points due to pricing pressures . the outsourcing & consulting gross profit decreased as a result of a decline in the gross profit rate . the outsourcing & consulting gross profit rate decreased 50 basis points due primarily to the reduction in our gross profit rate in our rpo product as a result of customer mix within that product . international gross profit declined as a result of lower revenue volume and negative currency effects . the international gross profit rate for 2019 was flat against 2018 . 32 operating results by segment ( continued ) ( dollars in millions ) replace_table_token_5_th 2020 vs. 2019 total sg & a expenses in professional & industrial decreased due primarily to lower salaries and related costs due to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . in addition , professional & industrial took restructuring actions in both 2020 and 2019 , which reduced salaries and related costs and facilities expenses . included in total sg & a expenses for 2020 and 2019 are the costs of those restructuring efforts of $ 6.0 million and $ 5.1 million , respectively , representing primarily employee severance costs . total sg & a expenses in science , engineering & technology decreased due primarily to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . total sg & a expenses in education decreased due primarily to lower salaries and related costs resulting from the cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . these decreases were partially offset by the impact of the acquisition of insight that took place in the first quarter of 2020. total sg & a expenses in outsourcing & consulting decreased due primarily to lower salaries and related expenses resulting from cost management actions and initiatives taken to help mitigate the lower revenue volume
| liquidity and capital resources as of june 30 , 2014 , our total current assets were $ 61,987,000 and our total current liabilities were $ 7,397,000. on june 30 , 2014 , we had a working capital surplus of $ 54,590,000 and an accumulated deficit of $ 113,834,000. as of june 30 , 2013 , our total current assets were $ 55,085,000 and our total current liabilities were $ 5,921,000. on june 30 , 2013 , we had a working capital surplus of $ 49,164,000 and an accumulated deficit of $ 86,902,000. our cash and cash equivalents as of june 30 , 2014 amounted to $ 4,493,000. this is a decrease of $ 4,514,000 from the $ 9,007,000 reported as of june 30 , 2013. cash balances decreased in the year ended june 30 , 2014 for the reasons presented below : operating activities used cash of $ 19,121,000 in the year ended june 30 , 2014. cash used by operating activities in the year ended june 30 , 2014 primarily consisted of payments of salaries to our employees , and payments of fees to our consultants , suppliers , subcontractors , and professional services providers including the costs of clinical studies , offset by an ocs grant . 28 investing activities provided cash of $ 1,983,000 in the year ended june 30 , 2014. the investing activities consisted primarily of withdrawal of $ 7,421,000 of short-term deposits and proceeds of $ 6,867,000 from the sale and redemption of marketable securities , offset by investing $ 10,851,000 in marketable securities and the purchase of property and equipment for $ 1,573,000. financing activities generated cash in the amount of $ 12,624,000 during the year ended june 30 , 2014. the financing activities are primarily attributable to net proceeds of $ 10,644,000 from issuing shares of our common stock under the atm agreement as described below , and from exercises of warrants by shareholders .
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customers on a global basis international – delivers staffing and direct-hire services in fifteen countries in europe , as well as mexico in addition , we provide staffing services to customers in the asia-pacific region through persolkelly pte . ltd. , our joint venture with persol asia pacific pte . ltd , a wholly owned subsidiary of persol holdings , a leading provider of hr solutions in japan . we earn revenues from customers that procure the services of our temporary employees on a time and materials basis , that use us to recruit permanent employees , and that rely on our talent advisory and outsourcing services . our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable . the nature of our business is such that trade accounts receivable are our most significant asset . average days sales outstanding varies within and outside the u.s. and was 64 days on a global basis as of the end of 2020 and 58 days as of the end of 2019. since receipts from customers generally lag temporary employee payroll , working capital requirements increase substantially in periods of growth and decline in periods of economic contraction . our perspective short term while far from certain , the impacts of covid-19 on the global economy , the talent solutions industry , our customers and our talent have become more clear since the beginning of the pandemic . year-over-year revenue declines have been substantial and recent trends have pointed to a gradual recovery in demand . in response to the crisis , in april 2020 we took a series of proactive actions . these actions were designed to reduce spending , minimize layoffs , and bolster the strength and flexibility of kelly 's finances . these actions included : a 10 % pay cut for full-time salaried employees in the u.s. , puerto rico and canada , in addition to certain actions in europe and asia-pacific ; substantially reduced ceo compensation and reduced compensation of 10 % or more for senior leaders ; temporary furloughing and or redeployment of some employees until business conditions improve ; suspension of the company match to certain retirement accounts in the u.s. and puerto rico ; reduction of discretionary expenses and projects , including capital expenditures ; and a hiring freeze with the exception of critical revenue-generating positions . the actions have generated substantial cost savings and have allowed us the time necessary to assess the variety of impacts the crisis has had on our business . these initial actions were intentionally broad in scope and as we have moved forward our actions are becoming more targeted to the areas of business where demand declines have been more significant and persistent . actions such as the 10 % pay cut , compensation adjustments for senior leaders and temporary furloughs were ended early in the fourth quarter of 2020. the suspension of the company match to retirement accounts ended in january 2021 and others such as reductions in discretionary spending , capital expenditures and carefully managing staffing levels in non-revenue generating positions will continue . in addition , we benefited from cares act provisions allowing deferral of employer social security tax payments . in the fourth quarter of 2020 , management reduced staffing levels to align with expected revenue levels and incurred restructuring charges of $ 4.4 million for severance and related benefits to be paid to impacted employees , and are included in our fourth quarter results . given the level of uncertainty surrounding the duration of the covid-19 crisis , kelly 's board also voted to suspend the quarterly dividend effective may , 2020 until conditions improve and continues to assess future actions with respect to our dividend policy . the impact of the pandemic began in march 2020 with the limitations on public life in the u.s. and the european markets we serve and continued through the end of 2020 as the effect of the pandemic response slowed global economic activity . we do expect that there will continue to be a material decline in our year-over-year revenues through the first quarter of 2021 as 23 demand for our services gradually recovers from the economic slowdown and the effects of customer and talent concerns related to operating safely during a pandemic . the impact on the revenues of each segment will vary given the differences in pandemic-related measures enacted in each geography , the customer industries served and the skill sets of the talent provided to our customers and their ability to work remotely . we currently expect a gradual return to pre-crisis levels of customer demand , however , the pace of such a return may be delayed by repeated cycles of increased economic activity and subsequent disruption caused by a resurgence in infection leading to additional containment measures . in the first quarter of 2021 , while our cost reduction efforts are expected to reduce year-over-year expenses , they will not be enough to completely offset declines in revenue and gross profit . as a result , we expect our first quarter 2021 earnings to decline year-over-year . for the full year of 2021 , we expect that our revenue will reflect a continued gradual improvement in demand and result in improvements in year-over-year gross profit and earnings from operations . in addition , negative market reaction to the covid-19 crisis in march 2020 , including declines in our common stock price , caused our market capitalization to decline significantly . this triggered an interim goodwill impairment test and resulted in a $ 147.7 million non-cash goodwill impairment charge in the first quarter of 2020. moving forward while the severity of the economic impacts and their duration can not be precisely predicted , we believe that the mid-term impacts on how people view , find and conduct work will continue to align with our strategic path . story_separator_special_tag 2019 vs. 2018 professional & industrial revenue from services decreased as a result of lower staffing revenues . this decrease was due to the disruption resulting from the restructure of the u.s. branch-based staffing in the first quarter of 2019 and slower achievement of the related benefits . the reduction in staffing revenue was partially offset by increases in our kellyconnect and outcome-based services revenues as a result of program expansions and new customer contracts . science , engineering & technology revenue from services increased due to higher staffing services revenue as a result of the acquisitions of global technology associates and nextgen in the first quarter of 2019. revenues also increased in our outcome-based services due to both adding new customers and existing customer program expansions . education revenue from services increased as a result of continued sales growth from new contracts with additional school districts coupled with year-over-year revenue increases in existing school districts . 29 outsourcing & consulting revenue from services was flat year over year . revenue increases in our msp product were offset by decreases in our ppo and rpo products . international revenue decreased 7.3 % on a reported basis and 3.4 % on a cc basis . the decline was primarily due to a decrease in hours volume reflecting softening market conditions in europe , particularly france and germany . these decreases were partially offset by increased revenue in russia , due to higher hours volume . 30 operating results by segment ( continued ) ( dollars in millions ) replace_table_token_4_th 2020 vs. 2019 gross profit for the professional & industrial segment declined as the result of lower revenue volume , partially offset by an improved gross profit rate . the gross profit rate increased 30 basis points due to lower employee-related costs coupled with improved product mix , as a greater proportion of the segment revenue came from outcome-based services with higher margins . the science , engineering & technology gross profit declined as lower revenue volume was partially offset by a higher gross profit rate . the gross profit rate increased 50 basis points due to lower employee-related costs , partially offset by specialty and customer mix . gross profit for the education segment declined as a result of lower revenue volume , combined with a lower gross profit rate . the education gross profit rate decreased 130 basis points due to increased pricing pressures , partially offset by lower employee-related costs . the outsourcing & consulting gross profit declined on lower revenue volume , partially offset by an improved gross profit rate . the outsourcing & consulting gross profit rate increased 60 basis points due to improved customer mix in the rpo product , coupled with lower employee-related costs in the ppo product . international gross profit declined as a result of lower revenue volume and a decline in the gross profit rate . the international gross profit rate decreased primarily due to lower permanent placement revenue . 2019 vs. 2018 gross profit for the professional & industrial segment declined as the result of lower revenue volume , partially offset by an improved gross profit rate . the gross profit rate increased 20 basis points due to customer and specialty mix . the science , engineering & technology gross profit increased as the result of higher revenue volume from the gta and nextgen acquisitions mentioned previously , combined with a higher gross profit rate . the gross profit rate increased 150 basis points due primarily to the impact of these acquisitions coupled with improved specialty mix . 31 gross profit for the education segment increased as a result of higher revenue volume , partially offset by a lower gross profit rate . the education gross profit rate decreased 50 basis points due to pricing pressures . the outsourcing & consulting gross profit decreased as a result of a decline in the gross profit rate . the outsourcing & consulting gross profit rate decreased 50 basis points due primarily to the reduction in our gross profit rate in our rpo product as a result of customer mix within that product . international gross profit declined as a result of lower revenue volume and negative currency effects . the international gross profit rate for 2019 was flat against 2018 . 32 operating results by segment ( continued ) ( dollars in millions ) replace_table_token_5_th 2020 vs. 2019 total sg & a expenses in professional & industrial decreased due primarily to lower salaries and related costs due to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . in addition , professional & industrial took restructuring actions in both 2020 and 2019 , which reduced salaries and related costs and facilities expenses . included in total sg & a expenses for 2020 and 2019 are the costs of those restructuring efforts of $ 6.0 million and $ 5.1 million , respectively , representing primarily employee severance costs . total sg & a expenses in science , engineering & technology decreased due primarily to cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . total sg & a expenses in education decreased due primarily to lower salaries and related costs resulting from the cost management actions and initiatives taken to help mitigate the lower revenue volume as a result of the covid-19 disruption . the decreased revenue volume also resulted in lower performance-based compensation . these decreases were partially offset by the impact of the acquisition of insight that took place in the first quarter of 2020. total sg & a expenses in outsourcing & consulting decreased due primarily to lower salaries and related expenses resulting from cost management actions and initiatives taken to help mitigate the lower revenue volume
| liquidity we expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations , available cash and equivalents , securitization of customer receivables and committed unused credit facilities . additional funding sources could include asset-based lending or additional bank facilities . to meet expected future cash requirements related to our nonqualified retirement plan , we may utilize proceeds from company-owned life insurance policies . during 2020 , cash generated from operations will continue to be supplemented by recent enactment of laws providing covid-19 relief , most notably the coronavirus aid , relief , and economic security act which allows for the deferral of payments of the company 's u.s. social security taxes . such deferrals are required to be repaid in 2021 and 2022. we utilize intercompany loans , dividends , capital contributions and redemptions to effectively manage our cash on a global basis . we periodically review our foreign subsidiaries ' cash balances and projected cash needs . as part of those reviews , we may identify cash that we feel should be repatriated to optimize the company 's overall capital structure . as of the 2020 year end , these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances . we expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs , primarily trade accounts receivable , increase during periods of growth . a cash pooling arrangement ( the “ cash pool ” ) is available to fund general corporate needs internationally . the cash pool is a set of cash accounts maintained with a single bank 38 that must , as a whole , maintain at least a zero balance ; individual accounts may be positive or negative . this allows countries with excess cash to invest and countries with cash needs to utilize the excess cash . at year-end 2020 , we had $ 200.0 million of available capacity on our $ 200.0 million revolving credit facility and $ 97.0 million of available capacity on our $ 150.0 million securitization facility .
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reaching “ 2b-10 ” in november 2013 , we introduced a multi-year “ 2b-10 ” plan , which provided a roadmap of revenue and margin metrics to achieve $ 2 billion in revenue with a 10 % adjusted ebitda margin . taken together , reaching “ 2b-10 ” would result in adjusted ebitda of at least $ 200 million . in november 2015 , we have refined the specific metrics we expect will lead us to our “ 2b-10 ” objectives by providing ranges to each metric instead of point estimates . since we rolled out our “ 2b-10 ” plan , we have consistently noted that there are a number of paths to achieving our underlying goal of $ 200 million of ebitda . additionally , during the second quarter of our fiscal 2015 , we made the decision that we would not continue to reinvest in new homebuilding assets in our new jersey division , which had a modest impact on the timing of the achievement of our “ 2b-10 ” objectives . nonetheless , we continue our commitment to reaching these objectives as soon as possible . we expect to reach these objectives by making improvements on five key metrics : ( 1 ) sales per community per month ( or our absorption rate ) ; ( 2 ) active community count ; ( 3 ) average selling prices ( asp ) ; ( 4 ) homebuilding gross margins and ( 5 ) cost leverage as measured by selling , general and administrative costs ( sg & a ) as a percentage of total revenue . during fiscal 2015 , we continued to make progress on several of these metrics , most notably by growing revenue to $ 1.6 billion , up 11.2 % year-over-year , and increasing our community count to 166 as of september 30 , 2015 , which is up from 155 as of the end of the prior fiscal year . adjusted ebitda was $ 126.8 million compared to $ 128.3 million in the prior year , a slight decline 24 of 1.1 % , and adjusted ebitda margin was 7.8 % compared to 8.8 % in the prior fiscal year , a decline of 100 basis points . however , excluding the one-time items noted above ( related to the florida stucco issues and litigation settlement in discontinued operations ) , adjusted ebitda would have increased 8.1 % year-over-year , after also adjusting fiscal 2014 for the florida stucco issues and the water intrusion issue in new jersey ( refer to item 6 , selected financial data , in this form 10-k for a reconciliation of adjusted ebitda ) . these improvements were due to the intense focus we have placed on the operational drivers of this plan , and in part , to stronger home pricing conditions . our progress on each metric is discussed in more detail below . during fiscal 2015 , our rate of sales per community per month was 2.8 , which was comparable with the prior fiscal year and remains one of the strongest absorption rates in the industry . although we experienced declining absorption rates in our most recent quarter due in part to a dip in consumer confidence and fears relating to interest rates , we are still an industry leader in this metric and continue to focus on it as a top strategic priority . our updated “ 2b-10 ” plan anticipates sales per community per month to be in the range of 2.8 to 3.2 . over the past couple of years , we significantly increased our level of land investments in an effort to grow our active community count . we purchased mostly raw and partially developed land in some of the best school districts and most active job markets in the country . we ended fiscal 2015 with 166 active communities , which was 7.1 % higher than a year earlier . for fiscal 2016 , we plan to continue our investment in current and replacement communities to drive year-over-year order growth . our revised “ 2b-10 ” target metric is a community count range between 170 and 175 , which we are approaching . although we have been buying land in almost all of our markets , our incremental land investments over the past couple of years have been disproportionately focused on securing attractive parcels in texas , california and the mid-atlantic , which feature some of the strongest employment characteristics and school districts in the country , as well as some of our higher-priced product lines . this geographic mix shift , combined with some market pricing power , has led to a significant rise in our asp from $ 284.8 thousand last year to $ 313.5 thousand this year . in addition , we ended fiscal 2015 with an asp for our units in backlog of $ 327.6 thousand , indicating that future asps should continue to increase . our targeted “ 2b-10 ” metric for asp has been increased to a range of $ 330.0 thousand to $ 340.0 thousand . we lost some progress on improving homebuilding gross margin during fiscal 2015 . for the year , our homebuilding gross margin ( excluding impairments , abandonments and interest in cost of sales ) declined 130 basis points to 20.6 % . our “ 2b-10 ” target for our homebuilding margin metric is now between 21.0 % and 22.0 % . excluding the impact of florida stucco issues , offset by the credit for anticipated insurance recoveries , homebuilding margin would have been 21.5 % for fiscal 2015 , which is within our revised “ 2b-10 ” target range . as discussed further below , our homebuilding gross margin has declined due to an increase in the cost of land , driven by both market conditions and the structure of our land deals , and labor , as well as geographic mix . story_separator_special_tag the tax benefit recognized during the fiscal year ended september 30 , 2015 was related to the release of a substantial portion of the valuation allowance on our deferred tax assets that we established beginning in fiscal 2008. for a further discussion of this release , refer to note 13 of the notes to consolidated financial statements in this form 10-k. the tax benefit recognized during the fiscal year ended september 30 , 2014 related primarily to the refund of tax and accrued interest from our irs examination closing , release of estimated liabilities for previously uncertain tax positions and utilization of certain carryback opportunities . the tax benefit recognized during the fiscal year ended september 30 , 2013 related primarily to our release of estimated liabilities for previously uncertain tax positions and utilization of certain carryback opportunities . fiscal year ended september 30 , 2015 as compared to 2014 west segment : homebuilding revenues increased 8.8 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , primarily due to an 11.1 % increase in asp , partially offset by a 2.1 % decrease in closings . the decrease in closings was driven by a lower backlog at the start of the year from lower new orders , net during our fiscal 2014. however , new orders , net in fiscal 2015 quickly picked up , particularly in our texas and california operations . as compared to the prior fiscal year , our homebuilding gross profit increased $ 1.2 million on lower closings , partially due to $ 4.9 million in impairments and abandonments recognized in fiscal 2014. homebuilding gross margins without impairments and abandonments decreased from 23.3 % to 20.8 % due to community and geographic mix , as well as increases in indirect construction costs . greater year-over-year homebuilding gross profit and an increase in land sales and other gross profit of $ 3.2 million , partially offset by an increase in commissions and selling and marketing costs ( due to an increase in homebuilding revenues and growth in community count , respectively ) , led to a net increase in operating income of $ 1.8 million over fiscal 2014. east segment : homebuilding revenues increased 4.6 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , driven by an 8.2 % increase in asp , partially offset by a 3.4 % decrease in closings . the decline in closings is primarily due to a year-over-year reduction in new jersey , where we elected not to continue to reinvest in new homebuilding assets . the increase in homebuilding revenues led to a $ 5.1 million increase in our homebuilding gross profit . homebuilding gross margins in our east segment increased only slightly , from 18.9 % in fiscal 2014 to 19.0 % in the current fiscal year , as the positive impact of product and geographic mix were largely offset by lower margins generated by communities being closed out in new jersey and the impact of a warranty charge of approximately $ 0.6 million recorded in the prior year period for one new jersey community . the increase in operating income in the east segment of $ 4.4 million was driven primarily by our increased homebuilding revenues and related gross profit , partially offset by a year-over-year decline in gross profit on land sales . southeast segment : homebuilding revenues increased 25.8 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , driven by an 11.4 % increase in closings combined with a 12.9 % increase in asp . this increase in revenues drove a $ 12.3 million increase in homebuilding gross profit . homebuilding gross margin in our southeast segment declined from 19.2 % in fiscal 2014 to 18.1 % due to the current year charge related to the florida stucco issues of $ 26.3 million , offset by $ 12.7 million in anticipated insurance recoveries recorded because the company exceeded its policy thresholds ( for a net negative margin impact of $ 13.6 million ) , partially offset by ( 1 ) $ 4.3 million of prior year charges related to the florida stucco issues and ( 2 ) impairments and abandonments recorded in the prior year of $ 2.5 million . excluding these amounts , margin for both fiscal 2015 and 2014 would have been 21.2 % . the higher homebuilding gross profit was partially offset by ( 1 ) an increase in year-over-year commissions on account of higher asps and closings and ( 2 ) incremental sales and marketing and g & a costs to support a higher community count , resulting in a higher operating income for our southeast segment of $ 5.3 million . corporate and unallocated : corporate and unallocated includes amortization of capitalized interest and indirects , as well as costs related to numerous shared services functions that benefit all segments , including information technology , treasury , corporate finance , legal , branding and national marketing . the costs of these shared services are not allocated to the operating segments . for the fiscal year ended september 30 , 2015 , our corporate and unallocated costs increased $ 15.5 million compared to the prior year due to an increase in interest amortized to cost of sales ( refer to note 6 of notes to the consolidated financial statements in this form 10-k ) , as well as certain incremental g & a expenditures related to our business growth . also included in the corporate and unallocated 31 line for the current fiscal year is a $ 6.2 million credit from the recording of anticipated insurance recoveries above those related to the florida stucco issues , which is partially offsetting the increased interest and g & a costs . fiscal year ended september 30 , 2014 as compared to 2013 west segment : homebuilding revenues decreased 1.2 % for
| liquidity we expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations , available cash and equivalents , securitization of customer receivables and committed unused credit facilities . additional funding sources could include asset-based lending or additional bank facilities . to meet expected future cash requirements related to our nonqualified retirement plan , we may utilize proceeds from company-owned life insurance policies . during 2020 , cash generated from operations will continue to be supplemented by recent enactment of laws providing covid-19 relief , most notably the coronavirus aid , relief , and economic security act which allows for the deferral of payments of the company 's u.s. social security taxes . such deferrals are required to be repaid in 2021 and 2022. we utilize intercompany loans , dividends , capital contributions and redemptions to effectively manage our cash on a global basis . we periodically review our foreign subsidiaries ' cash balances and projected cash needs . as part of those reviews , we may identify cash that we feel should be repatriated to optimize the company 's overall capital structure . as of the 2020 year end , these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances . we expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs , primarily trade accounts receivable , increase during periods of growth . a cash pooling arrangement ( the “ cash pool ” ) is available to fund general corporate needs internationally . the cash pool is a set of cash accounts maintained with a single bank 38 that must , as a whole , maintain at least a zero balance ; individual accounts may be positive or negative . this allows countries with excess cash to invest and countries with cash needs to utilize the excess cash . at year-end 2020 , we had $ 200.0 million of available capacity on our $ 200.0 million revolving credit facility and $ 97.0 million of available capacity on our $ 150.0 million securitization facility .
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reaching “ 2b-10 ” in november 2013 , we introduced a multi-year “ 2b-10 ” plan , which provided a roadmap of revenue and margin metrics to achieve $ 2 billion in revenue with a 10 % adjusted ebitda margin . taken together , reaching “ 2b-10 ” would result in adjusted ebitda of at least $ 200 million . in november 2015 , we have refined the specific metrics we expect will lead us to our “ 2b-10 ” objectives by providing ranges to each metric instead of point estimates . since we rolled out our “ 2b-10 ” plan , we have consistently noted that there are a number of paths to achieving our underlying goal of $ 200 million of ebitda . additionally , during the second quarter of our fiscal 2015 , we made the decision that we would not continue to reinvest in new homebuilding assets in our new jersey division , which had a modest impact on the timing of the achievement of our “ 2b-10 ” objectives . nonetheless , we continue our commitment to reaching these objectives as soon as possible . we expect to reach these objectives by making improvements on five key metrics : ( 1 ) sales per community per month ( or our absorption rate ) ; ( 2 ) active community count ; ( 3 ) average selling prices ( asp ) ; ( 4 ) homebuilding gross margins and ( 5 ) cost leverage as measured by selling , general and administrative costs ( sg & a ) as a percentage of total revenue . during fiscal 2015 , we continued to make progress on several of these metrics , most notably by growing revenue to $ 1.6 billion , up 11.2 % year-over-year , and increasing our community count to 166 as of september 30 , 2015 , which is up from 155 as of the end of the prior fiscal year . adjusted ebitda was $ 126.8 million compared to $ 128.3 million in the prior year , a slight decline 24 of 1.1 % , and adjusted ebitda margin was 7.8 % compared to 8.8 % in the prior fiscal year , a decline of 100 basis points . however , excluding the one-time items noted above ( related to the florida stucco issues and litigation settlement in discontinued operations ) , adjusted ebitda would have increased 8.1 % year-over-year , after also adjusting fiscal 2014 for the florida stucco issues and the water intrusion issue in new jersey ( refer to item 6 , selected financial data , in this form 10-k for a reconciliation of adjusted ebitda ) . these improvements were due to the intense focus we have placed on the operational drivers of this plan , and in part , to stronger home pricing conditions . our progress on each metric is discussed in more detail below . during fiscal 2015 , our rate of sales per community per month was 2.8 , which was comparable with the prior fiscal year and remains one of the strongest absorption rates in the industry . although we experienced declining absorption rates in our most recent quarter due in part to a dip in consumer confidence and fears relating to interest rates , we are still an industry leader in this metric and continue to focus on it as a top strategic priority . our updated “ 2b-10 ” plan anticipates sales per community per month to be in the range of 2.8 to 3.2 . over the past couple of years , we significantly increased our level of land investments in an effort to grow our active community count . we purchased mostly raw and partially developed land in some of the best school districts and most active job markets in the country . we ended fiscal 2015 with 166 active communities , which was 7.1 % higher than a year earlier . for fiscal 2016 , we plan to continue our investment in current and replacement communities to drive year-over-year order growth . our revised “ 2b-10 ” target metric is a community count range between 170 and 175 , which we are approaching . although we have been buying land in almost all of our markets , our incremental land investments over the past couple of years have been disproportionately focused on securing attractive parcels in texas , california and the mid-atlantic , which feature some of the strongest employment characteristics and school districts in the country , as well as some of our higher-priced product lines . this geographic mix shift , combined with some market pricing power , has led to a significant rise in our asp from $ 284.8 thousand last year to $ 313.5 thousand this year . in addition , we ended fiscal 2015 with an asp for our units in backlog of $ 327.6 thousand , indicating that future asps should continue to increase . our targeted “ 2b-10 ” metric for asp has been increased to a range of $ 330.0 thousand to $ 340.0 thousand . we lost some progress on improving homebuilding gross margin during fiscal 2015 . for the year , our homebuilding gross margin ( excluding impairments , abandonments and interest in cost of sales ) declined 130 basis points to 20.6 % . our “ 2b-10 ” target for our homebuilding margin metric is now between 21.0 % and 22.0 % . excluding the impact of florida stucco issues , offset by the credit for anticipated insurance recoveries , homebuilding margin would have been 21.5 % for fiscal 2015 , which is within our revised “ 2b-10 ” target range . as discussed further below , our homebuilding gross margin has declined due to an increase in the cost of land , driven by both market conditions and the structure of our land deals , and labor , as well as geographic mix . story_separator_special_tag the tax benefit recognized during the fiscal year ended september 30 , 2015 was related to the release of a substantial portion of the valuation allowance on our deferred tax assets that we established beginning in fiscal 2008. for a further discussion of this release , refer to note 13 of the notes to consolidated financial statements in this form 10-k. the tax benefit recognized during the fiscal year ended september 30 , 2014 related primarily to the refund of tax and accrued interest from our irs examination closing , release of estimated liabilities for previously uncertain tax positions and utilization of certain carryback opportunities . the tax benefit recognized during the fiscal year ended september 30 , 2013 related primarily to our release of estimated liabilities for previously uncertain tax positions and utilization of certain carryback opportunities . fiscal year ended september 30 , 2015 as compared to 2014 west segment : homebuilding revenues increased 8.8 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , primarily due to an 11.1 % increase in asp , partially offset by a 2.1 % decrease in closings . the decrease in closings was driven by a lower backlog at the start of the year from lower new orders , net during our fiscal 2014. however , new orders , net in fiscal 2015 quickly picked up , particularly in our texas and california operations . as compared to the prior fiscal year , our homebuilding gross profit increased $ 1.2 million on lower closings , partially due to $ 4.9 million in impairments and abandonments recognized in fiscal 2014. homebuilding gross margins without impairments and abandonments decreased from 23.3 % to 20.8 % due to community and geographic mix , as well as increases in indirect construction costs . greater year-over-year homebuilding gross profit and an increase in land sales and other gross profit of $ 3.2 million , partially offset by an increase in commissions and selling and marketing costs ( due to an increase in homebuilding revenues and growth in community count , respectively ) , led to a net increase in operating income of $ 1.8 million over fiscal 2014. east segment : homebuilding revenues increased 4.6 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , driven by an 8.2 % increase in asp , partially offset by a 3.4 % decrease in closings . the decline in closings is primarily due to a year-over-year reduction in new jersey , where we elected not to continue to reinvest in new homebuilding assets . the increase in homebuilding revenues led to a $ 5.1 million increase in our homebuilding gross profit . homebuilding gross margins in our east segment increased only slightly , from 18.9 % in fiscal 2014 to 19.0 % in the current fiscal year , as the positive impact of product and geographic mix were largely offset by lower margins generated by communities being closed out in new jersey and the impact of a warranty charge of approximately $ 0.6 million recorded in the prior year period for one new jersey community . the increase in operating income in the east segment of $ 4.4 million was driven primarily by our increased homebuilding revenues and related gross profit , partially offset by a year-over-year decline in gross profit on land sales . southeast segment : homebuilding revenues increased 25.8 % for the fiscal year ended september 30 , 2015 compared to the prior fiscal year , driven by an 11.4 % increase in closings combined with a 12.9 % increase in asp . this increase in revenues drove a $ 12.3 million increase in homebuilding gross profit . homebuilding gross margin in our southeast segment declined from 19.2 % in fiscal 2014 to 18.1 % due to the current year charge related to the florida stucco issues of $ 26.3 million , offset by $ 12.7 million in anticipated insurance recoveries recorded because the company exceeded its policy thresholds ( for a net negative margin impact of $ 13.6 million ) , partially offset by ( 1 ) $ 4.3 million of prior year charges related to the florida stucco issues and ( 2 ) impairments and abandonments recorded in the prior year of $ 2.5 million . excluding these amounts , margin for both fiscal 2015 and 2014 would have been 21.2 % . the higher homebuilding gross profit was partially offset by ( 1 ) an increase in year-over-year commissions on account of higher asps and closings and ( 2 ) incremental sales and marketing and g & a costs to support a higher community count , resulting in a higher operating income for our southeast segment of $ 5.3 million . corporate and unallocated : corporate and unallocated includes amortization of capitalized interest and indirects , as well as costs related to numerous shared services functions that benefit all segments , including information technology , treasury , corporate finance , legal , branding and national marketing . the costs of these shared services are not allocated to the operating segments . for the fiscal year ended september 30 , 2015 , our corporate and unallocated costs increased $ 15.5 million compared to the prior year due to an increase in interest amortized to cost of sales ( refer to note 6 of notes to the consolidated financial statements in this form 10-k ) , as well as certain incremental g & a expenditures related to our business growth . also included in the corporate and unallocated 31 line for the current fiscal year is a $ 6.2 million credit from the recording of anticipated insurance recoveries above those related to the florida stucco issues , which is partially offsetting the increased interest and g & a costs . fiscal year ended september 30 , 2014 as compared to 2013 west segment : homebuilding revenues decreased 1.2 % for
| net cash used in financing activities was $ 18.9 million for the year ended september 30 , 2015 , primarily related to the repayment of certain borrowings , including the remaining senior amortizing notes related to our tangible equity units , $ 2.0 million of our senior notes due 2016 , and certain other secured notes payable . net cash provided by financing activities for the year ended september 30 , 2014 was $ 12.2 million , primarily related to the net proceeds from the issuance of $ 325 million aggregate principal amount of 5.75 % senior notes due june 2019 ( the june 2019 notes ) at par ( before underwriting and other issuance costs ) through a private placement to qualified institutional buyers . the proceeds from the issuance of the june 2019 notes were used to redeem all of our then outstanding senior notes due june 2018 ( the 2018 notes ) , including the applicable $ 17.2 million call price and make-whole premiums provided for by the 2018 notes . in fiscal 2013 , we completed a $ 200 million senior debt offering , the net proceeds of which were used to repay our then outstanding 2015 senior notes and repurchase a portion of our 2019 senior notes . further , in september 2013 , we completed another $ 200 million senior debt offering , the proceeds of which were used to fund additional land acquisitions , land development and for general corporate purposes . during fiscal 2013 , we also repaid $ 205 million of our cash secured loans . these transactions resulted in $ 1.2 million of cash provided by financing activities in fiscal 2013. financial position .
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we expect to incur significant expenses and increasing operating losses for the foreseeable future . we expect our expenses to increase in connection with our ongoing activities , particularly as we advance our product candidates through preclinical activities and clinical trials to seek regulatory approval and , if approved , commercialize such product candidates . accordingly , we will need additional financing to support our continuing operations . we expect to seek to fund our operations through public or private equity , debt financings , equity-linked financings , collaborations , strategic alliances , licensing arrangements , research grants or other sources . adequate additional financing may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . we will need to generate significant revenues to achieve profitability , and we may never do so . financial operations overview revenue we have not generated any revenues to date . in the future , we may generate revenues from product sales . in addition , to the extent we enter into licensing or collaboration arrangements , we may have additional sources of revenue . we expect that any revenue we generate will fluctuate from quarter to quarter as a result of the amount and timing of payments that we may recognize upon the sale of our products , to the extent that any products are successfully commercialized , and the amount and timing of fees , reimbursements , milestone and other payments received under any future licensing or collaboration arrangements . if we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them , our ability to generate future revenue , and our results of operations and financial position , would be materially adversely affected . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our drug discovery efforts , and the development of our product candidates , which include : employee-related expenses , including salaries , benefits , travel and non-cash share-based compensation expense ; external research and development expenses incurred under arrangements with third parties such as contract research organizations , or cros , contract manufacturers , consultants and academic institutions ; and facilities and laboratory and other supplies . 68 we expense research and development costs to operations as incurred . we account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received , rather than when the payment is made . the following summarizes our most advanced current research and development programs . exebacase our most advanced clinical candidate , exebacase , is an investigational novel lysin that targets staphylococcus aureus ( staph aureus ) , including methicillin-resistant ( mrsa ) strains , which causes serious infections such as bacteremia , pneumonia and osteomyelitis . staph aureus is also a common cause of biofilm-associated infections of heart valves ( endocarditis ) , prosthetic joints , indwelling devices and catheters . these infections result in significant morbidity and mortality despite currently available antibiotic therapies . exebacase completed a phase 2 superiority study that evaluated its safety , tolerability , efficacy and pharmacokinetics ( pk ) when used in addition to background standard of care ( soc ) antibiotics compared to soc antibiotics alone for the treatment of staph aureus bacteremia , including endocarditis in adult patients . in january 2019 , we announced topline results from this study which showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to soc antibiotics compared to soc antibiotics alone . in the phase 2 study , the primary efficacy analysis population of 116 patients with documented staph aureus bacteremia , including endocarditis , who received a single intravenous ( iv ) infusion of blinded study drug , the clinical responder rate at day 14 was 70.4 % for patients treated with exebacase and 60.0 % for patients dosed with soc antibiotics alone ( p=0.314 ) . the clinical responder rate at day 14 in the subset of patients with bacteremia including right-sided endocarditis was 80.0 % for patients treated with exebacase compared to 59.5 % for patients treated with soc antibiotics alone , an increase of 20.5 % ( p=0.028 ) . in the subset of patients with bacteremia alone , the clinical responder rate at day 14 was 81.8 % for patients treated with exebacase compared to 61.5 % for patients treated with soc antibiotics alone , an increase of 20.3 % ( p=0.035 ) . in a pre-specified analysis of mrsa-infected patients , the clinical responder rate at day 14 in patients treated with exebacase was nearly 43-percentage points higher than in patients treated with soc antibiotics alone ( 74.1 % for patients treated with exebacase compared to 31.3 % for patients treated with soc antibiotics alone ( p=0.010 ) ) . in addition to the higher rate of clinical response , mrsa-infected patients treated with exebacase showed a 21-percentage point reduction in 30-day all-cause mortality ( p=0.056 ) , a four day lower mean length of hospital stay and meaningful reductions in hospital readmission rates . exebacase was well-tolerated and treatment emergent adverse events , including serious treatment-emergent serious adverse events ( saes ) were balanced between the treatment groups . there were no saes that we determined to be related to exebacase , there were no reports of hypersensitivity related to exebacase and no patients discontinued treatment with study drug in either treatment group . we believe these data have established proof of concept for exebacase and for dlas as therapeutic agents . story_separator_special_tag recent accounting pronouncements see note 2summary of significant accounting policies , of the notes to financial statements , for a discussion of the impact of new accounting standards on our financial statements . results of operations for a discussion of our results of operations for the year ended december 31 , 2017 , including a year-to-year comparison between 2018 and 2017 , refer to part ii , item 7 , management 's discussion and analysis of financial condition and results of operations in our annual report on form 10-k for the year ended december 31 , 2018. comparison of years ended december 31 , 2019 and 2018 the following table summarizes our results of operations for the years ended december 31 , 2019 and 2018 : replace_table_token_9_th research and development expenses research and development expense was $ 18.1 million for the year ended december 31 , 2019 , compared with $ 22.4 million for the year ended december 31 , 2018 , a decrease of $ 4.3 million . this decrease was primarily attributable to a $ 6.3 million decrease in expenditures on clinical trial costs as we completed the reporting of the phase 2 trial of exebacase early in 2019 as compared to the active recruiting period for the trial in 2018. we also recorded an additional $ 2.4 million in reimbursable grant expenses , including the new usamrdc grant for cf-296 and the carb-x grant for the amurin peptide program . these decreases were partially offset by an increase of $ 2.2 million relating to the cgmp manufacturing of exebacase in order to supply clinical trial material for the phase 3 disrupt trial , an increase of $ 1.8 million on the advancement of our other product candidates , including cf-370 to nomination as our next product candidate , and an increase of $ 0.4 million in licensing fees for the milestone paid to rockefeller upon completion of the phase 2 trial of exebacase . 74 general and administrative expenses general and administrative expense was $ 9.8 million for the year ended december 31 , 2019 , compared with $ 8.7 million for the year ended december 31 , 2018 , an increase of $ 1.1 million . this increase was primarily attributable to increased legal fees as we expanded our intellectual property portfolio . other increases included increases in compensation costs of $ 0.2 million , investor relations costs of $ 0.1 million and insurance costs of $ 0.1 million . other income ( expense ) other income was $ 15.1 million for the year ended december 31 , 2019 compared with other expense of $ 6.6 million for the year ended december 31 , 2018 , an increase of $ 21.6 million . in 2019 , we had a non-cash gain of $ 14.7 million related to the change in fair value of our warrant liability and interest income of $ 0.4 million . in 2018 , we had non-cash expense of $ 7.2 million related to the change in fair value of our warrant liability , which was partially offset by $ 0.7 million of interest income . liquidity and capital resources story_separator_special_tag margin-bottom:0pt ; font-family : times new roman ; font-size:10pt `` > seek marketing approvals for our product candidates that successfully complete clinical trials ; establish , either on our own or with strategic partners , a sales , marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval ; maintain , leverage and expand our intellectual property portfolio ; and add operational , financial and management information systems and personnel , including personnel to support our product development and future commercialization efforts . 76 without additional funding , we believe we will not have sufficient funds to meet our obligations within the next twelve months from the date of issuance of our audited consolidated financial statements that are included elsewhere in this annual report on form 10-k. we have based this estimate on assumptions that may prove to be wrong , and we could use our available capital resources sooner than we currently expect . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates , and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates , we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates . we plan to continue to fund our operations through public or private debt and equity financings , but there can be no assurances that such financing will be available to us on satisfactory terms , or at all . our future capital requirements will depend on many factors , including : the progress and results of the clinical trials of our lead product candidates ; the scope , progress , results and costs of compound discovery , preclinical development , laboratory testing and clinical trials for our other product candidates ; the extent to which we acquire or in-license other products and technologies ; the costs , timing and outcome of regulatory review of our product candidates ; the costs of future commercialization activities , including product sales , marketing , manufacturing and distribution , for any of our product candidates for which we receive marketing approval ; revenue , if any , received from commercial sales of our product candidates , should any of our product candidates receive marketing approval ; the costs of preparing , filing and prosecuting patent applications , maintaining and enforcing our intellectual property rights and defending intellectual property-related claims ; and our ability to establish any future collaboration arrangements on favorable terms , if at all . until such time , if ever , as we can generate substantial product revenues , we expect to finance our cash needs through a combination of equity and debt offerings , collaborations , strategic
| net cash used in financing activities was $ 18.9 million for the year ended september 30 , 2015 , primarily related to the repayment of certain borrowings , including the remaining senior amortizing notes related to our tangible equity units , $ 2.0 million of our senior notes due 2016 , and certain other secured notes payable . net cash provided by financing activities for the year ended september 30 , 2014 was $ 12.2 million , primarily related to the net proceeds from the issuance of $ 325 million aggregate principal amount of 5.75 % senior notes due june 2019 ( the june 2019 notes ) at par ( before underwriting and other issuance costs ) through a private placement to qualified institutional buyers . the proceeds from the issuance of the june 2019 notes were used to redeem all of our then outstanding senior notes due june 2018 ( the 2018 notes ) , including the applicable $ 17.2 million call price and make-whole premiums provided for by the 2018 notes . in fiscal 2013 , we completed a $ 200 million senior debt offering , the net proceeds of which were used to repay our then outstanding 2015 senior notes and repurchase a portion of our 2019 senior notes . further , in september 2013 , we completed another $ 200 million senior debt offering , the proceeds of which were used to fund additional land acquisitions , land development and for general corporate purposes . during fiscal 2013 , we also repaid $ 205 million of our cash secured loans . these transactions resulted in $ 1.2 million of cash provided by financing activities in fiscal 2013. financial position .
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we expect to incur significant expenses and increasing operating losses for the foreseeable future . we expect our expenses to increase in connection with our ongoing activities , particularly as we advance our product candidates through preclinical activities and clinical trials to seek regulatory approval and , if approved , commercialize such product candidates . accordingly , we will need additional financing to support our continuing operations . we expect to seek to fund our operations through public or private equity , debt financings , equity-linked financings , collaborations , strategic alliances , licensing arrangements , research grants or other sources . adequate additional financing may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . we will need to generate significant revenues to achieve profitability , and we may never do so . financial operations overview revenue we have not generated any revenues to date . in the future , we may generate revenues from product sales . in addition , to the extent we enter into licensing or collaboration arrangements , we may have additional sources of revenue . we expect that any revenue we generate will fluctuate from quarter to quarter as a result of the amount and timing of payments that we may recognize upon the sale of our products , to the extent that any products are successfully commercialized , and the amount and timing of fees , reimbursements , milestone and other payments received under any future licensing or collaboration arrangements . if we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them , our ability to generate future revenue , and our results of operations and financial position , would be materially adversely affected . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our drug discovery efforts , and the development of our product candidates , which include : employee-related expenses , including salaries , benefits , travel and non-cash share-based compensation expense ; external research and development expenses incurred under arrangements with third parties such as contract research organizations , or cros , contract manufacturers , consultants and academic institutions ; and facilities and laboratory and other supplies . 68 we expense research and development costs to operations as incurred . we account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received , rather than when the payment is made . the following summarizes our most advanced current research and development programs . exebacase our most advanced clinical candidate , exebacase , is an investigational novel lysin that targets staphylococcus aureus ( staph aureus ) , including methicillin-resistant ( mrsa ) strains , which causes serious infections such as bacteremia , pneumonia and osteomyelitis . staph aureus is also a common cause of biofilm-associated infections of heart valves ( endocarditis ) , prosthetic joints , indwelling devices and catheters . these infections result in significant morbidity and mortality despite currently available antibiotic therapies . exebacase completed a phase 2 superiority study that evaluated its safety , tolerability , efficacy and pharmacokinetics ( pk ) when used in addition to background standard of care ( soc ) antibiotics compared to soc antibiotics alone for the treatment of staph aureus bacteremia , including endocarditis in adult patients . in january 2019 , we announced topline results from this study which showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to soc antibiotics compared to soc antibiotics alone . in the phase 2 study , the primary efficacy analysis population of 116 patients with documented staph aureus bacteremia , including endocarditis , who received a single intravenous ( iv ) infusion of blinded study drug , the clinical responder rate at day 14 was 70.4 % for patients treated with exebacase and 60.0 % for patients dosed with soc antibiotics alone ( p=0.314 ) . the clinical responder rate at day 14 in the subset of patients with bacteremia including right-sided endocarditis was 80.0 % for patients treated with exebacase compared to 59.5 % for patients treated with soc antibiotics alone , an increase of 20.5 % ( p=0.028 ) . in the subset of patients with bacteremia alone , the clinical responder rate at day 14 was 81.8 % for patients treated with exebacase compared to 61.5 % for patients treated with soc antibiotics alone , an increase of 20.3 % ( p=0.035 ) . in a pre-specified analysis of mrsa-infected patients , the clinical responder rate at day 14 in patients treated with exebacase was nearly 43-percentage points higher than in patients treated with soc antibiotics alone ( 74.1 % for patients treated with exebacase compared to 31.3 % for patients treated with soc antibiotics alone ( p=0.010 ) ) . in addition to the higher rate of clinical response , mrsa-infected patients treated with exebacase showed a 21-percentage point reduction in 30-day all-cause mortality ( p=0.056 ) , a four day lower mean length of hospital stay and meaningful reductions in hospital readmission rates . exebacase was well-tolerated and treatment emergent adverse events , including serious treatment-emergent serious adverse events ( saes ) were balanced between the treatment groups . there were no saes that we determined to be related to exebacase , there were no reports of hypersensitivity related to exebacase and no patients discontinued treatment with study drug in either treatment group . we believe these data have established proof of concept for exebacase and for dlas as therapeutic agents . story_separator_special_tag recent accounting pronouncements see note 2summary of significant accounting policies , of the notes to financial statements , for a discussion of the impact of new accounting standards on our financial statements . results of operations for a discussion of our results of operations for the year ended december 31 , 2017 , including a year-to-year comparison between 2018 and 2017 , refer to part ii , item 7 , management 's discussion and analysis of financial condition and results of operations in our annual report on form 10-k for the year ended december 31 , 2018. comparison of years ended december 31 , 2019 and 2018 the following table summarizes our results of operations for the years ended december 31 , 2019 and 2018 : replace_table_token_9_th research and development expenses research and development expense was $ 18.1 million for the year ended december 31 , 2019 , compared with $ 22.4 million for the year ended december 31 , 2018 , a decrease of $ 4.3 million . this decrease was primarily attributable to a $ 6.3 million decrease in expenditures on clinical trial costs as we completed the reporting of the phase 2 trial of exebacase early in 2019 as compared to the active recruiting period for the trial in 2018. we also recorded an additional $ 2.4 million in reimbursable grant expenses , including the new usamrdc grant for cf-296 and the carb-x grant for the amurin peptide program . these decreases were partially offset by an increase of $ 2.2 million relating to the cgmp manufacturing of exebacase in order to supply clinical trial material for the phase 3 disrupt trial , an increase of $ 1.8 million on the advancement of our other product candidates , including cf-370 to nomination as our next product candidate , and an increase of $ 0.4 million in licensing fees for the milestone paid to rockefeller upon completion of the phase 2 trial of exebacase . 74 general and administrative expenses general and administrative expense was $ 9.8 million for the year ended december 31 , 2019 , compared with $ 8.7 million for the year ended december 31 , 2018 , an increase of $ 1.1 million . this increase was primarily attributable to increased legal fees as we expanded our intellectual property portfolio . other increases included increases in compensation costs of $ 0.2 million , investor relations costs of $ 0.1 million and insurance costs of $ 0.1 million . other income ( expense ) other income was $ 15.1 million for the year ended december 31 , 2019 compared with other expense of $ 6.6 million for the year ended december 31 , 2018 , an increase of $ 21.6 million . in 2019 , we had a non-cash gain of $ 14.7 million related to the change in fair value of our warrant liability and interest income of $ 0.4 million . in 2018 , we had non-cash expense of $ 7.2 million related to the change in fair value of our warrant liability , which was partially offset by $ 0.7 million of interest income . liquidity and capital resources story_separator_special_tag margin-bottom:0pt ; font-family : times new roman ; font-size:10pt `` > seek marketing approvals for our product candidates that successfully complete clinical trials ; establish , either on our own or with strategic partners , a sales , marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval ; maintain , leverage and expand our intellectual property portfolio ; and add operational , financial and management information systems and personnel , including personnel to support our product development and future commercialization efforts . 76 without additional funding , we believe we will not have sufficient funds to meet our obligations within the next twelve months from the date of issuance of our audited consolidated financial statements that are included elsewhere in this annual report on form 10-k. we have based this estimate on assumptions that may prove to be wrong , and we could use our available capital resources sooner than we currently expect . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates , and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates , we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates . we plan to continue to fund our operations through public or private debt and equity financings , but there can be no assurances that such financing will be available to us on satisfactory terms , or at all . our future capital requirements will depend on many factors , including : the progress and results of the clinical trials of our lead product candidates ; the scope , progress , results and costs of compound discovery , preclinical development , laboratory testing and clinical trials for our other product candidates ; the extent to which we acquire or in-license other products and technologies ; the costs , timing and outcome of regulatory review of our product candidates ; the costs of future commercialization activities , including product sales , marketing , manufacturing and distribution , for any of our product candidates for which we receive marketing approval ; revenue , if any , received from commercial sales of our product candidates , should any of our product candidates receive marketing approval ; the costs of preparing , filing and prosecuting patent applications , maintaining and enforcing our intellectual property rights and defending intellectual property-related claims ; and our ability to establish any future collaboration arrangements on favorable terms , if at all . until such time , if ever , as we can generate substantial product revenues , we expect to finance our cash needs through a combination of equity and debt offerings , collaborations , strategic
| sources of liquidity we have financed our operations to date primarily through proceeds from sales of common stock , common stock and warrants , convertible preferred stock and convertible debt and , to a lesser extent , grant funding . to date , we have not generated any revenue from the sale of products . we have incurred losses and generated negative cash flows from operations since inception . since the date of our initial public offering , we have funded our operations through the sale of registered securities for gross proceeds of $ 147.8 million , $ 9.6 million from the exercise of the class b warrants issued in our ipo , $ 23.0 million from the sale of securities in private placements and the receipt of $ 4.9 million of grant funding . as of december 31 , 2019 , we had approximately $ 24.2 million in cash and cash equivalents which will not be sufficient to meet our obligations within the next twelve months from the date of issuance of our audited consolidated financial statements that are included elsewhere in this annual report on form 10-k. combined with our accumulated deficit and our forecasted cash expenditures , these factors raise substantial doubt about our ability to continue as a going concern . we have relied on our ability to fund our operations primarily through public and private debt and equity financings , but there can be no assurances that such financing will continue to be available to us on satisfactory terms , or at all . we have also been successful obtaining grants to supplement our financings with non-dilutive funding .
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mueller co. we estimate approximately 70 % of mueller co. 's 2015 net sales were for repair and replacement directly related to municipal water infrastructure spending , approximately 25 % were related to residential construction activity and approximately 5 % were related to natural gas utilities . municipal spending in 2015 was relatively strong compared with the prior year period and economic forecasts predict this trend will continue . according to the u.s. bureau of economic analysis , state and local tax receipts for the quarter ended september 30 , 2015 were up year-over-year and , according to the u.s. department of labor , the trailing twelve-month average consumer price index for water and sewerage rates at september 30 , 2015 increased 4.5 % . however , water conservation efforts , particularly in areas impacted by recent drought conditions , have resulted in lower overall receipts for some u.s. water utilities . the year-over-year percentage change in housing starts is a key indicator of demand for mueller co. 's products sold in the residential construction market . in september 2015 , zelman & associates forecasted a 13 % increase in housing starts for calendar 2016 compared to the prior year . in october 2015 , blue chip consensus also forecasted a 13 % increase in housing starts for calendar 2016 compared to the prior year . we expect mueller co. 's net sales percentage growth in 2016 to be in the mid-single digits , with growth in key markets offset by anticipated unfavorable impacts from changes in canadian currency exchange rates and the divestiture of the municipal castings business in december 2014 . 26 index to financial statements anvil in 2015 , approximately 85 % of anvil 's net sales were generated by non-residential construction spending . several leading indicators related to non-residential construction appear to be signaling growth in this market . for example , the architectural billings index for september 2015 remained above 50 , which indicates growth , and blue chip consensus forecasted a 4.8 % increase in non-residential fixed investment in calendar 2016. sales to the oil & gas market accounted for approximately 10 % of anvil 's net sales in 2015 , down from 20 % in 2014. the trend in rig counts correlates with the direction of demand for anvil 's products that are sold into this market . according to baker hughes incorporated , u.s. land-based rig counts in early october 2015 represent a decline of approximately 58 % year-over-year . we expect anvil 's net sales percentage growth in 2016 to be in the low single digits , driven by the non-residential construction market . we believe anvil 's overall growth will continue to be impacted by an expected decline in net sales to its addressed oil & gas market on a year-over-year basis during the first half of the year , especially in the first quarter . based on current market conditions , we expect anvil 's net sales into this market during the second half of the year to be flat on a year-over-year basis . mueller technologies the municipal market is the key end market for the mueller technologies companies . these businesses are project-oriented and depend on customer adoption of their technology-based products and services . for 2016 , we entered the year with significantly higher ami backlog and projects awarded for mueller systems and higher projects under contract at echologics . we expect mueller technologies ' net sales percentage growth in 2016 to be approximately 10 % to 15 % . we also expect operating income to improve by approximately $ 7 million to $ 10 million . consolidated overall in 2016 for mueller water products , we expect year-over-year net sales percentage growth in the mid-single digits with stronger growth at the mueller co. and mueller technologies segments . we expect higher operating income and operating margin , driven primarily by a favorable mix of our higher-margin products at mueller co. 27 index to financial statements results of operations year ended september 30 , 2015 compared to year ended september 30 , 2014 replace_table_token_4_th consolidated analysis net sales for 2015 declined to $ 1,164.5 million from $ 1,184.7 million in the prior year period due primarily to lower shipment volumes of $ 16.7 million and unfavorable changes in canadian currency exchange rates of $ 10.7 million offset by improved pricing of $ 7.2 million . gross profit for 2015 of $ 347.3 million was essentially flat compared to $ 347.9 million in the prior year period . gross margin increased 40 basis points to 29.8 % in 2015 from 29.4 % in the prior year period due primarily to improved sales pricing . selling , general and administrative expenses ( “ sg & a ” ) for 2015 decreased to $ 216.9 million from $ 220.7 million in the prior year period . sg & a as a percentage of net sales was 18.6 % in both 2015 and in the prior year period . we have a tax-related receivable from walter energy from prior to our spin-off from walter in december 2006. walter filed a petition for reorganization under chapter 11 of the u.s. bankruptcy code in july 2015. as a result of this petition , we recorded a provision for doubtful accounts of $ 11.6 million in 2015 . 28 index to financial statements interest expense , net declined $ 22.0 million in 2015 compared to the prior year period due primarily to the debt refinancing we completed in november 2014 , which replaced the senior subordinated notes and the senior unsecured notes with the lower-rate term loan . also , debt principal outstanding declined by $ 45.0 million due to the november 2014 refinancing . story_separator_special_tag these estimates are based upon experience and on various other assumptions we believe to be reasonable under the circumstances . actual results may differ from these estimates . we consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations . we consider the accounting topics presented below to include our critical accounting estimates . revenue recognition we recognize revenue when delivery of a product or performance of a service has occurred and there is persuasive evidence of a sales arrangement , sales prices are fixed and determinable and collectability from the customers is reasonably assured . sales are recorded net of estimated discounts , returns and rebates . discounts , returns and rebates are estimated based upon current offered sales terms and historical return and allowance rates . receivables the estimated allowance for doubtful receivables is based upon judgments and estimates of expected losses and specific identification of problem accounts . significantly weaker than anticipated industry or economic conditions could impact customers ' ability to pay such that actual losses may be greater than the amounts provided for in this allowance . the periodic evaluation of the adequacy of the allowance for doubtful receivables is based on an analysis of prior collection experience , specific customer creditworthiness and current economic trends within the industries served . in circumstances where a specific customer 's inability to meet its financial obligation is known to us ( e.g . , bankruptcy filings or substantial downgrading of credit ratings ) , we record a specific allowance to reduce the receivable to the amount we reasonably believe will be collected . inventories we record inventories at the lower of first-in , first-out method cost or market value . inventory cost includes an overhead component that can be affected by levels of production and actual costs incurred . we evaluate the need to record adjustments for impairment of inventory at least quarterly . this evaluation includes such factors as anticipated usage , inventory levels and ultimate product sales value . inventory that , in the judgment of management , is obsolete or in excess of our normal usage is written-down to its estimated market value , if less than its cost . significant judgments must be made when establishing the allowance for obsolete and excess inventory . income taxes we recognize deferred tax liabilities and deferred tax assets for the expected future tax consequences of events that have been included in the financial statements or tax returns . deferred tax liabilities and assets are determined based on the differences between the financial statements and the tax basis of assets and liabilities , using enacted tax rates in effect for the years in which the differences are expected to reverse . a valuation allowance is provided to offset any net deferred tax assets when , based upon the available evidence , it is more likely than not that some or all of the deferred tax assets will not be realized . our tax balances are based on our expectations of future operating performance , reversal of taxable temporary differences , tax planning strategies , interpretation of the tax regulations currently enacted and rulings in numerous tax jurisdictions . we only record tax benefits for positions that we believe are more likely than not of being sustained under audit examination based solely on the technical merits of the associated tax position . the amount of tax benefit recognized for any position that meets the more likely than not threshold is the largest amount of the tax benefit that we believe is greater than 50 % likely of being realized . accounting for the impairment of long-lived assets including goodwill and other intangible assets we test indefinite-lived intangible assets for impairment annually ( or more frequently if events or circumstances indicate possible impairment ) . we performed this annual impairment testing at september 1 , and concluded that our indefinite-lived intangible assets were not impaired . we tested the indefinite-lived intangible assets for impairment using a “ royalty savings method , ” which is a variation of the discounted cash flow method . this method estimates a fair value by calculating an estimated discounted future cash flow stream from the hypothetical licensing of the indefinite-lived intangible assets . if this estimated fair value exceeds the carrying value , no impairment is indicated . this analysis is dependent on management 's best estimates of future operating results and the selection of reasonable discount rates and hypothetical royalty rates . significantly 37 index to financial statements different projected operating results could result in a different conclusion regarding impairment . no impairments would have been indicated for any discount rates and hypothetical royalty rates consistent with standard valuation methodologies considered reasonable by management . other long-lived assets , including finite-lived intangible assets , are amortized over their respective estimated useful lives and reviewed for impairment if events or circumstances indicate possible impairment . contingencies we are involved in litigation , investigations and claims arising out of the normal conduct of our business . we estimate and accrue liabilities resulting from such matters based on a variety of factors , including outstanding legal claims and proposed settlements ; assessments by counsel of pending or threatened litigation ; and assessments of potential environmental liabilities and remediation costs . we believe we have adequately accrued for these potential liabilities ; however , facts and circumstances may change and could cause the actual liability to exceed the estimates , or may require adjustments to the recorded liability balances in the future . as we learn new facts concerning contingencies , we reassess our position both with respect to accrued liabilities and other potential exposures . estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation , tax and legal matters . estimated future
| sources of liquidity we have financed our operations to date primarily through proceeds from sales of common stock , common stock and warrants , convertible preferred stock and convertible debt and , to a lesser extent , grant funding . to date , we have not generated any revenue from the sale of products . we have incurred losses and generated negative cash flows from operations since inception . since the date of our initial public offering , we have funded our operations through the sale of registered securities for gross proceeds of $ 147.8 million , $ 9.6 million from the exercise of the class b warrants issued in our ipo , $ 23.0 million from the sale of securities in private placements and the receipt of $ 4.9 million of grant funding . as of december 31 , 2019 , we had approximately $ 24.2 million in cash and cash equivalents which will not be sufficient to meet our obligations within the next twelve months from the date of issuance of our audited consolidated financial statements that are included elsewhere in this annual report on form 10-k. combined with our accumulated deficit and our forecasted cash expenditures , these factors raise substantial doubt about our ability to continue as a going concern . we have relied on our ability to fund our operations primarily through public and private debt and equity financings , but there can be no assurances that such financing will continue to be available to us on satisfactory terms , or at all . we have also been successful obtaining grants to supplement our financings with non-dilutive funding .
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mueller co. we estimate approximately 70 % of mueller co. 's 2015 net sales were for repair and replacement directly related to municipal water infrastructure spending , approximately 25 % were related to residential construction activity and approximately 5 % were related to natural gas utilities . municipal spending in 2015 was relatively strong compared with the prior year period and economic forecasts predict this trend will continue . according to the u.s. bureau of economic analysis , state and local tax receipts for the quarter ended september 30 , 2015 were up year-over-year and , according to the u.s. department of labor , the trailing twelve-month average consumer price index for water and sewerage rates at september 30 , 2015 increased 4.5 % . however , water conservation efforts , particularly in areas impacted by recent drought conditions , have resulted in lower overall receipts for some u.s. water utilities . the year-over-year percentage change in housing starts is a key indicator of demand for mueller co. 's products sold in the residential construction market . in september 2015 , zelman & associates forecasted a 13 % increase in housing starts for calendar 2016 compared to the prior year . in october 2015 , blue chip consensus also forecasted a 13 % increase in housing starts for calendar 2016 compared to the prior year . we expect mueller co. 's net sales percentage growth in 2016 to be in the mid-single digits , with growth in key markets offset by anticipated unfavorable impacts from changes in canadian currency exchange rates and the divestiture of the municipal castings business in december 2014 . 26 index to financial statements anvil in 2015 , approximately 85 % of anvil 's net sales were generated by non-residential construction spending . several leading indicators related to non-residential construction appear to be signaling growth in this market . for example , the architectural billings index for september 2015 remained above 50 , which indicates growth , and blue chip consensus forecasted a 4.8 % increase in non-residential fixed investment in calendar 2016. sales to the oil & gas market accounted for approximately 10 % of anvil 's net sales in 2015 , down from 20 % in 2014. the trend in rig counts correlates with the direction of demand for anvil 's products that are sold into this market . according to baker hughes incorporated , u.s. land-based rig counts in early october 2015 represent a decline of approximately 58 % year-over-year . we expect anvil 's net sales percentage growth in 2016 to be in the low single digits , driven by the non-residential construction market . we believe anvil 's overall growth will continue to be impacted by an expected decline in net sales to its addressed oil & gas market on a year-over-year basis during the first half of the year , especially in the first quarter . based on current market conditions , we expect anvil 's net sales into this market during the second half of the year to be flat on a year-over-year basis . mueller technologies the municipal market is the key end market for the mueller technologies companies . these businesses are project-oriented and depend on customer adoption of their technology-based products and services . for 2016 , we entered the year with significantly higher ami backlog and projects awarded for mueller systems and higher projects under contract at echologics . we expect mueller technologies ' net sales percentage growth in 2016 to be approximately 10 % to 15 % . we also expect operating income to improve by approximately $ 7 million to $ 10 million . consolidated overall in 2016 for mueller water products , we expect year-over-year net sales percentage growth in the mid-single digits with stronger growth at the mueller co. and mueller technologies segments . we expect higher operating income and operating margin , driven primarily by a favorable mix of our higher-margin products at mueller co. 27 index to financial statements results of operations year ended september 30 , 2015 compared to year ended september 30 , 2014 replace_table_token_4_th consolidated analysis net sales for 2015 declined to $ 1,164.5 million from $ 1,184.7 million in the prior year period due primarily to lower shipment volumes of $ 16.7 million and unfavorable changes in canadian currency exchange rates of $ 10.7 million offset by improved pricing of $ 7.2 million . gross profit for 2015 of $ 347.3 million was essentially flat compared to $ 347.9 million in the prior year period . gross margin increased 40 basis points to 29.8 % in 2015 from 29.4 % in the prior year period due primarily to improved sales pricing . selling , general and administrative expenses ( “ sg & a ” ) for 2015 decreased to $ 216.9 million from $ 220.7 million in the prior year period . sg & a as a percentage of net sales was 18.6 % in both 2015 and in the prior year period . we have a tax-related receivable from walter energy from prior to our spin-off from walter in december 2006. walter filed a petition for reorganization under chapter 11 of the u.s. bankruptcy code in july 2015. as a result of this petition , we recorded a provision for doubtful accounts of $ 11.6 million in 2015 . 28 index to financial statements interest expense , net declined $ 22.0 million in 2015 compared to the prior year period due primarily to the debt refinancing we completed in november 2014 , which replaced the senior subordinated notes and the senior unsecured notes with the lower-rate term loan . also , debt principal outstanding declined by $ 45.0 million due to the november 2014 refinancing . story_separator_special_tag these estimates are based upon experience and on various other assumptions we believe to be reasonable under the circumstances . actual results may differ from these estimates . we consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations . we consider the accounting topics presented below to include our critical accounting estimates . revenue recognition we recognize revenue when delivery of a product or performance of a service has occurred and there is persuasive evidence of a sales arrangement , sales prices are fixed and determinable and collectability from the customers is reasonably assured . sales are recorded net of estimated discounts , returns and rebates . discounts , returns and rebates are estimated based upon current offered sales terms and historical return and allowance rates . receivables the estimated allowance for doubtful receivables is based upon judgments and estimates of expected losses and specific identification of problem accounts . significantly weaker than anticipated industry or economic conditions could impact customers ' ability to pay such that actual losses may be greater than the amounts provided for in this allowance . the periodic evaluation of the adequacy of the allowance for doubtful receivables is based on an analysis of prior collection experience , specific customer creditworthiness and current economic trends within the industries served . in circumstances where a specific customer 's inability to meet its financial obligation is known to us ( e.g . , bankruptcy filings or substantial downgrading of credit ratings ) , we record a specific allowance to reduce the receivable to the amount we reasonably believe will be collected . inventories we record inventories at the lower of first-in , first-out method cost or market value . inventory cost includes an overhead component that can be affected by levels of production and actual costs incurred . we evaluate the need to record adjustments for impairment of inventory at least quarterly . this evaluation includes such factors as anticipated usage , inventory levels and ultimate product sales value . inventory that , in the judgment of management , is obsolete or in excess of our normal usage is written-down to its estimated market value , if less than its cost . significant judgments must be made when establishing the allowance for obsolete and excess inventory . income taxes we recognize deferred tax liabilities and deferred tax assets for the expected future tax consequences of events that have been included in the financial statements or tax returns . deferred tax liabilities and assets are determined based on the differences between the financial statements and the tax basis of assets and liabilities , using enacted tax rates in effect for the years in which the differences are expected to reverse . a valuation allowance is provided to offset any net deferred tax assets when , based upon the available evidence , it is more likely than not that some or all of the deferred tax assets will not be realized . our tax balances are based on our expectations of future operating performance , reversal of taxable temporary differences , tax planning strategies , interpretation of the tax regulations currently enacted and rulings in numerous tax jurisdictions . we only record tax benefits for positions that we believe are more likely than not of being sustained under audit examination based solely on the technical merits of the associated tax position . the amount of tax benefit recognized for any position that meets the more likely than not threshold is the largest amount of the tax benefit that we believe is greater than 50 % likely of being realized . accounting for the impairment of long-lived assets including goodwill and other intangible assets we test indefinite-lived intangible assets for impairment annually ( or more frequently if events or circumstances indicate possible impairment ) . we performed this annual impairment testing at september 1 , and concluded that our indefinite-lived intangible assets were not impaired . we tested the indefinite-lived intangible assets for impairment using a “ royalty savings method , ” which is a variation of the discounted cash flow method . this method estimates a fair value by calculating an estimated discounted future cash flow stream from the hypothetical licensing of the indefinite-lived intangible assets . if this estimated fair value exceeds the carrying value , no impairment is indicated . this analysis is dependent on management 's best estimates of future operating results and the selection of reasonable discount rates and hypothetical royalty rates . significantly 37 index to financial statements different projected operating results could result in a different conclusion regarding impairment . no impairments would have been indicated for any discount rates and hypothetical royalty rates consistent with standard valuation methodologies considered reasonable by management . other long-lived assets , including finite-lived intangible assets , are amortized over their respective estimated useful lives and reviewed for impairment if events or circumstances indicate possible impairment . contingencies we are involved in litigation , investigations and claims arising out of the normal conduct of our business . we estimate and accrue liabilities resulting from such matters based on a variety of factors , including outstanding legal claims and proposed settlements ; assessments by counsel of pending or threatened litigation ; and assessments of potential environmental liabilities and remediation costs . we believe we have adequately accrued for these potential liabilities ; however , facts and circumstances may change and could cause the actual liability to exceed the estimates , or may require adjustments to the recorded liability balances in the future . as we learn new facts concerning contingencies , we reassess our position both with respect to accrued liabilities and other potential exposures . estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation , tax and legal matters . estimated future
| cash and cash equivalents were $ 113.1 million at september 30 , 2015 compared to $ 161.1 million at september 30 , 2014 . cash and cash equivalents decreased during 2015 as a result of cash used in financing of $ 99.0 million , primarily debt repayments , and cash used in investing of $ 31.6 million , primarily capital expenditures , partially offset by cash provided by operating activities of $ 87.8 million . cash and cash equivalents also decreased by $ 5.2 million during 2015 due to changes in currency exchange rates . receivables , net were $ 175.3 million at september 30 , 2015 compared to $ 182.1 million at september 30 , 2014 . receivables at september 30 , 2015 and september 30 , 2014 represented approximately 51 and 52 days net sales , respectively . inventories were $ 219.1 million at september 30 , 2015 compared to $ 198.0 million at september 30 , 2014 . inventories increased during 2015 due primarily to lower sales into the oil & gas market , lower sales due to adverse weather impacts at mueller co. and a build-up of certain meter components . estimated inventory turns in 2015 were approximately half a turn slower than 2014. property , plant and equipment , net was $ 148.9 million at september 30 , 2015 compared to $ 146.3 million at september 30 , 2014 , and depreciation expense was $ 28.7 million in 2015 . capital expenditures , including external-use software development costs capitalized , were $ 37.5 million in 2015 . intangible assets were $ 507.3 million at september 30 , 2015 compared to $ 533.6 million at september 30 , 2014 . finite-lived intangible assets , $ 202.3 million of net book value at september 30 , 2015 , are amortized over their estimated useful lives . this amortization expense was $ 29.4 million during 2015 and is expected to be $ 20 million to $ 25 million for each of the next five years .
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among other things , the escrow release conditions included the consummation of our merger with media general and our assumption of all of the obligations of nexstar escrow under the 5.625 % notes . 37 merger with media general on january 17 , 2017 , we completed the merger with media general . media general owned , operated , or serviced 79 full power television stations in 48 markets . substantially concurrent with the merger , we sold the assets of 12 full power television stations in 12 markets , of which five stations were previously owned by us and seven stations were previously owned by media general . following these transactions , we own , operate , program or provide sales and other services to 171 full power television stations in 100 markets , reaching approximately 44.7 million viewers or nearly 39 % of all u.s. television households . pursuant to the terms of the merger agreement , we paid cash consideration of approximately $ 1.4 billion , issued stock consideration of 16,231,070 shares , including the reissuance of shares from nexstar 's treasury , with a fair value of approximately $ 1.0 billion and issued 228,438 stock option replacements with an estimated fair value of $ 10.7 million on the closing date . an additional consideration in the form of a non-tradeable cvr was also issued to the shareholders and outstanding equity awards of media general . the cvr represents the right to receive a pro rata share of the net proceeds from the disposition of media general 's spectrum in the fcc auction , reduced to account for the indirect benefit that such holder will receive as a shareholder of the combined company . we anticipate to receive , later in 2017 , an estimated $ 479.0 million of gross proceeds from the disposition of media general 's spectrum in the fcc auction but we do not anticipate any disposition of nexstar 's spectrum . the value of each cvr is estimated to be worth between $ 1.70 and $ 2.10 based on the estimated gross proceeds , less estimated transaction expenses , repacking expenses and taxes . simultaneously with the closing of the merger , certain then-existing indebtedness of the company and media general was extinguished , including the company 's term loans and revolving loans with a principal balance of $ 668.8 million and $ 2.0 million , respectively , and media general 's outstanding term loans and senior unsecured notes with a principal balance of approximately $ 1.4 billion and $ 275.0 million , respectively . we inherited the $ 400.0 million 5.875 % notes issued by lin tv , which became our indirect subsidiary as of the closing date . the cash consideration , the refinancing of the then-existing indebtedness of the company and media general , and the related fees and expenses were funded through a combination of cash on hand and new borrowings , including : $ 2.75 billion in senior secured term loan b due 2024 and payable in consecutive quarterly installments of 0.25 % of the principal , with the remainder due at maturity ; $ 51.3 million in new senior secured term loan a due 2018 and $ 318.7 million in new senior secured term loan a due 2022 both payable in quarterly installments that increase over time from 5.0 % to 10.0 % ; $ 175.0 million in total commitments under new senior secured revolving credit facilities , of which $ 3.0 million was drawn at closing ; $ 900.0 million from the issuance of the 5.625 % senior unsecured notes due 2024 by nexstar broadcasting , as successor to nexstar escrow , our wholly-owned subsidiary ; and $ 547.8 million in total consideration , plus working capital adjustments , from the previously announced sale of the assets of 12 full power television stations in 12 markets . in respect of the aforementioned television station divestitures , we previously owned five of such stations and seven stations were previously owned by media general . these divestitures were made to comply with the fcc 's local television ownership rule and the 39 % u.s. television household national ownership cap . our remaining commitments in connection with these transactions , including the bridge facility and the short-term facility totaling $ 530.0 million , were not funded and were consequently terminated upon closing of the merger . also on the closing date , in connection with the merger , we executed a joinder to the purchase agreement , dated july 13 , 2016 , by and among nexstar escrow and merrill lynch , pierce , fenner & smith incorporated , as representative of the several initial purchasers , relating to the issuance and sale of the 5.625 % notes to such initial purchasers , pursuant to which nexstar and certain of its subsidiaries became parties to the purchase agreement . on the closing date , we entered into a supplement to the indenture governing the 5.625 % notes , pursuant to which nexstar broadcasting assumed the obligations of nexstar escrow under such indenture and the 5.625 % notes , and we and mission provided guarantees under such indenture and the 5.625 % notes ( subject to the definition of “ guarantee ” in such indenture ) . following the merger , nexstar broadcasting , nexstar , lin tv , and the bank of new york mellon , as trustee , entered into the “ 5.875 % notes third supplemental indenture ” governing the 5.875 % notes , whereby nexstar broadcasting assumed the obligations of media general as a guarantor under such indenture and nexstar provided a guarantee of the 5.875 % notes ( subject to the definition of “ guarantee ” in the 5.875 % notes third supplemental indenture ) . story_separator_special_tag this was primarily attributable to decreases in amortization of other intangible assets from certain fully amortized assets of $ 8.2 million , partially offset by incremental amortization of other intangible assets from our newly acquired stations and entities of $ 6.3 million . amortization of broadcast rights , excluding barter was flat at $ 22.5 million for the year ended december 31 , 2016 , compared to $ 22.2 million for the same period in 2015. in the fourth quarter of 2016 , we recorded a goodwill impairment charge of $ 15.1 million in one of our digital businesses due to operating losses , industry-wide margin compression and lower short-term future earnings expectations . 43 interest expense , net interest expense , net was $ 116.1 million for the year ended december 31 , 2016 , compared to $ 80.5 million for the same period in 2015 , an increase of $ 35.6 million , or 44.2 % , primarily attributable to increased borrowings during 2016 and 2015 to fund our acquisitions . income taxes income tax expense was $ 77.6 million for the year ended december 31 , 2016 , compared to $ 48.7 million for the same period in 2015 , an increase of $ 28.9 million , or 59.3 % . the effective tax rates during the years ended december 31 , 2016 and 2015 were 45.5 % and 38.7 % , respectively . our station acquisitions reduced our blended state tax rate in 2015 resulting in an income tax benefit of $ 2.4 million , or a 1.9 % impact to the effective tax rate . in 2016 we booked a nondeductible goodwill impairment and nondeductible earnout payments that increased the effective tax rate by 3.6 % . year ended december 31 , 2015 compared to year ended december 31 , 2014 the period-to-period comparability of our consolidated operating results is affected by acquisitions . for each quarter we present , our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years . for our annual and year to date presentations , we combine the legacy stations ' amounts presented in each quarter revenue gross local advertising revenue was $ 369.3 million for the year ended december 31 , 2015 , compared to $ 279.2 million for the same period in 2014 , an increase of $ 90.2 million , or 32.3 % . gross national advertising revenue was $ 153.6 million for the year ended december 31 , 2015 , compared to $ 109.9 million for the same period in 2014 , an increase of $ 43.7 million , or 39.7 % . the increase in local and national advertising revenue was primarily attributable to incremental revenue from our newly acquired stations of $ 135.8 million . our legacy stations ' local and national advertising revenue were relatively flat during the year ended december 31 , 2015 compared to the same period in 2014. our largest advertiser category , automobile , represented approximately 24.8 % and 25.3 % of our local and national advertising revenue for the years ended december 31 , 2015 and 2014 , respectively . overall , including past results of our newly acquired stations , automobile revenues decreased during the year . the other categories representing our top five were fast food/restaurants which declined this year , furniture and medical/healthcare , which increased in 2015 , and radio/tv/cable/newspaper , which remained flat . gross political advertising revenue was $ 12.7 million for the year ended december 31 , 2015 , compared to $ 64.3 million for the same period in 2014 , a decrease of $ 51.6 million , as 2015 was not an election year . retransmission compensation was $ 298.0 million for the year ended december 31 , 2015 , compared to $ 155.0 million for the same period in 2014 , an increase of $ 143.1 million , or 92.3 % . the increase in retransmission compensation was attributable to a $ 70.7 million increase on our legacy stations , primarily related to the 2014 and 2015 renewals of contracts providing for higher rates per subscriber , and incremental revenue from our newly acquired stations of $ 72.4 million . digital media revenue , representing advertising revenue on our stations ' web and mobile sites and revenue from our other digital operations , was $ 89.9 million for the year ended december 31 , 2015 , compared to $ 46.7 million for the same period in 2014 , an increase of $ 43.2 million or 92.5 % . the increase was primarily attributable to the $ 39.3 million in incremental revenue from our newly acquired stations and entities , and a $ 2.9 million increase in revenue from our legacy stations . operating expenses corporate expenses , related to costs associated with the centralized management of our stations , were $ 44.9 million for the year ended december 31 , 2015 , compared to $ 35.2 million for the same period in 2014 , an increase of $ 9.7 million , or 27.5 % . this was primarily attributable to an increase in stock-based compensation expense of $ 3.8 million due to equity incentive awards in 2015 , an increase in payroll expense of $ 1.6 million related to the increased number of stations , an increase in legal and professional fees of $ 2.4 million primarily associated with our acquisitions of stations and entities , and costs incurred attributable to new vies of $ 1.2 million . station direct operating expenses , consisting primarily of news , engineering , programming and selling , general and administrative expenses ( net of trade expense ) were $ 480.9 million for the year ended december 31 , 2015 , compared to $ 319.0 million for the same period in 2014 , an increase of $ 161.9 million , or 50.7 % . the increase was primarily due to
| cash and cash equivalents were $ 113.1 million at september 30 , 2015 compared to $ 161.1 million at september 30 , 2014 . cash and cash equivalents decreased during 2015 as a result of cash used in financing of $ 99.0 million , primarily debt repayments , and cash used in investing of $ 31.6 million , primarily capital expenditures , partially offset by cash provided by operating activities of $ 87.8 million . cash and cash equivalents also decreased by $ 5.2 million during 2015 due to changes in currency exchange rates . receivables , net were $ 175.3 million at september 30 , 2015 compared to $ 182.1 million at september 30 , 2014 . receivables at september 30 , 2015 and september 30 , 2014 represented approximately 51 and 52 days net sales , respectively . inventories were $ 219.1 million at september 30 , 2015 compared to $ 198.0 million at september 30 , 2014 . inventories increased during 2015 due primarily to lower sales into the oil & gas market , lower sales due to adverse weather impacts at mueller co. and a build-up of certain meter components . estimated inventory turns in 2015 were approximately half a turn slower than 2014. property , plant and equipment , net was $ 148.9 million at september 30 , 2015 compared to $ 146.3 million at september 30 , 2014 , and depreciation expense was $ 28.7 million in 2015 . capital expenditures , including external-use software development costs capitalized , were $ 37.5 million in 2015 . intangible assets were $ 507.3 million at september 30 , 2015 compared to $ 533.6 million at september 30 , 2014 . finite-lived intangible assets , $ 202.3 million of net book value at september 30 , 2015 , are amortized over their estimated useful lives . this amortization expense was $ 29.4 million during 2015 and is expected to be $ 20 million to $ 25 million for each of the next five years .
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among other things , the escrow release conditions included the consummation of our merger with media general and our assumption of all of the obligations of nexstar escrow under the 5.625 % notes . 37 merger with media general on january 17 , 2017 , we completed the merger with media general . media general owned , operated , or serviced 79 full power television stations in 48 markets . substantially concurrent with the merger , we sold the assets of 12 full power television stations in 12 markets , of which five stations were previously owned by us and seven stations were previously owned by media general . following these transactions , we own , operate , program or provide sales and other services to 171 full power television stations in 100 markets , reaching approximately 44.7 million viewers or nearly 39 % of all u.s. television households . pursuant to the terms of the merger agreement , we paid cash consideration of approximately $ 1.4 billion , issued stock consideration of 16,231,070 shares , including the reissuance of shares from nexstar 's treasury , with a fair value of approximately $ 1.0 billion and issued 228,438 stock option replacements with an estimated fair value of $ 10.7 million on the closing date . an additional consideration in the form of a non-tradeable cvr was also issued to the shareholders and outstanding equity awards of media general . the cvr represents the right to receive a pro rata share of the net proceeds from the disposition of media general 's spectrum in the fcc auction , reduced to account for the indirect benefit that such holder will receive as a shareholder of the combined company . we anticipate to receive , later in 2017 , an estimated $ 479.0 million of gross proceeds from the disposition of media general 's spectrum in the fcc auction but we do not anticipate any disposition of nexstar 's spectrum . the value of each cvr is estimated to be worth between $ 1.70 and $ 2.10 based on the estimated gross proceeds , less estimated transaction expenses , repacking expenses and taxes . simultaneously with the closing of the merger , certain then-existing indebtedness of the company and media general was extinguished , including the company 's term loans and revolving loans with a principal balance of $ 668.8 million and $ 2.0 million , respectively , and media general 's outstanding term loans and senior unsecured notes with a principal balance of approximately $ 1.4 billion and $ 275.0 million , respectively . we inherited the $ 400.0 million 5.875 % notes issued by lin tv , which became our indirect subsidiary as of the closing date . the cash consideration , the refinancing of the then-existing indebtedness of the company and media general , and the related fees and expenses were funded through a combination of cash on hand and new borrowings , including : $ 2.75 billion in senior secured term loan b due 2024 and payable in consecutive quarterly installments of 0.25 % of the principal , with the remainder due at maturity ; $ 51.3 million in new senior secured term loan a due 2018 and $ 318.7 million in new senior secured term loan a due 2022 both payable in quarterly installments that increase over time from 5.0 % to 10.0 % ; $ 175.0 million in total commitments under new senior secured revolving credit facilities , of which $ 3.0 million was drawn at closing ; $ 900.0 million from the issuance of the 5.625 % senior unsecured notes due 2024 by nexstar broadcasting , as successor to nexstar escrow , our wholly-owned subsidiary ; and $ 547.8 million in total consideration , plus working capital adjustments , from the previously announced sale of the assets of 12 full power television stations in 12 markets . in respect of the aforementioned television station divestitures , we previously owned five of such stations and seven stations were previously owned by media general . these divestitures were made to comply with the fcc 's local television ownership rule and the 39 % u.s. television household national ownership cap . our remaining commitments in connection with these transactions , including the bridge facility and the short-term facility totaling $ 530.0 million , were not funded and were consequently terminated upon closing of the merger . also on the closing date , in connection with the merger , we executed a joinder to the purchase agreement , dated july 13 , 2016 , by and among nexstar escrow and merrill lynch , pierce , fenner & smith incorporated , as representative of the several initial purchasers , relating to the issuance and sale of the 5.625 % notes to such initial purchasers , pursuant to which nexstar and certain of its subsidiaries became parties to the purchase agreement . on the closing date , we entered into a supplement to the indenture governing the 5.625 % notes , pursuant to which nexstar broadcasting assumed the obligations of nexstar escrow under such indenture and the 5.625 % notes , and we and mission provided guarantees under such indenture and the 5.625 % notes ( subject to the definition of “ guarantee ” in such indenture ) . following the merger , nexstar broadcasting , nexstar , lin tv , and the bank of new york mellon , as trustee , entered into the “ 5.875 % notes third supplemental indenture ” governing the 5.875 % notes , whereby nexstar broadcasting assumed the obligations of media general as a guarantor under such indenture and nexstar provided a guarantee of the 5.875 % notes ( subject to the definition of “ guarantee ” in the 5.875 % notes third supplemental indenture ) . story_separator_special_tag this was primarily attributable to decreases in amortization of other intangible assets from certain fully amortized assets of $ 8.2 million , partially offset by incremental amortization of other intangible assets from our newly acquired stations and entities of $ 6.3 million . amortization of broadcast rights , excluding barter was flat at $ 22.5 million for the year ended december 31 , 2016 , compared to $ 22.2 million for the same period in 2015. in the fourth quarter of 2016 , we recorded a goodwill impairment charge of $ 15.1 million in one of our digital businesses due to operating losses , industry-wide margin compression and lower short-term future earnings expectations . 43 interest expense , net interest expense , net was $ 116.1 million for the year ended december 31 , 2016 , compared to $ 80.5 million for the same period in 2015 , an increase of $ 35.6 million , or 44.2 % , primarily attributable to increased borrowings during 2016 and 2015 to fund our acquisitions . income taxes income tax expense was $ 77.6 million for the year ended december 31 , 2016 , compared to $ 48.7 million for the same period in 2015 , an increase of $ 28.9 million , or 59.3 % . the effective tax rates during the years ended december 31 , 2016 and 2015 were 45.5 % and 38.7 % , respectively . our station acquisitions reduced our blended state tax rate in 2015 resulting in an income tax benefit of $ 2.4 million , or a 1.9 % impact to the effective tax rate . in 2016 we booked a nondeductible goodwill impairment and nondeductible earnout payments that increased the effective tax rate by 3.6 % . year ended december 31 , 2015 compared to year ended december 31 , 2014 the period-to-period comparability of our consolidated operating results is affected by acquisitions . for each quarter we present , our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years . for our annual and year to date presentations , we combine the legacy stations ' amounts presented in each quarter revenue gross local advertising revenue was $ 369.3 million for the year ended december 31 , 2015 , compared to $ 279.2 million for the same period in 2014 , an increase of $ 90.2 million , or 32.3 % . gross national advertising revenue was $ 153.6 million for the year ended december 31 , 2015 , compared to $ 109.9 million for the same period in 2014 , an increase of $ 43.7 million , or 39.7 % . the increase in local and national advertising revenue was primarily attributable to incremental revenue from our newly acquired stations of $ 135.8 million . our legacy stations ' local and national advertising revenue were relatively flat during the year ended december 31 , 2015 compared to the same period in 2014. our largest advertiser category , automobile , represented approximately 24.8 % and 25.3 % of our local and national advertising revenue for the years ended december 31 , 2015 and 2014 , respectively . overall , including past results of our newly acquired stations , automobile revenues decreased during the year . the other categories representing our top five were fast food/restaurants which declined this year , furniture and medical/healthcare , which increased in 2015 , and radio/tv/cable/newspaper , which remained flat . gross political advertising revenue was $ 12.7 million for the year ended december 31 , 2015 , compared to $ 64.3 million for the same period in 2014 , a decrease of $ 51.6 million , as 2015 was not an election year . retransmission compensation was $ 298.0 million for the year ended december 31 , 2015 , compared to $ 155.0 million for the same period in 2014 , an increase of $ 143.1 million , or 92.3 % . the increase in retransmission compensation was attributable to a $ 70.7 million increase on our legacy stations , primarily related to the 2014 and 2015 renewals of contracts providing for higher rates per subscriber , and incremental revenue from our newly acquired stations of $ 72.4 million . digital media revenue , representing advertising revenue on our stations ' web and mobile sites and revenue from our other digital operations , was $ 89.9 million for the year ended december 31 , 2015 , compared to $ 46.7 million for the same period in 2014 , an increase of $ 43.2 million or 92.5 % . the increase was primarily attributable to the $ 39.3 million in incremental revenue from our newly acquired stations and entities , and a $ 2.9 million increase in revenue from our legacy stations . operating expenses corporate expenses , related to costs associated with the centralized management of our stations , were $ 44.9 million for the year ended december 31 , 2015 , compared to $ 35.2 million for the same period in 2014 , an increase of $ 9.7 million , or 27.5 % . this was primarily attributable to an increase in stock-based compensation expense of $ 3.8 million due to equity incentive awards in 2015 , an increase in payroll expense of $ 1.6 million related to the increased number of stations , an increase in legal and professional fees of $ 2.4 million primarily associated with our acquisitions of stations and entities , and costs incurred attributable to new vies of $ 1.2 million . station direct operating expenses , consisting primarily of news , engineering , programming and selling , general and administrative expenses ( net of trade expense ) were $ 480.9 million for the year ended december 31 , 2015 , compared to $ 319.0 million for the same period in 2014 , an increase of $ 161.9 million , or 50.7 % . the increase was primarily due to
| liquidity and capital resources the company is highly leveraged , which makes it vulnerable to changes in general economic conditions . the company 's ability to meet the future cash requirements described below depends on its ability to generate cash in the future , which is subject to general economic , financial , competitive , legislative , regulatory and other conditions , many of which are beyond the company 's control . based on current operations and anticipated future growth , the company believes that its available cash , anticipated cash flow from operations and available borrowings under the senior secured credit facilities will be sufficient to fund working capital , capital expenditure requirements , interest payments and scheduled debt principal payments for at least the next twelve months as of the filing date of this annual report on form 10-k. in order to meet future cash needs the company may , from time to time , borrow under its existing senior secured credit facilities or issue other long- or short-term debt or equity , if the market and the terms of its existing debt arrangements permit . we will continue to evaluate the best use of our operating cash flow among our capital expenditures , acquisitions and debt reduction . overview the following tables present summarized financial information management believes is helpful in evaluating the company 's liquidity and capital resources ( in thousands ) : replace_table_token_12_th ( 1 ) the cash paid for income taxes , net of refunds , during the year ended december 31 , 2015 includes payments totaling $ 23.0 million in tax liabilities assumed in or resulting from various acquisitions and sales .
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while the business environment remained competitive , we experienced pricing improvement in several areas of our business . we use the term “ pricing ” to mean the contract profitability or margin on the work that we sell . in our consulting business , revenues for fiscal 2019 increased 5 % in u.s. dollars and 8 % in local currency compared to fiscal 2018 . consulting revenue growth in local currency in fiscal 2019 was led by very strong growth in resources , strong growth in health & public service , products and communications , media & technology and modest growth in financial services . our consulting revenue growth continues to be driven by strong demand for digital- , cloud- and security-related services and assisting clients with the adoption of new technologies . in addition , clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency , as well as projects to integrate their global operations and grow and transform their businesses . in our outsourcing business , revenues for fiscal 2019 increased 6 % in u.s. dollars and 9 % in local currency compared to fiscal 2018 . outsourcing revenue growth in local currency in fiscal 2019 was led by very strong growth in resources , communications , media & technology and products , solid growth in financial services and modest 27 growth in health & public service . we continue to experience growing demand to assist clients with the operation and maintenance of digital-related services and cloud enablement . in addition , clients continue to be focused on transforming their operations to improve effectiveness and cost efficiency . as we are a global company , our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations . if the u.s. dollar weakens against other currencies , resulting in favorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be higher . if the u.s. dollar strengthens against other currencies , resulting in unfavorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be lower . the u.s. dollar strengthened against various currencies during fiscal 2019 , resulting in unfavorable currency translation and u.s. dollar revenue growth that was approximately 3 % lower than our revenue growth in local currency for the year . assuming that exchange rates stay within recent ranges , we estimate that our full fiscal 2020 revenue growth in u.s. dollars will be approximately 1 % lower in u.s. dollars than our revenue growth in local currency . the primary categories of operating expenses include cost of services , sales and marketing and general and administrative costs . cost of services is primarily driven by the cost of client-service personnel , which consists mainly of compensation , subcontractor and other personnel costs , and non-payroll costs on outsourcing contracts . cost of services includes a variety of activities such as : contract delivery ; recruiting and training ; software development ; and integration of acquisitions . sales and marketing costs are driven primarily by : compensation costs for business development activities ; marketing- and advertising-related activities ; and certain acquisition-related costs . general and administrative costs primarily include costs for non-client-facing personnel , information systems , office space and certain acquisition-related costs . utilization for fiscal 2019 was 91 % , consistent with fiscal 2018 . we continue to hire to meet current and projected future demand . we proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions , given that compensation costs are the most significant portion of our operating expenses . based on current and projected future demand , we have increased our headcount , the majority of which serve our clients , to approximately 492,000 as of august 31 , 2019 , compared to approximately 459,000 as of august 31 , 2018 . the year-over-year increase in our headcount reflects an overall increase in demand for our services and solutions , as well as headcount added in connection with acquisitions . attrition , excluding involuntary terminations , for fiscal 2019 was 17 % , up from 15 % in fiscal 2018 . we evaluate voluntary attrition , adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand . in addition , we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees . for the majority of our personnel , compensation increases become effective december 1st of each fiscal year . we strive to adjust pricing and or the mix of resources to reduce the impact of compensation increases on our margin . our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to : keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding ; recover increases in compensation ; deploy our employees globally on a timely basis ; manage attrition ; and or effectively assimilate and utilize new employees . effective september 1 , 2018 , we adopted asu no . 2017-07 , compensation—retirement benefits ( topic 715 ) , which required us to reclassify certain components of pension costs from operating expenses to non-operating expenses . prior period results have been revised to reflect the fiscal 2019 presentation . for additional information , see note 1 ( summary of significant accounting policies ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . story_separator_special_tag operating expenses operating expenses for fiscal 2019 increased $ 1,816 million , or 5 % , over fiscal 2018 , and decreased as a percentage of revenues to 85.4 % from 85.6 % during this period . cost of services cost of services for fiscal 2019 increased $ 1,401 million , or 5 % , over fiscal 2018 , and decreased as a percentage of revenues to 69.2 % from 69.5 % during this period . gross margin for fiscal 2019 increased to 30.8 % from 30.5 % in fiscal 2018 . the increase in gross margin for fiscal 2019 was primarily due to lower non-payroll and labor costs as a percentage of revenues compared to fiscal 2018. sales and marketing sales and marketing expense for fiscal 2019 increased $ 251 million , or 6 % , over fiscal 2018 , and increased as a percentage of revenues to 10.3 % from 10.2 % during this period . general and administrative costs general and administrative costs for fiscal 2019 increased $ 164 million , or 7 % , over fiscal 2018 , and remained flat as a percentage of revenues at 5.9 % during this period . operating income and operating margin operating income for fiscal 2019 increased $ 406 million , or 7 % , over fiscal 2018 . operating income and operating margin for each of the operating groups were as follows : replace_table_token_4_th _ amounts in table may not total due to rounding . ( 1 ) effective september 1 , 2018 , we adopted fasb asu no . 2017-07 , compensation-retirement benefits ( topic 715 ) : improving the presentation of net periodic pension cost and net periodic postretirement benefit cost . certain components of pension service costs were reclassified from operating expenses to non-operating expenses . prior period amounts have been revised to conform with the current period presentation . we estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during fiscal 2019 was similar to that disclosed for revenue . the commentary below provides insight into other factors affecting operating group performance and operating margin for fiscal 2019 compared with fiscal 2018 : communications , media & technology operating income increased primarily due to revenue growth and higher contract profitability . financial services operating income decreased as higher consulting contract profitability and revenue growth were offset by higher operating expenses as a percentage of revenues . 33 health & public service operating income decreased as revenue growth was offset by lower consulting contract profitability and higher operating expenses as a percentage of revenues . products operating income increased primarily due to revenue growth and higher contract profitability , partially offset by higher operating expenses as a percentage of revenues . resources operating income increased primarily due to revenue growth and higher contract profitability . provision for income taxes the effective tax rate for fiscal 2019 was 22.5 % , compared with 27.4 % for fiscal 2018 . in fiscal 2018 , we recorded a $ 258 million charge associated with tax law changes . absent this charge , our effective tax rate for fiscal 2018 would have been 23.0 % . the lower effective tax rate for fiscal 2019 was primarily due to changes in the geographic distribution of earnings , higher benefits from final determinations of prior year taxes and lower expense for adjustments to prior year tax liabilities . these decreases were partially offset by higher expense from the adoption of fasb asu no . 2016-16 and lower tax benefits from share-based payments . for additional information , see note 10 ( income taxes ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” net income attributable to noncontrolling interests net income attributable to noncontrolling interests reflects the income earned or expense incurred attributable to the equity interest that some current and former members of accenture leadership and their permitted transferees have in our accenture canada holdings inc. subsidiary . see “ business—organizational structure . ” noncontrolling interests also includes amounts primarily attributable to noncontrolling shareholders in our avanade inc. subsidiary . net income attributable to accenture plc represents the income attributable to the shareholders of accenture plc . net income attributable to noncontrolling interests for fiscal 2019 decreased $ 88 million , or 57 % , from fiscal 2018 , due to the decrease in the non-controlling ownership percentage in march 2018 from 4 % held by accenture holdings plc and accenture canada holdings inc. to less than 1 % held by only accenture canada holdings inc. driven by the accenture holdings plc merger with and into accenture plc . for additional information on the merger , see note 1 ( summary of significant accounting policies ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” earnings per share diluted earnings per share were $ 7.36 for fiscal 2019 , compared with $ 6.34 for fiscal 2018 . the $ 1.02 increase in our diluted earnings per share included the impact of tax law changes , which decreased diluted earnings per share for fiscal 2018 by $ 0.40 . excluding the impact of these changes , diluted earnings per share for fiscal 2019 increased $ 0.62 compared with fiscal 2018 , due to increases of $ 0.48 from higher revenues and operating results , $ 0.05 from a lower effective tax rate , $ 0.05 from lower weighted average shares outstanding , and $ 0.04 from lower non-operating expense . for information regarding our earnings per share calculations , see note 3 ( earnings per share ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” 34 results of operations for fiscal 2018 compared to fiscal 2017 revenues ( by operating group , geographic region and type of work ) were as follows : replace_table_token_5_th _ n/m = not meaningful amounts
| liquidity and capital resources the company is highly leveraged , which makes it vulnerable to changes in general economic conditions . the company 's ability to meet the future cash requirements described below depends on its ability to generate cash in the future , which is subject to general economic , financial , competitive , legislative , regulatory and other conditions , many of which are beyond the company 's control . based on current operations and anticipated future growth , the company believes that its available cash , anticipated cash flow from operations and available borrowings under the senior secured credit facilities will be sufficient to fund working capital , capital expenditure requirements , interest payments and scheduled debt principal payments for at least the next twelve months as of the filing date of this annual report on form 10-k. in order to meet future cash needs the company may , from time to time , borrow under its existing senior secured credit facilities or issue other long- or short-term debt or equity , if the market and the terms of its existing debt arrangements permit . we will continue to evaluate the best use of our operating cash flow among our capital expenditures , acquisitions and debt reduction . overview the following tables present summarized financial information management believes is helpful in evaluating the company 's liquidity and capital resources ( in thousands ) : replace_table_token_12_th ( 1 ) the cash paid for income taxes , net of refunds , during the year ended december 31 , 2015 includes payments totaling $ 23.0 million in tax liabilities assumed in or resulting from various acquisitions and sales .
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while the business environment remained competitive , we experienced pricing improvement in several areas of our business . we use the term “ pricing ” to mean the contract profitability or margin on the work that we sell . in our consulting business , revenues for fiscal 2019 increased 5 % in u.s. dollars and 8 % in local currency compared to fiscal 2018 . consulting revenue growth in local currency in fiscal 2019 was led by very strong growth in resources , strong growth in health & public service , products and communications , media & technology and modest growth in financial services . our consulting revenue growth continues to be driven by strong demand for digital- , cloud- and security-related services and assisting clients with the adoption of new technologies . in addition , clients continue to be focused on initiatives designed to deliver cost savings and operational efficiency , as well as projects to integrate their global operations and grow and transform their businesses . in our outsourcing business , revenues for fiscal 2019 increased 6 % in u.s. dollars and 9 % in local currency compared to fiscal 2018 . outsourcing revenue growth in local currency in fiscal 2019 was led by very strong growth in resources , communications , media & technology and products , solid growth in financial services and modest 27 growth in health & public service . we continue to experience growing demand to assist clients with the operation and maintenance of digital-related services and cloud enablement . in addition , clients continue to be focused on transforming their operations to improve effectiveness and cost efficiency . as we are a global company , our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations . if the u.s. dollar weakens against other currencies , resulting in favorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be higher . if the u.s. dollar strengthens against other currencies , resulting in unfavorable currency translation , our revenues , revenue growth and results of operations in u.s. dollars may be lower . the u.s. dollar strengthened against various currencies during fiscal 2019 , resulting in unfavorable currency translation and u.s. dollar revenue growth that was approximately 3 % lower than our revenue growth in local currency for the year . assuming that exchange rates stay within recent ranges , we estimate that our full fiscal 2020 revenue growth in u.s. dollars will be approximately 1 % lower in u.s. dollars than our revenue growth in local currency . the primary categories of operating expenses include cost of services , sales and marketing and general and administrative costs . cost of services is primarily driven by the cost of client-service personnel , which consists mainly of compensation , subcontractor and other personnel costs , and non-payroll costs on outsourcing contracts . cost of services includes a variety of activities such as : contract delivery ; recruiting and training ; software development ; and integration of acquisitions . sales and marketing costs are driven primarily by : compensation costs for business development activities ; marketing- and advertising-related activities ; and certain acquisition-related costs . general and administrative costs primarily include costs for non-client-facing personnel , information systems , office space and certain acquisition-related costs . utilization for fiscal 2019 was 91 % , consistent with fiscal 2018 . we continue to hire to meet current and projected future demand . we proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions , given that compensation costs are the most significant portion of our operating expenses . based on current and projected future demand , we have increased our headcount , the majority of which serve our clients , to approximately 492,000 as of august 31 , 2019 , compared to approximately 459,000 as of august 31 , 2018 . the year-over-year increase in our headcount reflects an overall increase in demand for our services and solutions , as well as headcount added in connection with acquisitions . attrition , excluding involuntary terminations , for fiscal 2019 was 17 % , up from 15 % in fiscal 2018 . we evaluate voluntary attrition , adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand . in addition , we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees . for the majority of our personnel , compensation increases become effective december 1st of each fiscal year . we strive to adjust pricing and or the mix of resources to reduce the impact of compensation increases on our margin . our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to : keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding ; recover increases in compensation ; deploy our employees globally on a timely basis ; manage attrition ; and or effectively assimilate and utilize new employees . effective september 1 , 2018 , we adopted asu no . 2017-07 , compensation—retirement benefits ( topic 715 ) , which required us to reclassify certain components of pension costs from operating expenses to non-operating expenses . prior period results have been revised to reflect the fiscal 2019 presentation . for additional information , see note 1 ( summary of significant accounting policies ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . story_separator_special_tag operating expenses operating expenses for fiscal 2019 increased $ 1,816 million , or 5 % , over fiscal 2018 , and decreased as a percentage of revenues to 85.4 % from 85.6 % during this period . cost of services cost of services for fiscal 2019 increased $ 1,401 million , or 5 % , over fiscal 2018 , and decreased as a percentage of revenues to 69.2 % from 69.5 % during this period . gross margin for fiscal 2019 increased to 30.8 % from 30.5 % in fiscal 2018 . the increase in gross margin for fiscal 2019 was primarily due to lower non-payroll and labor costs as a percentage of revenues compared to fiscal 2018. sales and marketing sales and marketing expense for fiscal 2019 increased $ 251 million , or 6 % , over fiscal 2018 , and increased as a percentage of revenues to 10.3 % from 10.2 % during this period . general and administrative costs general and administrative costs for fiscal 2019 increased $ 164 million , or 7 % , over fiscal 2018 , and remained flat as a percentage of revenues at 5.9 % during this period . operating income and operating margin operating income for fiscal 2019 increased $ 406 million , or 7 % , over fiscal 2018 . operating income and operating margin for each of the operating groups were as follows : replace_table_token_4_th _ amounts in table may not total due to rounding . ( 1 ) effective september 1 , 2018 , we adopted fasb asu no . 2017-07 , compensation-retirement benefits ( topic 715 ) : improving the presentation of net periodic pension cost and net periodic postretirement benefit cost . certain components of pension service costs were reclassified from operating expenses to non-operating expenses . prior period amounts have been revised to conform with the current period presentation . we estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during fiscal 2019 was similar to that disclosed for revenue . the commentary below provides insight into other factors affecting operating group performance and operating margin for fiscal 2019 compared with fiscal 2018 : communications , media & technology operating income increased primarily due to revenue growth and higher contract profitability . financial services operating income decreased as higher consulting contract profitability and revenue growth were offset by higher operating expenses as a percentage of revenues . 33 health & public service operating income decreased as revenue growth was offset by lower consulting contract profitability and higher operating expenses as a percentage of revenues . products operating income increased primarily due to revenue growth and higher contract profitability , partially offset by higher operating expenses as a percentage of revenues . resources operating income increased primarily due to revenue growth and higher contract profitability . provision for income taxes the effective tax rate for fiscal 2019 was 22.5 % , compared with 27.4 % for fiscal 2018 . in fiscal 2018 , we recorded a $ 258 million charge associated with tax law changes . absent this charge , our effective tax rate for fiscal 2018 would have been 23.0 % . the lower effective tax rate for fiscal 2019 was primarily due to changes in the geographic distribution of earnings , higher benefits from final determinations of prior year taxes and lower expense for adjustments to prior year tax liabilities . these decreases were partially offset by higher expense from the adoption of fasb asu no . 2016-16 and lower tax benefits from share-based payments . for additional information , see note 10 ( income taxes ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” net income attributable to noncontrolling interests net income attributable to noncontrolling interests reflects the income earned or expense incurred attributable to the equity interest that some current and former members of accenture leadership and their permitted transferees have in our accenture canada holdings inc. subsidiary . see “ business—organizational structure . ” noncontrolling interests also includes amounts primarily attributable to noncontrolling shareholders in our avanade inc. subsidiary . net income attributable to accenture plc represents the income attributable to the shareholders of accenture plc . net income attributable to noncontrolling interests for fiscal 2019 decreased $ 88 million , or 57 % , from fiscal 2018 , due to the decrease in the non-controlling ownership percentage in march 2018 from 4 % held by accenture holdings plc and accenture canada holdings inc. to less than 1 % held by only accenture canada holdings inc. driven by the accenture holdings plc merger with and into accenture plc . for additional information on the merger , see note 1 ( summary of significant accounting policies ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” earnings per share diluted earnings per share were $ 7.36 for fiscal 2019 , compared with $ 6.34 for fiscal 2018 . the $ 1.02 increase in our diluted earnings per share included the impact of tax law changes , which decreased diluted earnings per share for fiscal 2018 by $ 0.40 . excluding the impact of these changes , diluted earnings per share for fiscal 2019 increased $ 0.62 compared with fiscal 2018 , due to increases of $ 0.48 from higher revenues and operating results , $ 0.05 from a lower effective tax rate , $ 0.05 from lower weighted average shares outstanding , and $ 0.04 from lower non-operating expense . for information regarding our earnings per share calculations , see note 3 ( earnings per share ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data . ” 34 results of operations for fiscal 2018 compared to fiscal 2017 revenues ( by operating group , geographic region and type of work ) were as follows : replace_table_token_5_th _ n/m = not meaningful amounts
| liquidity and capital resources our primary sources of liquidity are cash flows from operations , available cash reserves and debt capacity available under various credit facilities . we could raise additional funds through other public or private debt or equity financings . we may use our available or additional funds to , among other things : facilitate purchases , redemptions and exchanges of shares and pay dividends ; acquire complementary businesses or technologies ; take advantage of opportunities , including more rapid expansion ; or develop new services and solutions . as of august 31 , 2019 , cash and cash equivalents were $ 6.1 billion , compared with $ 5.1 billion as of august 31 , 2018 . cash flows from operating , investing and financing activities , as reflected in our consolidated cash flows statements , are summarized in the following table : replace_table_token_7_th operating activities : the $ 600 million year-over-year increase in operating cash flow was due to higher net income as well as changes in operating assets and liabilities , including an increase in accounts payable , partially offset by higher tax disbursements . investing activities : the $ 506 million increase in cash used was primarily due to higher spending on business acquisitions and investments . for additional information , see note 6 ( business combinations ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data.
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. see note 4 , “ acquisitions and divestitures , ” and “ equity method investments , ” of note 7 , “ investments , ” to the consolidated financial statements for further discussion of these transactions . for a detailed discussion of our results of operations , see “ segment operating results ” below . replace_table_token_6_th _ n/m not meaningful . 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 . ” 32 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_7_th ( 1 ) includes the revenues from the bwise enterprise governance , risk and compliance software platform which was sold in march 2019 and 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 corporate solutions business within our corporate services segment . see “ 2019 divestitures , ” and “ 2018 divestiture , ” of note 4 , “ acquisitions and divestitures , ” to the consolidated financial statements for further discussion . the following charts show our market services , corporate services , information services , and market technology segments as a percentage of our total revenues less transaction-based expenses of $ 2,535 million in 2019 , $ 2,526 million in 2018 and $ 2,411 million in 2017 : 33 34 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_8_th ( 1 ) includes section 31 fees of $ 43 million in 2019 , $ 39 million in 2018 , and $ 40 million in 2017. 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 $ 337 million in 2019 , $ 343 million in 2018 , and $ 319 million in 2017. 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 decreased in 2019 compared with 2018 , reflecting in large part a significantly lower volume and volatility market environment in the u.s. as compared to 2018. the decrease in equity derivative trading and clearing revenues in 2019 was primarily due to lower u.s. industry trading volumes and lower overall u.s. matched market share executed on nasdaq 's exchanges , partially offset by a higher u.s. gross capture rate and higher section 31 pass-through fee revenue . the decrease in equity derivative trading and clearing revenues less transaction-based expenses in 2019 was primarily due to lower u.s. industry trading volumes and lower overall u.s. matched market share executed on nasdaq 's exchanges , partially offset by a higher u.s. net capture rate . the decreases in equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses also included an unfavorable impact from foreign exchange of $ 3 million related to nasdaq 's nordic 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 . section 31 fees increased in 2019 compared with 2018 primarily due to higher average sec fee rates , partially offset by lower dollar value traded on nasdaq 's exchanges . 35 transaction rebates , in which we credit a portion of the per share execution charge to the market participant , decreased in 2019 compared with 2018 primarily due to lower u.s. industry trading volumes , a decrease in our overall u.s. matched market share executed on nasdaq 's exchanges , and a decrease in the u.s. rebate capture rate . brokerage , clearance and exchange fees increased in 2019 compared with 2018 primarily due to higher section 31 pass-through fees , as discussed above . cash equity trading revenues cash equity trading revenues and cash equity trading revenues less transaction-based expenses decreased in 2019 compared with 2018 reflecting in large part the lower volume and volatility market environment in the u.s. as compared to 2018 as mentioned above in “ equity derivative trading and clearing revenues . ” the decrease in cash equity trading revenues in 2019 was primarily due to lower u.s. industry trading volumes and lower section 31 pass-through fee revenue , partially offset by a higher u.s. gross capture rate . the decrease in cash equity trading revenues less transaction-based expenses in 2019 primarily reflects lower u.s. and european industry trading volumes and a lower u.s. net capture rate due to a particularly strong 2018 period , partially offset by a higher european net capture rate . the decreases in cash equity trading revenues and cash equity trading revenues less transaction-based expenses also included an unfavorable impact from foreign exchange of $ 7 million related to nasdaq 's nordic exchanges . story_separator_special_tag for 2018 , other significant items primarily included : a net gain on divestiture of businesses which represents our pre-tax net gain of $ 33 million on the sale of the public relations solutions and digital media services businesses ; a gain on the sale of an investment security which represents our pre-tax gain of $ 118 million on the sale of our 5.0 % ownership interest in lch group holdings limited , or lch ; other items : ◦ charges related to uncertain positions pertaining to sales and use tax and vat which are recorded in general , administrative and other expense in the consolidated statements of income ; and ◦ certain litigation costs which are recorded in professional and contract services expense in the consolidated statements of income . significant tax items : the non-gaap adjustment to the income tax provision included the tax impact of each non-gaap adjustment and : for 2019 , a tax benefit of $ 10 million primarily related to an adjustment to the 2018 federal and state tax returns and a tax benefit of $ 10 million related to capital distributions from the occ . see “ occ capital plan , ” of note 7 , “ investments , ” to the consolidated financial statements for further discussion of our occ investment . for 2018 , a net $ 7 million increase to tax expense due to a remeasurement of unrecognized tax benefits ( excluding the reversal of certain swedish tax benefits discussed below ) and the impact of state tax rate changes . additional adjustments included the following items : for 2019 and 2018 , excess tax benefits related to employee share-based compensation to reflect the recognition of the income tax effects of share-based awards when awards vest or are settled . this item is subject to volatility and will vary based on the timing of the vesting of employee share-based compensation arrangements and fluctuation in our stock price . for 2018 : ◦ the impact of enacted u.s. tax legislation , which related to the tax cuts and jobs act that was enacted in december 2017. we recorded an increase to tax expense of $ 290 million and a reduction to deferred tax assets related to foreign currency translation as a result of the finalization of the provisional estimate related to this act ; and ◦ a reversal of certain swedish tax benefits . see note 18 , “ income taxes , ” to the consolidated financial statements for further discussion . 41 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 : year ended december 31 , 2019 year ended december 31 , 2018 year ended december 31 , 2017 ( in millions , except share and per share amounts ) net income diluted earnings per share net income diluted earnings per share net income diluted earnings per share u.s. gaap net income attributable to nasdaq and diluted earnings per share $ 774 $ 4.63 $ 458 $ 2.73 $ 729 $ 4.30 non-gaap adjustments : amortization expense of acquired intangible assets 101 0.60 109 0.65 92 0.54 merger and strategic initiatives expense 30 0.18 21 0.13 44 0.26 restructuring charges 39 0.23 — — — — net income from unconsolidated investee ( 82 ) ( 0.49 ) ( 16 ) ( 0.10 ) ( 13 ) ( 0.08 ) clearing default loss — — 31 0.18 — — provision for notes receivable 20 0.12 — — — — extinguishment of debt 11 0.07 — — 10 0.06 net gain on divestiture of businesses ( 27 ) ( 0.16 ) ( 33 ) ( 0.20 ) — — gain on sale of investment security — — ( 118 ) ( 0.69 ) — — other 17 0.11 17 0.10 3 0.02 total non-gaap adjustments 109 0.66 11 0.07 136 0.80 adjustment to the income tax provision to reflect non-gaap adjustments and other tax items ( 43 ) ( 0.26 ) 6 0.03 ( 66 ) ( 0.39 ) excess tax benefits related to employee share-based compensation ( 5 ) ( 0.03 ) ( 9 ) ( 0.05 ) ( 40 ) ( 0.24 ) impact of enacted u.s. tax legislation — — 290 1.73 ( 89 ) ( 0.52 ) reversal of certain swedish tax benefits — — 41 0.24 — — total non-gaap tax adjustments ( 48 ) ( 0.29 ) 328 1.95 ( 195 ) ( 1.15 ) total non-gaap adjustments , net of tax 61 0.37 339 2.02 ( 59 ) ( 0.35 ) non-gaap net income attributable to nasdaq and diluted earnings per share $ 835 $ 5.00 $ 797 $ 4.75 $ 670 $ 3.95 weighted-average common shares outstanding for diluted earnings per share 166,970,161 167,691,299 169,585,031 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 march 2019 , we used net proceeds from the sale of commercial paper and cash on hand to redeem all of our 2019 notes . in april 2019 , we issued the 2029 notes and in may 2019 , we primarily used the net proceeds from the 2029 notes to repay in full and terminate our 2020 notes . in addition , in june 2019 , we used proceeds from issuances of commercial paper to repay in full and terminate our 2016 credit facility , and in february 2020 , we issued the 2030 notes . we will primarily use the net proceeds from the 2030 notes to redeem the 2021 notes and for other general corporate purposes . see “ 1.75 % senior unsecured notes due 2029 , ” “ early extinguishment of 5.55 % senior unsecured notes due 2020
| liquidity and capital resources our primary sources of liquidity are cash flows from operations , available cash reserves and debt capacity available under various credit facilities . we could raise additional funds through other public or private debt or equity financings . we may use our available or additional funds to , among other things : facilitate purchases , redemptions and exchanges of shares and pay dividends ; acquire complementary businesses or technologies ; take advantage of opportunities , including more rapid expansion ; or develop new services and solutions . as of august 31 , 2019 , cash and cash equivalents were $ 6.1 billion , compared with $ 5.1 billion as of august 31 , 2018 . cash flows from operating , investing and financing activities , as reflected in our consolidated cash flows statements , are summarized in the following table : replace_table_token_7_th operating activities : the $ 600 million year-over-year increase in operating cash flow was due to higher net income as well as changes in operating assets and liabilities , including an increase in accounts payable , partially offset by higher tax disbursements . investing activities : the $ 506 million increase in cash used was primarily due to higher spending on business acquisitions and investments . for additional information , see note 6 ( business combinations ) to our consolidated financial statements under item 8 , “ financial statements and supplementary data.
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. see note 4 , “ acquisitions and divestitures , ” and “ equity method investments , ” of note 7 , “ investments , ” to the consolidated financial statements for further discussion of these transactions . for a detailed discussion of our results of operations , see “ segment operating results ” below . replace_table_token_6_th _ n/m not meaningful . 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 . ” 32 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_7_th ( 1 ) includes the revenues from the bwise enterprise governance , risk and compliance software platform which was sold in march 2019 and 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 corporate solutions business within our corporate services segment . see “ 2019 divestitures , ” and “ 2018 divestiture , ” of note 4 , “ acquisitions and divestitures , ” to the consolidated financial statements for further discussion . the following charts show our market services , corporate services , information services , and market technology segments as a percentage of our total revenues less transaction-based expenses of $ 2,535 million in 2019 , $ 2,526 million in 2018 and $ 2,411 million in 2017 : 33 34 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_8_th ( 1 ) includes section 31 fees of $ 43 million in 2019 , $ 39 million in 2018 , and $ 40 million in 2017. 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 $ 337 million in 2019 , $ 343 million in 2018 , and $ 319 million in 2017. 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 decreased in 2019 compared with 2018 , reflecting in large part a significantly lower volume and volatility market environment in the u.s. as compared to 2018. the decrease in equity derivative trading and clearing revenues in 2019 was primarily due to lower u.s. industry trading volumes and lower overall u.s. matched market share executed on nasdaq 's exchanges , partially offset by a higher u.s. gross capture rate and higher section 31 pass-through fee revenue . the decrease in equity derivative trading and clearing revenues less transaction-based expenses in 2019 was primarily due to lower u.s. industry trading volumes and lower overall u.s. matched market share executed on nasdaq 's exchanges , partially offset by a higher u.s. net capture rate . the decreases in equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses also included an unfavorable impact from foreign exchange of $ 3 million related to nasdaq 's nordic 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 . section 31 fees increased in 2019 compared with 2018 primarily due to higher average sec fee rates , partially offset by lower dollar value traded on nasdaq 's exchanges . 35 transaction rebates , in which we credit a portion of the per share execution charge to the market participant , decreased in 2019 compared with 2018 primarily due to lower u.s. industry trading volumes , a decrease in our overall u.s. matched market share executed on nasdaq 's exchanges , and a decrease in the u.s. rebate capture rate . brokerage , clearance and exchange fees increased in 2019 compared with 2018 primarily due to higher section 31 pass-through fees , as discussed above . cash equity trading revenues cash equity trading revenues and cash equity trading revenues less transaction-based expenses decreased in 2019 compared with 2018 reflecting in large part the lower volume and volatility market environment in the u.s. as compared to 2018 as mentioned above in “ equity derivative trading and clearing revenues . ” the decrease in cash equity trading revenues in 2019 was primarily due to lower u.s. industry trading volumes and lower section 31 pass-through fee revenue , partially offset by a higher u.s. gross capture rate . the decrease in cash equity trading revenues less transaction-based expenses in 2019 primarily reflects lower u.s. and european industry trading volumes and a lower u.s. net capture rate due to a particularly strong 2018 period , partially offset by a higher european net capture rate . the decreases in cash equity trading revenues and cash equity trading revenues less transaction-based expenses also included an unfavorable impact from foreign exchange of $ 7 million related to nasdaq 's nordic exchanges . story_separator_special_tag for 2018 , other significant items primarily included : a net gain on divestiture of businesses which represents our pre-tax net gain of $ 33 million on the sale of the public relations solutions and digital media services businesses ; a gain on the sale of an investment security which represents our pre-tax gain of $ 118 million on the sale of our 5.0 % ownership interest in lch group holdings limited , or lch ; other items : ◦ charges related to uncertain positions pertaining to sales and use tax and vat which are recorded in general , administrative and other expense in the consolidated statements of income ; and ◦ certain litigation costs which are recorded in professional and contract services expense in the consolidated statements of income . significant tax items : the non-gaap adjustment to the income tax provision included the tax impact of each non-gaap adjustment and : for 2019 , a tax benefit of $ 10 million primarily related to an adjustment to the 2018 federal and state tax returns and a tax benefit of $ 10 million related to capital distributions from the occ . see “ occ capital plan , ” of note 7 , “ investments , ” to the consolidated financial statements for further discussion of our occ investment . for 2018 , a net $ 7 million increase to tax expense due to a remeasurement of unrecognized tax benefits ( excluding the reversal of certain swedish tax benefits discussed below ) and the impact of state tax rate changes . additional adjustments included the following items : for 2019 and 2018 , excess tax benefits related to employee share-based compensation to reflect the recognition of the income tax effects of share-based awards when awards vest or are settled . this item is subject to volatility and will vary based on the timing of the vesting of employee share-based compensation arrangements and fluctuation in our stock price . for 2018 : ◦ the impact of enacted u.s. tax legislation , which related to the tax cuts and jobs act that was enacted in december 2017. we recorded an increase to tax expense of $ 290 million and a reduction to deferred tax assets related to foreign currency translation as a result of the finalization of the provisional estimate related to this act ; and ◦ a reversal of certain swedish tax benefits . see note 18 , “ income taxes , ” to the consolidated financial statements for further discussion . 41 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 : year ended december 31 , 2019 year ended december 31 , 2018 year ended december 31 , 2017 ( in millions , except share and per share amounts ) net income diluted earnings per share net income diluted earnings per share net income diluted earnings per share u.s. gaap net income attributable to nasdaq and diluted earnings per share $ 774 $ 4.63 $ 458 $ 2.73 $ 729 $ 4.30 non-gaap adjustments : amortization expense of acquired intangible assets 101 0.60 109 0.65 92 0.54 merger and strategic initiatives expense 30 0.18 21 0.13 44 0.26 restructuring charges 39 0.23 — — — — net income from unconsolidated investee ( 82 ) ( 0.49 ) ( 16 ) ( 0.10 ) ( 13 ) ( 0.08 ) clearing default loss — — 31 0.18 — — provision for notes receivable 20 0.12 — — — — extinguishment of debt 11 0.07 — — 10 0.06 net gain on divestiture of businesses ( 27 ) ( 0.16 ) ( 33 ) ( 0.20 ) — — gain on sale of investment security — — ( 118 ) ( 0.69 ) — — other 17 0.11 17 0.10 3 0.02 total non-gaap adjustments 109 0.66 11 0.07 136 0.80 adjustment to the income tax provision to reflect non-gaap adjustments and other tax items ( 43 ) ( 0.26 ) 6 0.03 ( 66 ) ( 0.39 ) excess tax benefits related to employee share-based compensation ( 5 ) ( 0.03 ) ( 9 ) ( 0.05 ) ( 40 ) ( 0.24 ) impact of enacted u.s. tax legislation — — 290 1.73 ( 89 ) ( 0.52 ) reversal of certain swedish tax benefits — — 41 0.24 — — total non-gaap tax adjustments ( 48 ) ( 0.29 ) 328 1.95 ( 195 ) ( 1.15 ) total non-gaap adjustments , net of tax 61 0.37 339 2.02 ( 59 ) ( 0.35 ) non-gaap net income attributable to nasdaq and diluted earnings per share $ 835 $ 5.00 $ 797 $ 4.75 $ 670 $ 3.95 weighted-average common shares outstanding for diluted earnings per share 166,970,161 167,691,299 169,585,031 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 march 2019 , we used net proceeds from the sale of commercial paper and cash on hand to redeem all of our 2019 notes . in april 2019 , we issued the 2029 notes and in may 2019 , we primarily used the net proceeds from the 2029 notes to repay in full and terminate our 2020 notes . in addition , in june 2019 , we used proceeds from issuances of commercial paper to repay in full and terminate our 2016 credit facility , and in february 2020 , we issued the 2030 notes . we will primarily use the net proceeds from the 2030 notes to redeem the 2021 notes and for other general corporate purposes . see “ 1.75 % senior unsecured notes due 2029 , ” “ early extinguishment of 5.55 % senior unsecured notes due 2020
| repatriation of cash our cash and cash equivalents held outside of the u.s. in various foreign subsidiaries totaled $ 160 million as of december 31 , 2019 and $ 367 million as of december 31 , 2018 . the remaining balance held in the u.s. totaled $ 172 million as of december 31 , 2019 and $ 178 million as of december 31 , 2018 . unremitted earnings of subsidiaries outside of the u.s. are used to finance our international operations and are considered to be indefinitely reinvested . share repurchase program see “ share repurchase program , ” of note 13 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of our share repurchase program . cash dividends on common stock the following table shows quarterly cash dividends paid per common share on our outstanding common stock : replace_table_token_17_th see “ cash dividends on common stock , ” of note 13 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of the dividends . financial investments our financial investments totaled $ 291 million as of december 31 , 2019 and $ 268 million as of december 31 , 2018 and are primarily comprised of highly rated european government debt securities . of these securities , $ 169 million as of december 31 , 2019 and $ 166 million as of december 31 , 2018 are assets primarily utilized to meet regulatory capital requirements , mainly for our clearing operations at nasdaq clearing . see note 7 , “ investments , ” to the consolidated financial statements for further discussion . * * * * * * debt obligations the following table summarizes our debt obligations by contractual maturity : replace_table_token_18_th ( 1 ) balance was reclassified to short-term debt as of march 31 , 2019. in addition to the $ 1 billion senior unsecured revolving credit facility , we also have other credit facilities primarily related to our nasdaq clearing operations in order to provide further liquidity .
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these were as follows : acquisition transaction and integration costs $ 11.8 million restructuring and other charges $ 45.2 million premium on early extinguishment of debt $ 4.5 million write-down in investment of development stage enterprise $ 7.6 million total $ 69.1million the company continued to execute on its growth strategies of geographic expansion and new product innovation and development . we are currently commissioning two new satellite pcc plants in china and have three additional satellites under construction . the total capacity being installed with these three new satellite plants is approximately 215,000 tons . the company continued to see progress in its major growth strategy of developing and commercializing new products in advancing the fulfill® platform of technologies of higher filler loading . since the end of 2014 , we have signed 6 commercial agreements for fulfill® with two north american paper companies , two with european paper companies , and two companies in asia . we presently have twenty four commercial contracts for fulfill® . our three-year term refractory maintenance agreement with united steel company b.s.c . ( sulb ) , in bahrain expired in the fourth quarter . we recorded sales to sulb of $ 6.3 million in 2015. our refractories segment entered into two multi-year agreements in 2014 to provide cost-per-ton ( cpt ) steel refractory maintenance in europe and in india . we recorded sales of approximately $ 2.0 million during 2015. these agreements are due to expire in 2016 . 29 long term debt as of december 31 , 2015 was $ 1,255.3 million . during 2015 , we repaid $ 190.2 million of our term loan debt . since the acquisition of amcol , we have repaid over $ 290 million of our long-term debt . cash , cash equivalents and short-term investments were $ 232 million as of december 31 , 2015. our intention continues to be to use excess cash flow to repay debt and to de-lever as quickly as possible . outlook looking forward , we remain cautious about the state of the global economy and the impact it will have on our product lines . in addition to the integration of amcol and realization of the potential synergies from the acquired businesses , the company will also continue to focus on innovation and new product development and other opportunities for sales growth in 2016 , as follows : · develop multiple high-filler technologies under the fulfill® platform of products , to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials . · develop products and processes for waste management and recycling opportunities to reduce the environmental impact of the paper mill , reduce energy consumption and improve the sustainability of the papermaking process , including our new yield tm products . · further penetration into the packaging segment of the paper industry . · increase our sales of pcc for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills , particularly in emerging markets . · expand the company 's pcc coating product line using the satellite model . · increase our presence and gain penetration of our bentonite based foundry customers for the metalcasting industry in emerging markets , such as china and india . · increase our presence and market share in global pet care products , particularly in emerging markets . · deploy new products in pet care such as lightweight litter . · promote the company 's expertise in crystal engineering , especially in helping papermakers customize pcc morphologies for specific paper applications . · expand pcc produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of pcc for fiber substitutions . · develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers , a new market opportunity . · deploy new talc and gcc products in paint , coating and packaging applications . · deploy value-added formulations of refractory materials that not only reduce costs but improve performance . · expand our solid core wire product line into bric , middle eastern and other asian countries . · deploy our laser measurement technologies into new applications . · expand our refractory maintenance model to other steel makers globally . · increase our presence and market share in asia and in the global powdered detergent market . · continue the development of our proprietary enersol® products for agricultural applications worldwide . · pursue opportunities for our products in environmental and building and construction markets in the middle east , asia pacific and south america regions . · increase our presence and market share for geosynthetic clay liners within the environmental products product line . · increase our presence and market penetration in filtration and well testing within the energy services segment . · increase global market share in the floating production storage and offloading ( fpso ) in filtration . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · continue to explore selective small bolt-on type acquisitions to fit our core competencies in minerals and fine particle technology . however , there can be no assurance that we will achieve success in implementing any one or more of these opportunities . 30 results of operations consolidated income statement review replace_table_token_6_th * not meaningful net sales replace_table_token_7_th * not meaningful 31 worldwide net sales in 2015 increased 4.2 % from the previous year to $ 1,797.6 million . foreign exchange had an unfavorable impact on sales of $ 95.3 million or 6 percentage point of growth . net sales in the united states grew slightly to $ 1,049.6 million in 2015 and represented 58.4 % of consolidated net sales . international sales increased 3.8 % to $ 748.0 million from $ 720.6 million . story_separator_special_tag we do not expect to make a tax payment related to these obligations within the next year that would significantly impact liquidity . 37 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates and assumptions , including those related to revenue recognition , allowance for doubtful accounts , valuation of inventories , valuation of long-term assets , goodwill and other intangible assets , pension plan assumptions , income taxes , asset retirement obligations , income tax valuation allowances , stock-based compensation , and litigation and environmental liabilities . we base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that can not readily be determined from other sources . there can be no assurance that actual results will not differ from those estimates . we believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements : · revenue recognition : revenue from sale of products is recognized when the title passes to the customer , the customer assumes the risks and rewards of ownership , and collectability is reasonably assured . generally this occurs when the goods are shipped to the customer . revenues from sales of equipment are recorded upon completion of installation and receipt of customer acceptance . revenues from services are recorded when the services are performed . in most of our pcc contracts , the price per ton is based upon the total number of tons sold to the customer during the year . under those contracts , the price billed to the customer for shipments during the year is based on periodic estimates of the total annual volume that will be sold to the customer . revenues are adjusted at the end of each year to reflect the actual volume sold . there were no significant revenue adjustments in the fourth quarter of 2015 and 2014 , respectively . we have consignment arrangements with certain customers in our refractories segment . revenues for these transactions are recorded when the consigned products are consumed by the customer . revenues within our energy services segment is service based . certain contracts within this segment are long-term contracts , the revenue for which is recorded using percentage-of-completion method . progress is generally based upon costs incurred to date as compared to the total estimated costs to complete the work under the contract or the amount of product installed in relation to the total amount expected to be installed . all known or anticipated losses on contracts are provided when they become evident . cost adjustments that are in the process of being negotiated with customers for extra work or changes in scope of the work are included in revenue when collection is reasonable assured . . · allowance for doubtful accounts : we provide credit to customers in the ordinary course of business and perform ongoing credit evaluations . our customer base is diverse and includes customers located throughout the world . payment terms in certain of the foreign countries in which we do business are longer than those that are customary in the u.s. , and , as a result , may give rise to additional credit risk related to outstanding accounts receivable from these non-u.s. customers . likewise , a change in the financial position , liquidity or prospects of any of our customers could have an impact on our ability to collect amounts due . while concentrations of credit risk related to trade receivables are somewhat limited by our large customer base , we do extend significant credit to some of our customers . we make estimates of the amounts of our gross accounts receivable that will not be collectible , and record an allowance for doubtful accounts to reduce the carrying value of accounts receivable to the amount that is expected to be realized . in addition to specific allowances established for bankrupt customers , we also analyze the collection history and financial condition of our other customers considering current industry conditions and determine whether an allowance needs to be established or adjusted . we record the increases in the allowance for doubtful accounts as an expense in the period identified in the marketing and administrative expenses line within our consolidated statements of income . we recorded bad debt expenses of $ 2.6 million , $ 2.4 million and $ 0.6 million in 2015 , 2014 and 2013 , respectively . · property , plant and equipment : property , plant and equipment are depreciated over their useful lives . useful lives are based on management 's estimates of the period that the assets can generate revenue , which does not necessarily coincide with the remaining term of a customer 's contractual obligation to purchase products made using those assets . our sales of pcc are predominately pursuant to long-term evergreen contracts , initially ten years in length , with paper mills at which we operate satellite pcc plants . the terms of many of these agreements have been extended , often in connection with an expansion of the satellite pcc plant . failure of a pcc customer to renew an agreement or continue to purchase pcc from our facility could result in an impairment of assets or accelerated depreciation at such facility . we evaluate the recoverability of our property , plant and equipment whenever events or change in
| repatriation of cash our cash and cash equivalents held outside of the u.s. in various foreign subsidiaries totaled $ 160 million as of december 31 , 2019 and $ 367 million as of december 31 , 2018 . the remaining balance held in the u.s. totaled $ 172 million as of december 31 , 2019 and $ 178 million as of december 31 , 2018 . unremitted earnings of subsidiaries outside of the u.s. are used to finance our international operations and are considered to be indefinitely reinvested . share repurchase program see “ share repurchase program , ” of note 13 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of our share repurchase program . cash dividends on common stock the following table shows quarterly cash dividends paid per common share on our outstanding common stock : replace_table_token_17_th see “ cash dividends on common stock , ” of note 13 , “ nasdaq stockholders ' equity , ” to the consolidated financial statements for further discussion of the dividends . financial investments our financial investments totaled $ 291 million as of december 31 , 2019 and $ 268 million as of december 31 , 2018 and are primarily comprised of highly rated european government debt securities . of these securities , $ 169 million as of december 31 , 2019 and $ 166 million as of december 31 , 2018 are assets primarily utilized to meet regulatory capital requirements , mainly for our clearing operations at nasdaq clearing . see note 7 , “ investments , ” to the consolidated financial statements for further discussion . * * * * * * debt obligations the following table summarizes our debt obligations by contractual maturity : replace_table_token_18_th ( 1 ) balance was reclassified to short-term debt as of march 31 , 2019. in addition to the $ 1 billion senior unsecured revolving credit facility , we also have other credit facilities primarily related to our nasdaq clearing operations in order to provide further liquidity .
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these were as follows : acquisition transaction and integration costs $ 11.8 million restructuring and other charges $ 45.2 million premium on early extinguishment of debt $ 4.5 million write-down in investment of development stage enterprise $ 7.6 million total $ 69.1million the company continued to execute on its growth strategies of geographic expansion and new product innovation and development . we are currently commissioning two new satellite pcc plants in china and have three additional satellites under construction . the total capacity being installed with these three new satellite plants is approximately 215,000 tons . the company continued to see progress in its major growth strategy of developing and commercializing new products in advancing the fulfill® platform of technologies of higher filler loading . since the end of 2014 , we have signed 6 commercial agreements for fulfill® with two north american paper companies , two with european paper companies , and two companies in asia . we presently have twenty four commercial contracts for fulfill® . our three-year term refractory maintenance agreement with united steel company b.s.c . ( sulb ) , in bahrain expired in the fourth quarter . we recorded sales to sulb of $ 6.3 million in 2015. our refractories segment entered into two multi-year agreements in 2014 to provide cost-per-ton ( cpt ) steel refractory maintenance in europe and in india . we recorded sales of approximately $ 2.0 million during 2015. these agreements are due to expire in 2016 . 29 long term debt as of december 31 , 2015 was $ 1,255.3 million . during 2015 , we repaid $ 190.2 million of our term loan debt . since the acquisition of amcol , we have repaid over $ 290 million of our long-term debt . cash , cash equivalents and short-term investments were $ 232 million as of december 31 , 2015. our intention continues to be to use excess cash flow to repay debt and to de-lever as quickly as possible . outlook looking forward , we remain cautious about the state of the global economy and the impact it will have on our product lines . in addition to the integration of amcol and realization of the potential synergies from the acquired businesses , the company will also continue to focus on innovation and new product development and other opportunities for sales growth in 2016 , as follows : · develop multiple high-filler technologies under the fulfill® platform of products , to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials . · develop products and processes for waste management and recycling opportunities to reduce the environmental impact of the paper mill , reduce energy consumption and improve the sustainability of the papermaking process , including our new yield tm products . · further penetration into the packaging segment of the paper industry . · increase our sales of pcc for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills , particularly in emerging markets . · expand the company 's pcc coating product line using the satellite model . · increase our presence and gain penetration of our bentonite based foundry customers for the metalcasting industry in emerging markets , such as china and india . · increase our presence and market share in global pet care products , particularly in emerging markets . · deploy new products in pet care such as lightweight litter . · promote the company 's expertise in crystal engineering , especially in helping papermakers customize pcc morphologies for specific paper applications . · expand pcc produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of pcc for fiber substitutions . · develop unique calcium carbonate and talc products used in the manufacture of novel biopolymers , a new market opportunity . · deploy new talc and gcc products in paint , coating and packaging applications . · deploy value-added formulations of refractory materials that not only reduce costs but improve performance . · expand our solid core wire product line into bric , middle eastern and other asian countries . · deploy our laser measurement technologies into new applications . · expand our refractory maintenance model to other steel makers globally . · increase our presence and market share in asia and in the global powdered detergent market . · continue the development of our proprietary enersol® products for agricultural applications worldwide . · pursue opportunities for our products in environmental and building and construction markets in the middle east , asia pacific and south america regions . · increase our presence and market share for geosynthetic clay liners within the environmental products product line . · increase our presence and market penetration in filtration and well testing within the energy services segment . · increase global market share in the floating production storage and offloading ( fpso ) in filtration . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · continue to explore selective small bolt-on type acquisitions to fit our core competencies in minerals and fine particle technology . however , there can be no assurance that we will achieve success in implementing any one or more of these opportunities . 30 results of operations consolidated income statement review replace_table_token_6_th * not meaningful net sales replace_table_token_7_th * not meaningful 31 worldwide net sales in 2015 increased 4.2 % from the previous year to $ 1,797.6 million . foreign exchange had an unfavorable impact on sales of $ 95.3 million or 6 percentage point of growth . net sales in the united states grew slightly to $ 1,049.6 million in 2015 and represented 58.4 % of consolidated net sales . international sales increased 3.8 % to $ 748.0 million from $ 720.6 million . story_separator_special_tag we do not expect to make a tax payment related to these obligations within the next year that would significantly impact liquidity . 37 critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates and assumptions , including those related to revenue recognition , allowance for doubtful accounts , valuation of inventories , valuation of long-term assets , goodwill and other intangible assets , pension plan assumptions , income taxes , asset retirement obligations , income tax valuation allowances , stock-based compensation , and litigation and environmental liabilities . we base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that can not readily be determined from other sources . there can be no assurance that actual results will not differ from those estimates . we believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements : · revenue recognition : revenue from sale of products is recognized when the title passes to the customer , the customer assumes the risks and rewards of ownership , and collectability is reasonably assured . generally this occurs when the goods are shipped to the customer . revenues from sales of equipment are recorded upon completion of installation and receipt of customer acceptance . revenues from services are recorded when the services are performed . in most of our pcc contracts , the price per ton is based upon the total number of tons sold to the customer during the year . under those contracts , the price billed to the customer for shipments during the year is based on periodic estimates of the total annual volume that will be sold to the customer . revenues are adjusted at the end of each year to reflect the actual volume sold . there were no significant revenue adjustments in the fourth quarter of 2015 and 2014 , respectively . we have consignment arrangements with certain customers in our refractories segment . revenues for these transactions are recorded when the consigned products are consumed by the customer . revenues within our energy services segment is service based . certain contracts within this segment are long-term contracts , the revenue for which is recorded using percentage-of-completion method . progress is generally based upon costs incurred to date as compared to the total estimated costs to complete the work under the contract or the amount of product installed in relation to the total amount expected to be installed . all known or anticipated losses on contracts are provided when they become evident . cost adjustments that are in the process of being negotiated with customers for extra work or changes in scope of the work are included in revenue when collection is reasonable assured . . · allowance for doubtful accounts : we provide credit to customers in the ordinary course of business and perform ongoing credit evaluations . our customer base is diverse and includes customers located throughout the world . payment terms in certain of the foreign countries in which we do business are longer than those that are customary in the u.s. , and , as a result , may give rise to additional credit risk related to outstanding accounts receivable from these non-u.s. customers . likewise , a change in the financial position , liquidity or prospects of any of our customers could have an impact on our ability to collect amounts due . while concentrations of credit risk related to trade receivables are somewhat limited by our large customer base , we do extend significant credit to some of our customers . we make estimates of the amounts of our gross accounts receivable that will not be collectible , and record an allowance for doubtful accounts to reduce the carrying value of accounts receivable to the amount that is expected to be realized . in addition to specific allowances established for bankrupt customers , we also analyze the collection history and financial condition of our other customers considering current industry conditions and determine whether an allowance needs to be established or adjusted . we record the increases in the allowance for doubtful accounts as an expense in the period identified in the marketing and administrative expenses line within our consolidated statements of income . we recorded bad debt expenses of $ 2.6 million , $ 2.4 million and $ 0.6 million in 2015 , 2014 and 2013 , respectively . · property , plant and equipment : property , plant and equipment are depreciated over their useful lives . useful lives are based on management 's estimates of the period that the assets can generate revenue , which does not necessarily coincide with the remaining term of a customer 's contractual obligation to purchase products made using those assets . our sales of pcc are predominately pursuant to long-term evergreen contracts , initially ten years in length , with paper mills at which we operate satellite pcc plants . the terms of many of these agreements have been extended , often in connection with an expansion of the satellite pcc plant . failure of a pcc customer to renew an agreement or continue to purchase pcc from our facility could result in an impairment of assets or accelerated depreciation at such facility . we evaluate the recoverability of our property , plant and equipment whenever events or change in
| liquidity and capital resources cash provided from continuing operations in 2015 was $ 270.0 million , compared with $ 314.1 million in prior year . cash flows provided from operations in 2015 were principally used for repayment of debt , to fund capital expenditures and pay the company 's dividend to common shareholders . on may 9 , 2014 , in connection with the acquisition of amcol , the company entered into a credit agreement providing for the $ 1.560 billion senior secured term loan facility ( the “ term facility ” ) and a $ 200 million senior secured revolving credit facility ( the “ revolving facility ” and , together with the term facility , the “ facilities ” ) . the net proceeds of the term facility , together with the company 's cash on hand , were used as cash consideration for the acquisition of amcol and to refinance certain existing indebtedness of the company ( including the company 's 3.46 % series a senior notes due october 7 , 2020 and 4.13 % series b senior notes due october 7 , 2023 ) and amcol and to pay fees and expenses in connection with the foregoing . loans under the revolving facility will be used for working capital and other general corporate purposes of the company and its subsidiaries . as of december 31 , 2015 , the revolving facility remained unused . our intention is to use excess cash flow to repay debt and to de-lever as quickly as possible . during 2015 , the company repaid $ 190.2 million in principal amount of its term loan debt . on june 23 , 2015 , the company entered into an amendment to the credit agreement to reprice the $ 1.378 billion then outstanding on the term facility . as amended , the term facility has a $ 1.078 billion floating rate tranche and a $ 300 million fixed rate tranche . the maturity date for loans under the term facility was not changed by the amendment .
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north american potash inventory levels are now below five-year average inventory levels . challenging logistics hindered dealer efforts to obtain inventory on a timely basis during 2014. as a result of solid overall demand and these lower inventory levels , potash prices have increased steadily over the past few quarters . trio ® prices and demand . an imbalance between supply and demand , as well as dealers and farmer recognition of the added value of magnesium and sulfate and the benefits of a low-chloride specialty product , helped support trio ® pricing 34 despite lower potash prices in the past few years . demand for granular- and premium-sized trio ® continues to be strong in the domestic market . we have seen weaker demand and softer pricing for standard-sized trio ® in the export market . should we choose to manage our trio ® inventory levels by increasing our mix of export sales , we would likely see a lower net realized sales price for trio ® . major capital projects . our capital project investment decreased significantly in 2014 as compared to 2013 and 2012. over the last two years , we completed several major capital projects that are intended to increase production , decrease our per-ton operating costs and increase our overall marketing flexibility . we are now focused on optimizing and gaining the efficiencies from these projects . additional information about these capital projects is included below under the heading “ capital investments . ” selected operating and financial data the following tables present selected operations data for the periods noted . analysis of the details of this information is contained throughout this discussion . we present this table as a summary of information relating to key indicators of financial condition and operating performance that we believe are important . we calculate average net realized sales price by deducting freight costs from gross revenues and then by dividing this result by tons of product sold during the period . 35 replace_table_token_10_th ( 1 ) additional information about our non-gaap financial measures is set forth under the heading `` non-gaap financial measures . ” ( 2 ) amounts are presented net of by-product credits . on a per-ton basis , by-product credits were $ 7 for the year ended december 31 , 2014 , $ 9 for the year ended 2013 , and $ 8 for the year ended 2012 . by-product credits were $ 6.5 million , $ 6.5 million and $ 6.5 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . 36 results of operations operating highlights net income for 2014 was $ 9.8 million , or $ 0.13 per diluted share , and cash flows from operating activities were $ 127.5 million . potash the majority of our revenues and gross margin are derived from the production and sales of potash . potash sales as a percentage of our net sales , which we calculate as gross sales less freight costs , and gross margin were approximately as follows for the indicated periods . replace_table_token_11_th we sold 915,000 tons of potash in 2014 compared with 692,000 tons in 2013 . the increase in sales volume was driven by increased confidence in potash pricing from buyers and our agricultural customers ' demand for product in 2014 as compared to 2013. our ability to supply tons to our customers on a timely basis was a fundamental element of our success in 2014. we utilized our geographic advantage as well as our warehouse system to effectively position product closer to our customers . our average net realized sales price of potash was $ 332 per ton in 2014 , as compared to $ 382 per ton in 2013 , largely as a result of concerns that global productive capacity exceeds demand . however , as a result of strong demand and tight inventory levels , we experienced sequential increases in our potash average net realized sales price each of the last three quarters of 2014. the table below shows our potash sales mix for 2014 , 2013 , and 2012. replace_table_token_12_th our production volume of potash in 2014 increased to 859,000 tons , compared with 780,000 tons produced in 2013 . the production increase was due to new production from our hb mine as well as higher production from our east facility , partially offset by decreased production at our west and moab facilities . our cash operating costs stayed relatively flat at $ 198 per ton in 2014 , compared with $ 195 per ton in 2013 . our industrial sales are significantly influenced by oil and gas drilling activity , we believe our sales volumes to our industrial customers will decrease , and potentially pressure our net realized sales price , during 2015 as oil and gas drilling activity slows in response to lower crude oil pricing . trio ® our trio ® production was lower in 2014 than in 2013 as we experienced lower ore grade and higher losses associated with higher production of premium-sized trio ® which results in losses during the conversion from standard to premium-sized products . as the export market for trio ® remains soft , we continue to focus on the domestic market . our sales of trio ® increased to 182,000 tons in 2014 as compared with 123,000 tons in 2013 , as demand for our granular- and premium-sized trio ® has remained strong . the standard-sized product is largely sold into the export market or converted into premium-sized product through a process we call pelletization . the export market for the standard-sized product was weaker in 2014 compared to 2013 , highlighting the importance of our focus on improving the efficiency of our pelletization process . story_separator_special_tag we recorded an additional allowance of $ 2.8 million against previously filed claims in `` other expense `` included in operating income in the consolidated statement of operations in 2013. in 2014 , we received notice that claims that had been previously denied had been approved . accordingly , we reduced our estimate of the allowance related to the realizability of our claims by $ 4.1 million . the credits that we estimate will now be realized were for periods prior to 2014 and the inventory produced during that time has been sold ; therefore , we recorded the decrease in the allowance as `` other expense `` in operating income in 2014. also in 2013 , we received a refund from the state of new mexico related to a compensating tax refund submitted in prior periods . the receipt of the refund removed uncertainty about the amount and collection of the refund and therefore , we recorded $ 1.7 million of income , which was also recorded in `` other expense `` included in operating income in the consolidated statement of operations in 2013. other income ( expense ) in april 2013 , we funded $ 2.0 million to settle all pension plan liabilities and recorded an additional expense of approximately $ 1.9 million to reflect the termination of the pension plan . this amount is recorded as `` other income ( expense ) `` in the consolidated statements of operations for the year ended december 31 , 2013 , and represents the difference between the final amount funded , and the sum of the recorded pension liability and the unrecognized actuarial losses included in accumulated other comprehensive income . results of operations for the years ended december 31 , 2013 , and 2012 net sales net sales of potash decreased $ 117.0 million , or 31 % , from $ 381.0 million for the year ended december 31 , 2012 , to $ 264.0 million for the year ended december 31 , 2013. this decrease was the result of an 18 % decrease in sales volumes of potash in addition to a decrease in the average net realized sales price of potash by $ 72 per ton , or 16 % , in the comparable period . our customers delayed purchases of potash in 2013 given downward pressure on potash prices driven by softness and uncertainty in the global potash market , as discussed previously . net sales of trio ® increased from $ 41.2 million for the year ended december 31 , 2012 , to $ 43.4 million for the year ended december 31 , 2013 , due to a 7 % increase in the average net realized sales price of trio ® offset by a slight decrease of 2 % in the volume of sales . we continued to see strong demand for our trio ® product , particularly the granular-sized and pelletized products . trio ® domestic pricing has historically tended to move in a relatively close correlation to potash pricing . dealers ' and farmers ' recognition of the benefits of this low chloride product , however , translated into higher prices despite sequentially lower potash prices during 2013. our production volume of potash in 2013 was 780,000 tons , or 16,000 tons less than in 2012. our trio ® production increased 46,000 tons , or 35 % , in 2013 as we operated our langbeinite facility more effectively and efficiently . 41 cost of goods sold the following table presents our cost of goods sold for potash and trio ® for the subject periods : replace_table_token_16_th ( 1 ) depreciation , depletion , and amortizations expense for potash was $ 35.6 million and $ 35.8 million in 2013 and 2012 , respectively , which equates to $ 52 and $ 43 on a per ton basis . ( 2 ) depreciation , depletion , and amortizations expense for trio ® was $ 6.8 million and $ 7.6 million in 2013 and 2012 , respectively , which equates to $ 55 and $ 61 on a per ton basis . total cost of goods sold of potash , which includes royalties and depreciation , depletion and amortization , increased $ 20 per ton , or 8 % , from $ 240 per ton for the year ended december 31 , 2012 , to $ 260 per ton for the year ended december 31 , 2013. we experienced higher cash operating costs per ton in 2013 due to increased production costs per ton at our east and west facilities resulting from comparatively lower production levels as we work through more complex ore zones at our east west facilities . total cost of goods sold of trio ® decreased $ 12 per ton , or 4 % , from $ 286 per ton for the year ended december 31 , 2012 , to $ 274 per ton for the year ended december 31 , 2013. this decrease in cost of goods sold on a per-ton basis was primarily due to higher trio ® production volumes in 2013 over which production costs are allocated . in total , our cost of goods sold decreased $ 23.6 million , or 10 % , from $ 236.5 million in 2012 to $ 212.9 million in 2013 , as a result of fewer tons of potash sold in 2013. as a percentage of sales , cost of goods sold increased as our production costs increased while our total production decreased , resulting in higher per ton inventory values . the increases in production costs were the result of increases in labor costs , natural gas , electricity , maintenance and professional services during the year ended december 31 , 2013. on a comparative basis , and within our production costs , depreciation and depletion increased $ 12.4 million , or 29 % , during 2013 as a result of the significant capital investments being placed into service during 2013. selling
| liquidity and capital resources cash provided from continuing operations in 2015 was $ 270.0 million , compared with $ 314.1 million in prior year . cash flows provided from operations in 2015 were principally used for repayment of debt , to fund capital expenditures and pay the company 's dividend to common shareholders . on may 9 , 2014 , in connection with the acquisition of amcol , the company entered into a credit agreement providing for the $ 1.560 billion senior secured term loan facility ( the “ term facility ” ) and a $ 200 million senior secured revolving credit facility ( the “ revolving facility ” and , together with the term facility , the “ facilities ” ) . the net proceeds of the term facility , together with the company 's cash on hand , were used as cash consideration for the acquisition of amcol and to refinance certain existing indebtedness of the company ( including the company 's 3.46 % series a senior notes due october 7 , 2020 and 4.13 % series b senior notes due october 7 , 2023 ) and amcol and to pay fees and expenses in connection with the foregoing . loans under the revolving facility will be used for working capital and other general corporate purposes of the company and its subsidiaries . as of december 31 , 2015 , the revolving facility remained unused . our intention is to use excess cash flow to repay debt and to de-lever as quickly as possible . during 2015 , the company repaid $ 190.2 million in principal amount of its term loan debt . on june 23 , 2015 , the company entered into an amendment to the credit agreement to reprice the $ 1.378 billion then outstanding on the term facility . as amended , the term facility has a $ 1.078 billion floating rate tranche and a $ 300 million fixed rate tranche . the maturity date for loans under the term facility was not changed by the amendment .
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north american potash inventory levels are now below five-year average inventory levels . challenging logistics hindered dealer efforts to obtain inventory on a timely basis during 2014. as a result of solid overall demand and these lower inventory levels , potash prices have increased steadily over the past few quarters . trio ® prices and demand . an imbalance between supply and demand , as well as dealers and farmer recognition of the added value of magnesium and sulfate and the benefits of a low-chloride specialty product , helped support trio ® pricing 34 despite lower potash prices in the past few years . demand for granular- and premium-sized trio ® continues to be strong in the domestic market . we have seen weaker demand and softer pricing for standard-sized trio ® in the export market . should we choose to manage our trio ® inventory levels by increasing our mix of export sales , we would likely see a lower net realized sales price for trio ® . major capital projects . our capital project investment decreased significantly in 2014 as compared to 2013 and 2012. over the last two years , we completed several major capital projects that are intended to increase production , decrease our per-ton operating costs and increase our overall marketing flexibility . we are now focused on optimizing and gaining the efficiencies from these projects . additional information about these capital projects is included below under the heading “ capital investments . ” selected operating and financial data the following tables present selected operations data for the periods noted . analysis of the details of this information is contained throughout this discussion . we present this table as a summary of information relating to key indicators of financial condition and operating performance that we believe are important . we calculate average net realized sales price by deducting freight costs from gross revenues and then by dividing this result by tons of product sold during the period . 35 replace_table_token_10_th ( 1 ) additional information about our non-gaap financial measures is set forth under the heading `` non-gaap financial measures . ” ( 2 ) amounts are presented net of by-product credits . on a per-ton basis , by-product credits were $ 7 for the year ended december 31 , 2014 , $ 9 for the year ended 2013 , and $ 8 for the year ended 2012 . by-product credits were $ 6.5 million , $ 6.5 million and $ 6.5 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . 36 results of operations operating highlights net income for 2014 was $ 9.8 million , or $ 0.13 per diluted share , and cash flows from operating activities were $ 127.5 million . potash the majority of our revenues and gross margin are derived from the production and sales of potash . potash sales as a percentage of our net sales , which we calculate as gross sales less freight costs , and gross margin were approximately as follows for the indicated periods . replace_table_token_11_th we sold 915,000 tons of potash in 2014 compared with 692,000 tons in 2013 . the increase in sales volume was driven by increased confidence in potash pricing from buyers and our agricultural customers ' demand for product in 2014 as compared to 2013. our ability to supply tons to our customers on a timely basis was a fundamental element of our success in 2014. we utilized our geographic advantage as well as our warehouse system to effectively position product closer to our customers . our average net realized sales price of potash was $ 332 per ton in 2014 , as compared to $ 382 per ton in 2013 , largely as a result of concerns that global productive capacity exceeds demand . however , as a result of strong demand and tight inventory levels , we experienced sequential increases in our potash average net realized sales price each of the last three quarters of 2014. the table below shows our potash sales mix for 2014 , 2013 , and 2012. replace_table_token_12_th our production volume of potash in 2014 increased to 859,000 tons , compared with 780,000 tons produced in 2013 . the production increase was due to new production from our hb mine as well as higher production from our east facility , partially offset by decreased production at our west and moab facilities . our cash operating costs stayed relatively flat at $ 198 per ton in 2014 , compared with $ 195 per ton in 2013 . our industrial sales are significantly influenced by oil and gas drilling activity , we believe our sales volumes to our industrial customers will decrease , and potentially pressure our net realized sales price , during 2015 as oil and gas drilling activity slows in response to lower crude oil pricing . trio ® our trio ® production was lower in 2014 than in 2013 as we experienced lower ore grade and higher losses associated with higher production of premium-sized trio ® which results in losses during the conversion from standard to premium-sized products . as the export market for trio ® remains soft , we continue to focus on the domestic market . our sales of trio ® increased to 182,000 tons in 2014 as compared with 123,000 tons in 2013 , as demand for our granular- and premium-sized trio ® has remained strong . the standard-sized product is largely sold into the export market or converted into premium-sized product through a process we call pelletization . the export market for the standard-sized product was weaker in 2014 compared to 2013 , highlighting the importance of our focus on improving the efficiency of our pelletization process . story_separator_special_tag we recorded an additional allowance of $ 2.8 million against previously filed claims in `` other expense `` included in operating income in the consolidated statement of operations in 2013. in 2014 , we received notice that claims that had been previously denied had been approved . accordingly , we reduced our estimate of the allowance related to the realizability of our claims by $ 4.1 million . the credits that we estimate will now be realized were for periods prior to 2014 and the inventory produced during that time has been sold ; therefore , we recorded the decrease in the allowance as `` other expense `` in operating income in 2014. also in 2013 , we received a refund from the state of new mexico related to a compensating tax refund submitted in prior periods . the receipt of the refund removed uncertainty about the amount and collection of the refund and therefore , we recorded $ 1.7 million of income , which was also recorded in `` other expense `` included in operating income in the consolidated statement of operations in 2013. other income ( expense ) in april 2013 , we funded $ 2.0 million to settle all pension plan liabilities and recorded an additional expense of approximately $ 1.9 million to reflect the termination of the pension plan . this amount is recorded as `` other income ( expense ) `` in the consolidated statements of operations for the year ended december 31 , 2013 , and represents the difference between the final amount funded , and the sum of the recorded pension liability and the unrecognized actuarial losses included in accumulated other comprehensive income . results of operations for the years ended december 31 , 2013 , and 2012 net sales net sales of potash decreased $ 117.0 million , or 31 % , from $ 381.0 million for the year ended december 31 , 2012 , to $ 264.0 million for the year ended december 31 , 2013. this decrease was the result of an 18 % decrease in sales volumes of potash in addition to a decrease in the average net realized sales price of potash by $ 72 per ton , or 16 % , in the comparable period . our customers delayed purchases of potash in 2013 given downward pressure on potash prices driven by softness and uncertainty in the global potash market , as discussed previously . net sales of trio ® increased from $ 41.2 million for the year ended december 31 , 2012 , to $ 43.4 million for the year ended december 31 , 2013 , due to a 7 % increase in the average net realized sales price of trio ® offset by a slight decrease of 2 % in the volume of sales . we continued to see strong demand for our trio ® product , particularly the granular-sized and pelletized products . trio ® domestic pricing has historically tended to move in a relatively close correlation to potash pricing . dealers ' and farmers ' recognition of the benefits of this low chloride product , however , translated into higher prices despite sequentially lower potash prices during 2013. our production volume of potash in 2013 was 780,000 tons , or 16,000 tons less than in 2012. our trio ® production increased 46,000 tons , or 35 % , in 2013 as we operated our langbeinite facility more effectively and efficiently . 41 cost of goods sold the following table presents our cost of goods sold for potash and trio ® for the subject periods : replace_table_token_16_th ( 1 ) depreciation , depletion , and amortizations expense for potash was $ 35.6 million and $ 35.8 million in 2013 and 2012 , respectively , which equates to $ 52 and $ 43 on a per ton basis . ( 2 ) depreciation , depletion , and amortizations expense for trio ® was $ 6.8 million and $ 7.6 million in 2013 and 2012 , respectively , which equates to $ 55 and $ 61 on a per ton basis . total cost of goods sold of potash , which includes royalties and depreciation , depletion and amortization , increased $ 20 per ton , or 8 % , from $ 240 per ton for the year ended december 31 , 2012 , to $ 260 per ton for the year ended december 31 , 2013. we experienced higher cash operating costs per ton in 2013 due to increased production costs per ton at our east and west facilities resulting from comparatively lower production levels as we work through more complex ore zones at our east west facilities . total cost of goods sold of trio ® decreased $ 12 per ton , or 4 % , from $ 286 per ton for the year ended december 31 , 2012 , to $ 274 per ton for the year ended december 31 , 2013. this decrease in cost of goods sold on a per-ton basis was primarily due to higher trio ® production volumes in 2013 over which production costs are allocated . in total , our cost of goods sold decreased $ 23.6 million , or 10 % , from $ 236.5 million in 2012 to $ 212.9 million in 2013 , as a result of fewer tons of potash sold in 2013. as a percentage of sales , cost of goods sold increased as our production costs increased while our total production decreased , resulting in higher per ton inventory values . the increases in production costs were the result of increases in labor costs , natural gas , electricity , maintenance and professional services during the year ended december 31 , 2013. on a comparative basis , and within our production costs , depreciation and depletion increased $ 12.4 million , or 29 % , during 2013 as a result of the significant capital investments being placed into service during 2013. selling
| liquidity and capital resources as of december 31 , 2014 , we had cash , cash equivalents , and investments of $ 89.9 million . we also have an unsecured credit facility that provides a revolving credit facility of up to $ 250 million , provided that we meet specified financial covenants , as described below under the heading “ unsecured credit facility. ” as of december 31 , 2014 , we had $ 211 million available , and no borrowings outstanding under this facility . the $ 89.9 million of cash , cash equivalents , and investments at december 31 , 2014 , was made up of the following : $ 16.5 million in cash ; $ 51.1 million in cash equivalent investments , consisting of money market accounts with banking institutions that we believe are financially sound ; and $ 10.4 million and $ 11.9 million invested in short and long-term investments , respectively . our operations have been and are expected to be primarily funded from cash on hand and cash generated by operations ; if necessary , we have the ability to borrow under our unsecured credit facility . the following summarizes our cash flow activity for the years ended december 31 , 2014 , 2013 and 2012 : 43 replace_table_token_17_th operating activities total cash provided by operating activities for the year ended december 31 , 2014 , was $ 127.5 million , an increase of $ 62.6 million compared with the year ended december 31 , 2013 . the primary driver of this increase was higher sales volumes at a lower average net realized sales price for potash , as discussed previously , which , together , resulted in lower net income . total cash provided by operating activities decreased by $ 122.9 million in 2013 compared to 2012 . the primary driver of this decline was lower sales volumes and a lower average net realized sales price for potash which , together , resulted in lower net income . cash provided by operating activities for the year ended december 31 , 2013 , was negatively impacted by an increase in inventory of $ 51.7 million as inventory levels and per-ton production costs both increased .
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additionally , intense competition at the system level can result in an environment in which pricing falls rapidly , thereby further increasing demand for solar energy solutions but constraining the ability for project developers , epc companies , and vertically-integrated solar companies such as first solar to sustain meaningful and consistent profitability . in light of such market realities , we are executing our long term strategic plan , vision 2020 described below , under which we are focusing on our competitive strengths . such strengths include our advanced module and system technologies as well as our differentiated , vertically-integrated business model that enables us to provide utility-scale pv solar energy solutions to key geographic markets with immediate electricity needs . worldwide solar markets continue to develop , in part aided by demand elasticity resulting from declining industry average selling prices , both at the module and system level , which make solar power more affordable to new markets , and we have continued to develop our localized presence and expertise in such markets . we are developing , constructing , or operating multiple solar projects around the world , many of which are the largest or among the largest in their regions . in north america , we continue to execute on our advanced-stage utility-scale project pipeline , which includes the construction of some of the world 's largest pv solar power systems . we expect a substantial portion of our consolidated net sales , operating income , and cash flows through the end of 2016 to be derived from these projects . we continue to advance the development and selling efforts for the other projects included in our advanced-stage utility-scale project pipeline and also continue to develop our early-to-mid stage project pipeline and evaluate acquisitions of projects to continue to add to our advanced-stage utility-scale project pipeline . lower industry module and system pricing , while currently challenging for certain solar manufacturers ( particularly manufacturers with high cost structures ) , is expected to continue to contribute to global market diversification and volume elasticity . over time , declining average selling prices are consistent with the erosion of one of the primary historical constraints to widespread solar market penetration , its affordability . in the near term , however , declining average selling prices could adversely affect our results of operations . if competitors reduce pricing to levels below their costs , bid aggressively low prices for ppas and epc agreements , or are able to operate at negative or minimal operating margins for sustained periods of time , our results of operations could be further adversely affected . we continue to mitigate this uncertainty in part by executing on and building our advanced-stage utility-scale systems pipeline , executing on our module efficiency improvement and bos cost reduction roadmaps , and continuing the development of key geographic markets . we continue to face intense competition from manufacturers of crystalline silicon solar modules and other types of solar modules and pv solar power systems . solar module manufacturers compete with one another in several product performance attributes , including conversion efficiency , energy density , reliability , and selling price per watt , and , with respect to pv solar power systems , net present value , return on equity , and lcoe , meaning the net present value of total life cycle costs of the pv solar power system divided by the quantity of energy which is expected to be produced over the system 's life . we believe we are among the lowest cost pv module manufacturers in the solar industry on a module cost per watt basis , based on publicly available information . this cost competitiveness is reflected in the price at which we sell our modules and fully integrated pv solar power systems and enables our systems to compete favorably . our cost competitiveness is based in large part on our module conversion efficiency , proprietary manufacturing technology ( which enables us to produce a cdte module in less than 2.5 hours using a continuous and highly automated industrial manufacturing process , as opposed to a batch process ) , our scale , and our operational excellence . in addition , our cdte modules use approximately 1-2 % of the amount of the semiconductor material that is used to manufacture traditional crystalline silicon solar modules . the cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules , and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels . polysilicon costs have had periods of decline over the past several years , contributing to a decline in our relative manufacturing cost competitiveness over traditional crystalline silicon module manufacturers . given the smaller size ( sometimes referred to as form factor ) of our cdte modules compared to certain types of crystalline silicon modules , we may incur higher labor and bos costs associated with systems using our modules . thus , to compete effectively on an lcoe basis , our modules may need to maintain a certain cost advantage per watt compared to crystalline silicon-based modules with larger form factors . bos costs represent a significant portion of the costs associated with the construction of a typical utility-scale pv solar power system . 47 in terms of energy density , in many climates , our cdte modules provide a significant energy yield advantage over conventional crystalline silicon solar modules of equivalent efficiency rating . for example , in humid climates , our cdte modules provide a superior spectral response , and in hot climates , our cdte modules provide a superior temperature coefficient . as a result , at temperatures above 25°c ( standard test conditions ) , our cdte modules produce more energy than competing conventional crystalline silicon solar modules with an equivalent efficiency rating . story_separator_special_tag replace_table_token_4_th 51 projects with executed ppa not sold/not contracted replace_table_token_5_th ( 1 ) the volume of modules installed in mw dc will be higher than the mw ac size pursuant to a dc-ac ratio typically ranging from 1.2 to 1.3 ; such ratio varies across different projects due to various system design factors ( 2 ) controlling interest in the project sold to southern company in august 2015 ( 3 ) contracted but not specified ( 4 ) ppa contracted partners include cobb electric membership corporation , flint electric membership corporation , and sawnee electric membership corporation ( 5 ) nepco is defined as national electric power company , the country of jordan 's regulatory authority for power generation and distribution and a consortium of investors ( 6 ) uog is defined as utility owned generation ( 7 ) project sold under a development agreement in february 2016 ( 8 ) pg & e 150 mw ac and apple inc. 130 mw ac ( 9 ) tsspdcl is defined as southern power distribution company of telangana state ltd and consists of 110 mw ac of projects ; and apspdcl is defined as andhra pradesh southern power distribution company ltd and consists of 80 mw ac of projects ( 10 ) no ppa – electricity to be sold on an open contract basis ( 11 ) scppa is defined as southern california public power authority ; scppa 20 mw ac and city of pasadena 20 mw ac ( 12 ) electricity expected to be sold under feed-in-tariff structure for ten years , pending acquisition of certain licenses ( 13 ) pg & e 11 mw ac and sce 20 mw ac 52 results of operations during 2015 , we revised our previously issued financial statements from 2011 to 2014 to properly record a liability associated with an uncertain tax position related to income of a foreign subsidiary . additional revisions were made for previously identified errors that were corrected in a period subsequent to the period in which the error originated . all financial information presented herein was revised to reflect the correction of these errors . see note 1 “ first solar and its business – revision of previously issued financial statements ” to our consolidated financial statements for the year ended december 31 , 2015 included in this annual report on form 10-k for additional information . the following table sets forth our consolidated statements of operations as a percentage of net sales for the years ended december 31 , 2015 , 2014 , and 2013 : replace_table_token_6_th segment overview we operate our business in two segments . our components segment involves the design , manufacture , and sale of solar modules which convert sunlight into electricity , and our systems segment includes the development , construction , operation , and maintenance of pv solar power systems , which primarily use our solar modules . see note 23 “ segment and geographical information ” to our consolidated financial statements for the year ended december 31 , 2015 included in this annual report on form 10-k. see also item 7 : “ management 's discussion and analysis of financial condition and results of operations – systems project pipeline ” for a description of the system projects in our advanced-stage project pipeline . product revenue the following table sets forth the total amounts of solar module and solar power system net sales for the years ended december 31 , 2015 , 2014 , and 2013 . for the purpose of the following table , ( i ) solar module revenue is composed of total net sales from the sale of solar modules to third parties , and ( ii ) solar power system revenue is composed of total net sales from the sale of pv solar power systems and related services and solutions including the solar modules installed in the systems we develop and construct along with revenue generated from such systems ( in thousands ) : replace_table_token_7_th 53 solar module revenue to third parties decreased by $ 0.9 million during 2015 compared to 2014 primarily due to a 10 % decrease in the average selling price per watt , partially offset by an 11 % increase in the volume of watts sold . solar power system revenue increased by $ 188.7 million during 2015 compared to 2014 primarily due to higher revenue from module plus transactions . our net sales for 2015 also included the sale of majority interests in the partially constructed desert stateline project and north star project and higher revenue from our silver state south , mccoy , and imperial energy center west projects , which commenced construction in late 2014. these 2015 net sales were offset by lower revenue from the completion , or substantial completion , of our desert sunlight , solar gen 2 , topaz , and campo verde projects in 2014. solar module revenue to third parties decreased by $ 152.6 million during 2014 compared to 2013 primarily as a result of a 26 % decrease in the volume of watts sold and a 19 % decrease in the average selling price per watt . solar power system revenue increased by $ 234.1 million during 2014 compared to 2013 primarily as a result of the number and size of projects under construction between these periods as well as the timing of when all the revenue recognition criteria was met . specifically , the increase was attributable to higher revenue from the partial sale of our solar gen 2 project , the sale of our campo verde and macho springs projects , and the commencement of construction and related revenue recognition on multiple projects in california and our agl nyngan project in australia . these increases were partially offset by decreases in systems business project revenue from our desert sunlight project as it neared substantial completion , our completed first phase of the imperial solar energy center south project and our completed amherstburg ,
| liquidity and capital resources as of december 31 , 2014 , we had cash , cash equivalents , and investments of $ 89.9 million . we also have an unsecured credit facility that provides a revolving credit facility of up to $ 250 million , provided that we meet specified financial covenants , as described below under the heading “ unsecured credit facility. ” as of december 31 , 2014 , we had $ 211 million available , and no borrowings outstanding under this facility . the $ 89.9 million of cash , cash equivalents , and investments at december 31 , 2014 , was made up of the following : $ 16.5 million in cash ; $ 51.1 million in cash equivalent investments , consisting of money market accounts with banking institutions that we believe are financially sound ; and $ 10.4 million and $ 11.9 million invested in short and long-term investments , respectively . our operations have been and are expected to be primarily funded from cash on hand and cash generated by operations ; if necessary , we have the ability to borrow under our unsecured credit facility . the following summarizes our cash flow activity for the years ended december 31 , 2014 , 2013 and 2012 : 43 replace_table_token_17_th operating activities total cash provided by operating activities for the year ended december 31 , 2014 , was $ 127.5 million , an increase of $ 62.6 million compared with the year ended december 31 , 2013 . the primary driver of this increase was higher sales volumes at a lower average net realized sales price for potash , as discussed previously , which , together , resulted in lower net income . total cash provided by operating activities decreased by $ 122.9 million in 2013 compared to 2012 . the primary driver of this decline was lower sales volumes and a lower average net realized sales price for potash which , together , resulted in lower net income . cash provided by operating activities for the year ended december 31 , 2013 , was negatively impacted by an increase in inventory of $ 51.7 million as inventory levels and per-ton production costs both increased .
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additionally , intense competition at the system level can result in an environment in which pricing falls rapidly , thereby further increasing demand for solar energy solutions but constraining the ability for project developers , epc companies , and vertically-integrated solar companies such as first solar to sustain meaningful and consistent profitability . in light of such market realities , we are executing our long term strategic plan , vision 2020 described below , under which we are focusing on our competitive strengths . such strengths include our advanced module and system technologies as well as our differentiated , vertically-integrated business model that enables us to provide utility-scale pv solar energy solutions to key geographic markets with immediate electricity needs . worldwide solar markets continue to develop , in part aided by demand elasticity resulting from declining industry average selling prices , both at the module and system level , which make solar power more affordable to new markets , and we have continued to develop our localized presence and expertise in such markets . we are developing , constructing , or operating multiple solar projects around the world , many of which are the largest or among the largest in their regions . in north america , we continue to execute on our advanced-stage utility-scale project pipeline , which includes the construction of some of the world 's largest pv solar power systems . we expect a substantial portion of our consolidated net sales , operating income , and cash flows through the end of 2016 to be derived from these projects . we continue to advance the development and selling efforts for the other projects included in our advanced-stage utility-scale project pipeline and also continue to develop our early-to-mid stage project pipeline and evaluate acquisitions of projects to continue to add to our advanced-stage utility-scale project pipeline . lower industry module and system pricing , while currently challenging for certain solar manufacturers ( particularly manufacturers with high cost structures ) , is expected to continue to contribute to global market diversification and volume elasticity . over time , declining average selling prices are consistent with the erosion of one of the primary historical constraints to widespread solar market penetration , its affordability . in the near term , however , declining average selling prices could adversely affect our results of operations . if competitors reduce pricing to levels below their costs , bid aggressively low prices for ppas and epc agreements , or are able to operate at negative or minimal operating margins for sustained periods of time , our results of operations could be further adversely affected . we continue to mitigate this uncertainty in part by executing on and building our advanced-stage utility-scale systems pipeline , executing on our module efficiency improvement and bos cost reduction roadmaps , and continuing the development of key geographic markets . we continue to face intense competition from manufacturers of crystalline silicon solar modules and other types of solar modules and pv solar power systems . solar module manufacturers compete with one another in several product performance attributes , including conversion efficiency , energy density , reliability , and selling price per watt , and , with respect to pv solar power systems , net present value , return on equity , and lcoe , meaning the net present value of total life cycle costs of the pv solar power system divided by the quantity of energy which is expected to be produced over the system 's life . we believe we are among the lowest cost pv module manufacturers in the solar industry on a module cost per watt basis , based on publicly available information . this cost competitiveness is reflected in the price at which we sell our modules and fully integrated pv solar power systems and enables our systems to compete favorably . our cost competitiveness is based in large part on our module conversion efficiency , proprietary manufacturing technology ( which enables us to produce a cdte module in less than 2.5 hours using a continuous and highly automated industrial manufacturing process , as opposed to a batch process ) , our scale , and our operational excellence . in addition , our cdte modules use approximately 1-2 % of the amount of the semiconductor material that is used to manufacture traditional crystalline silicon solar modules . the cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules , and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels . polysilicon costs have had periods of decline over the past several years , contributing to a decline in our relative manufacturing cost competitiveness over traditional crystalline silicon module manufacturers . given the smaller size ( sometimes referred to as form factor ) of our cdte modules compared to certain types of crystalline silicon modules , we may incur higher labor and bos costs associated with systems using our modules . thus , to compete effectively on an lcoe basis , our modules may need to maintain a certain cost advantage per watt compared to crystalline silicon-based modules with larger form factors . bos costs represent a significant portion of the costs associated with the construction of a typical utility-scale pv solar power system . 47 in terms of energy density , in many climates , our cdte modules provide a significant energy yield advantage over conventional crystalline silicon solar modules of equivalent efficiency rating . for example , in humid climates , our cdte modules provide a superior spectral response , and in hot climates , our cdte modules provide a superior temperature coefficient . as a result , at temperatures above 25°c ( standard test conditions ) , our cdte modules produce more energy than competing conventional crystalline silicon solar modules with an equivalent efficiency rating . story_separator_special_tag replace_table_token_4_th 51 projects with executed ppa not sold/not contracted replace_table_token_5_th ( 1 ) the volume of modules installed in mw dc will be higher than the mw ac size pursuant to a dc-ac ratio typically ranging from 1.2 to 1.3 ; such ratio varies across different projects due to various system design factors ( 2 ) controlling interest in the project sold to southern company in august 2015 ( 3 ) contracted but not specified ( 4 ) ppa contracted partners include cobb electric membership corporation , flint electric membership corporation , and sawnee electric membership corporation ( 5 ) nepco is defined as national electric power company , the country of jordan 's regulatory authority for power generation and distribution and a consortium of investors ( 6 ) uog is defined as utility owned generation ( 7 ) project sold under a development agreement in february 2016 ( 8 ) pg & e 150 mw ac and apple inc. 130 mw ac ( 9 ) tsspdcl is defined as southern power distribution company of telangana state ltd and consists of 110 mw ac of projects ; and apspdcl is defined as andhra pradesh southern power distribution company ltd and consists of 80 mw ac of projects ( 10 ) no ppa – electricity to be sold on an open contract basis ( 11 ) scppa is defined as southern california public power authority ; scppa 20 mw ac and city of pasadena 20 mw ac ( 12 ) electricity expected to be sold under feed-in-tariff structure for ten years , pending acquisition of certain licenses ( 13 ) pg & e 11 mw ac and sce 20 mw ac 52 results of operations during 2015 , we revised our previously issued financial statements from 2011 to 2014 to properly record a liability associated with an uncertain tax position related to income of a foreign subsidiary . additional revisions were made for previously identified errors that were corrected in a period subsequent to the period in which the error originated . all financial information presented herein was revised to reflect the correction of these errors . see note 1 “ first solar and its business – revision of previously issued financial statements ” to our consolidated financial statements for the year ended december 31 , 2015 included in this annual report on form 10-k for additional information . the following table sets forth our consolidated statements of operations as a percentage of net sales for the years ended december 31 , 2015 , 2014 , and 2013 : replace_table_token_6_th segment overview we operate our business in two segments . our components segment involves the design , manufacture , and sale of solar modules which convert sunlight into electricity , and our systems segment includes the development , construction , operation , and maintenance of pv solar power systems , which primarily use our solar modules . see note 23 “ segment and geographical information ” to our consolidated financial statements for the year ended december 31 , 2015 included in this annual report on form 10-k. see also item 7 : “ management 's discussion and analysis of financial condition and results of operations – systems project pipeline ” for a description of the system projects in our advanced-stage project pipeline . product revenue the following table sets forth the total amounts of solar module and solar power system net sales for the years ended december 31 , 2015 , 2014 , and 2013 . for the purpose of the following table , ( i ) solar module revenue is composed of total net sales from the sale of solar modules to third parties , and ( ii ) solar power system revenue is composed of total net sales from the sale of pv solar power systems and related services and solutions including the solar modules installed in the systems we develop and construct along with revenue generated from such systems ( in thousands ) : replace_table_token_7_th 53 solar module revenue to third parties decreased by $ 0.9 million during 2015 compared to 2014 primarily due to a 10 % decrease in the average selling price per watt , partially offset by an 11 % increase in the volume of watts sold . solar power system revenue increased by $ 188.7 million during 2015 compared to 2014 primarily due to higher revenue from module plus transactions . our net sales for 2015 also included the sale of majority interests in the partially constructed desert stateline project and north star project and higher revenue from our silver state south , mccoy , and imperial energy center west projects , which commenced construction in late 2014. these 2015 net sales were offset by lower revenue from the completion , or substantial completion , of our desert sunlight , solar gen 2 , topaz , and campo verde projects in 2014. solar module revenue to third parties decreased by $ 152.6 million during 2014 compared to 2013 primarily as a result of a 26 % decrease in the volume of watts sold and a 19 % decrease in the average selling price per watt . solar power system revenue increased by $ 234.1 million during 2014 compared to 2013 primarily as a result of the number and size of projects under construction between these periods as well as the timing of when all the revenue recognition criteria was met . specifically , the increase was attributable to higher revenue from the partial sale of our solar gen 2 project , the sale of our campo verde and macho springs projects , and the commencement of construction and related revenue recognition on multiple projects in california and our agl nyngan project in australia . these increases were partially offset by decreases in systems business project revenue from our desert sunlight project as it neared substantial completion , our completed first phase of the imperial solar energy center south project and our completed amherstburg ,
| cash flows the following table summarizes our cash flow activity for the years ended december 31 , 2015 , 2014 , and 2013 ( in thousands ) : replace_table_token_22_th operating activities the decrease in cash provided by operating activities during 2015 was primarily driven by the increase in project assets and deferred project costs resulting from our financing the construction of certain projects with our working capital and increases in our trade accounts receivable . the decrease in cash provided by operating activities during 2014 was primarily attributable to the timing of cash received from customers for the sale of certain systems projects . investing activities the decrease in cash used in investing activities during 2015 was driven by the receipt of $ 239.0 million from the initial public offering of 8point3 energy partners lp , changes in our restricted cash balance , and lower purchases of property , plant and equipment . the effects of these items were partially offset by net purchases of marketable securities of $ 203.1 million during 2015 compared to $ 77.5 million during 2014. the decrease in cash used in investing activities during 2014 was primarily due to changes in our restricted cash balance , lower proceeds from sales of property , plant and equipment , and certain investments in affiliate notes receivable . the effects of these items were partially offset by net purchases of marketable securities of $ 77.5 million during 2014 compared to $ 341.0 million during 2013 . 63 financing activities cash provided by financing activities during 2015 resulted primarily from $ 146.0 million of proceeds from borrowings under our project construction credit facilities in chile , japan , and india and $ 44.7 million of proceeds from the leaseback financing associated with the maryland solar project , partially offset by $ 47.1 million of payments on long-term debt . cash provided by financing activities during 2014 resulted primarily from $ 65.6 million of proceeds from borrowings under our project construction credit facilities in chile , partially offset by $ 60.1 million of payments on long-term debt .
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28 acquisitions on june 10 , 2014 , we acquired 100 % of the outstanding equity of auctane llc , which operates shipstation , in a cash and contingent stock transaction . shipstation , based in austin , texas , offers monthly subscription based e-commerce shipping software primarily under the brands shipstation and auctane . shipstation is a leading web-based shipping software solution that allows online retailers and e-commerce merchants to organize , process , fulfill and ship their orders quickly and easily . shipstation supports automatic order importing from over 50 shopping carts and marketplaces , including ebay , amazon , shopify , bigcommerce , volusion , squarespace and others . shipstation offers multi-carrier shipping options , and automation features like custom hierarchical rules and product profiles that allow customers to easily and automatically optimize their shipping . using shipstation , an online retailer or e-commerce merchant can ship their orders from wherever they sell and however they ship . on august 29 , 2014 , we acquired 100 % of the outstanding equity of interapptive inc , which operates shipworks , in a cash transaction . shipworks based in st. louis , missouri , offers monthly subscription based e-commerce shipping software that provides simple , powerful and easy to use solutions for online sellers . shipworks solutions integrate with over 50 popular online sales and marketplaces systems including ebay , paypal , amazon , yahoo ! and others . shipworks offers multi-carrier shipping options and features including sending email notifications to buyers , updating online order status , generating reports and many more . the acquisitions of shipstation and shipworks represent a significant strategic investment in our high volume and e-commerce shipping business . please see note 3 – “ acquisitions ” in our notes to consolidated financial statements for further description . results of operations the results of our operations during the year ended december 31 , 2014 includes operations of shipstation from the period june 10 , 2014 through december 31 , 2014 and shipworks from the period august 29 , 2014 through december 31 , 2014. please see note 3 – “ acquisitions ” in our notes to consolidated financial statements for further description . years ended december 31 , 2014 and 2013 total revenue increased 15 % to $ 147.3 million in 2014 from $ 127.8 million in 2013. mailing and shipping revenue , which includes service revenue , product revenue and insurance revenue , was $ 141.8 million in 2014 , an increase of 15 % from $ 123.1 million in 2013. photostamps revenue increased 16 % to $ 5.4 million in 2014 from $ 4.7 million in 2013. the following table sets forth the breakdown of revenue for 2014 and 2013 and the resulting percent change ( revenue in thousands ) : replace_table_token_6_th core mailing and shipping revenue in 2014 was $ 139.7 million , an increase of 16 % from $ 120.2 million in 2013. non-core mailing and shipping revenue in 2014 was $ 2.1 million , a decrease of 26 % from $ 2.9 million in 2013 . 29 the following table sets forth the breakdown of mailing and shipping revenue , which includes core mailing and shipping revenue and non-core mailing and shipping revenue for 2014 and 2013 and the resulting percent change ( revenue in thousands ) : replace_table_token_7_th the increase in core mailing and shipping revenue was driven by both an increase in annual average paid customers and an increase in annual average revenue per paid customer . annual average paid customers increased 7 % to 500,000 in 2014 from 466,000 in 2013. annual average revenue per paid customer increased 8 % to $ 280 in 2014 from $ 258 in 2013. the decrease in non-core mailing and shipping revenue was primarily attributable to lower marketing spend in the online enhanced promotion channel . we expect non-core mailing and shipping revenue will continue to be down in 2015 compared to 2014 as we expect to continue to minimize investments in these areas of our business . we define paid customers for the quarter as ones from whom we successfully collected service fees at least once during that quarter , and we define average paid customers for the year as the average of the paid customers for each of the four quarters during the year . the following table sets forth the number of paid customers in the period for our core mailing and shipping business ( in thousands ) : replace_table_token_8_th the following table sets forth the growth in paid customers and average annual revenue per paid customer for our core mailing and shipping business ( in thousands except average annual revenue per paid customer ) : replace_table_token_9_th the increase in paid customers is primarily driven by ( 1 ) a higher number of stamps.com new paid customers compared to the prior year as a result of our increased spending in core mailing and shipping marketing channels , ( 2 ) the addition of new paid customers from shipstation and shipworks as a result of our acquisitions in 2014 , and ( 3 ) our customer churn rates remained at levels that were consistent with the prior year . for our core mailing and shipping business , our average annual and monthly core mailing and shipping revenue per paid customer in 2014 was $ 280 and $ 23.27 , respectively , which increased by 8 % compared to $ 258 and $ 21.51 , respectively , in 2013. the increase in average revenue per paid customer ( “ arpu ” ) was primarily the result of the addition of new paid customers from our acquisitions of shipstation and shipworks where the arpu for those newly acquired paid customers is higher as compared to the arpu from the existing stamps.com small business customers as well as growth in stamps.com 's high volume shipping business . story_separator_special_tag 35 the following table sets forth the number of paid customers in the period for our core mailing and shipping business ( in thousands ) : replace_table_token_15_th the following table sets forth the growth in paid customers and average annual revenue per paid customer for our core mailing and shipping business ( in thousands except average annual revenue per paid customer ) : replace_table_token_16_th the increase in paid customers is primarily driven by an increased number of new customers acquired , which was driven by our increased spend in core mailing and shipping marketing channels , while our lost customer churn rates remained at levels that were consistent with the prior year . for our core mailing and shipping business , our average annual and monthly core mailing and shipping revenue per paid customer in 2013 was $ 258 and $ 21.51 respectively , which increased by 2 % compared to $ 254 and $ 21.18 , respectively in 2012. the increase in average revenue per paid customer was primarily attributable to higher service revenue per paid customer from our high volume shipping and enterprise customers and higher store revenue per paid customer from increased sales of netstamps labels ; partially offset by a reduction in revenue per paid customer from our amazon partnership . revenue by product the following table shows our components of revenue and their respective percentages of total revenue for the periods indicated ( in thousands except percentage ) : replace_table_token_17_th our revenue is derived primarily from five sources : ( 1 ) service revenue from subscription , transaction and other fees related to our mailing and shipping services and integrations ; ( 2 ) product revenue from the direct sale of consumables and supplies through our supplies store ; ( 3 ) insurance revenue from the sale of package insurance to our customers ; ( 4 ) photostamps revenue from selling sheets of photostamps postage ; and ( 5 ) other revenue , consisting primarily of advertising revenue derived from advertising programs with our existing customers . service revenue increased 12 % to $ 99.0 million in 2013 from $ 88.2 million in 2012. the 12 % increase in service revenue in 2013 consisted of a 12 % increase in service revenue from our core mailing and shipping business while the service revenue from our non-core mailing and shipping business decreased 5 % . the 12 % increase in our core mailing and shipping service revenue consisted of an 11 % increase in our annual average paid customers and a 2 % increase in our annual average revenue per paid customer . 36 product revenue increased 13 % to $ 16.6 million in 2013 from $ 14.7 million in 2012. the increase was primarily attributable to the following : ( 1 ) increase in netstamps label sales ; ( 2 ) growth in our paid customer base ; ( 3 ) the postal rate increase in january 2013 , which generated incremental label sales for the period of time around the rate increase ; ( 4 ) marketing our supplies store to our existing customer base ; and ( 5 ) growth in postage printed , which helps drive sales of consumable supplies such as labels . total postage printed by customers using our service in 2013 was $ 1.6 billion , a 36 % increase from the $ 1.1 billion printed in 2012. insurance revenue increased 6 % to $ 7.5 million in 2013 from $ 7.1 million in 2012. this increase was primarily attributable to increased insurance purchases by our high volume shippers , partially offset by a reduction in insurance revenue through our amazon partnership . we continued to reduce our photostamps sales and marketing spending in 2013 compared with 2012 , and plan to continue to reduce our sales and marketing spending on photostamps in future periods to maintain or improve profitability in that business , although we believe that there may be potential opportunities to grow the business in a better economic environment . as a result of this decision photostamps revenue decreased 17 % to $ 4.7 million in 2013 from $ 5.7 million in 2012. total photostamps sheets shipped in 2013 decreased 20 % to 255 thousand compared to 2012 and average revenue per photostamps sheet shipped increased 4 % to $ 18.50 in 2013 compared to 2012. the decrease in sheets shipped was primarily attributable to our lower marketing spend and the increase in average revenue per sheet shipped was primarily attributable to less discounting on custom negotiated pricing . cost of revenue the following table shows cost of revenues and cost of revenues as a percentage of its associated revenue for the periods indicated ( in thousands except percentage ) : replace_table_token_18_th cost of service revenue principally consists of the cost of customer service , certain promotional expenses , system operating costs , credit card processing fees and customer misprints that do not qualify for reimbursement from the usps . cost of product revenue principally consists of the cost of products sold through our mailing & shipping supplies store and the related costs of shipping and handling . the cost of insurance revenue principally consists of parcel insurance offering costs . cost of photostamps revenue principally consists of the face value of postage , customer service , image review costs , and printing and fulfillment costs . cost of service revenue decreased 2 % to $ 15.4 million in 2013 from $ 15.7 million in 2012. the decrease in cost of service revenue is primarily attributable to lower promotional expense as a result of a decrease in our coupon redemption rate , partially offset by higher system operating costs , credit card processing fees and customer service costs reflecting the growth in our business and our associated investments to support that growth . promotional expense , which represents a material portion of total cost of service revenue , is expensed in the period in which a
| cash flows the following table summarizes our cash flow activity for the years ended december 31 , 2015 , 2014 , and 2013 ( in thousands ) : replace_table_token_22_th operating activities the decrease in cash provided by operating activities during 2015 was primarily driven by the increase in project assets and deferred project costs resulting from our financing the construction of certain projects with our working capital and increases in our trade accounts receivable . the decrease in cash provided by operating activities during 2014 was primarily attributable to the timing of cash received from customers for the sale of certain systems projects . investing activities the decrease in cash used in investing activities during 2015 was driven by the receipt of $ 239.0 million from the initial public offering of 8point3 energy partners lp , changes in our restricted cash balance , and lower purchases of property , plant and equipment . the effects of these items were partially offset by net purchases of marketable securities of $ 203.1 million during 2015 compared to $ 77.5 million during 2014. the decrease in cash used in investing activities during 2014 was primarily due to changes in our restricted cash balance , lower proceeds from sales of property , plant and equipment , and certain investments in affiliate notes receivable . the effects of these items were partially offset by net purchases of marketable securities of $ 77.5 million during 2014 compared to $ 341.0 million during 2013 . 63 financing activities cash provided by financing activities during 2015 resulted primarily from $ 146.0 million of proceeds from borrowings under our project construction credit facilities in chile , japan , and india and $ 44.7 million of proceeds from the leaseback financing associated with the maryland solar project , partially offset by $ 47.1 million of payments on long-term debt . cash provided by financing activities during 2014 resulted primarily from $ 65.6 million of proceeds from borrowings under our project construction credit facilities in chile , partially offset by $ 60.1 million of payments on long-term debt .
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28 acquisitions on june 10 , 2014 , we acquired 100 % of the outstanding equity of auctane llc , which operates shipstation , in a cash and contingent stock transaction . shipstation , based in austin , texas , offers monthly subscription based e-commerce shipping software primarily under the brands shipstation and auctane . shipstation is a leading web-based shipping software solution that allows online retailers and e-commerce merchants to organize , process , fulfill and ship their orders quickly and easily . shipstation supports automatic order importing from over 50 shopping carts and marketplaces , including ebay , amazon , shopify , bigcommerce , volusion , squarespace and others . shipstation offers multi-carrier shipping options , and automation features like custom hierarchical rules and product profiles that allow customers to easily and automatically optimize their shipping . using shipstation , an online retailer or e-commerce merchant can ship their orders from wherever they sell and however they ship . on august 29 , 2014 , we acquired 100 % of the outstanding equity of interapptive inc , which operates shipworks , in a cash transaction . shipworks based in st. louis , missouri , offers monthly subscription based e-commerce shipping software that provides simple , powerful and easy to use solutions for online sellers . shipworks solutions integrate with over 50 popular online sales and marketplaces systems including ebay , paypal , amazon , yahoo ! and others . shipworks offers multi-carrier shipping options and features including sending email notifications to buyers , updating online order status , generating reports and many more . the acquisitions of shipstation and shipworks represent a significant strategic investment in our high volume and e-commerce shipping business . please see note 3 – “ acquisitions ” in our notes to consolidated financial statements for further description . results of operations the results of our operations during the year ended december 31 , 2014 includes operations of shipstation from the period june 10 , 2014 through december 31 , 2014 and shipworks from the period august 29 , 2014 through december 31 , 2014. please see note 3 – “ acquisitions ” in our notes to consolidated financial statements for further description . years ended december 31 , 2014 and 2013 total revenue increased 15 % to $ 147.3 million in 2014 from $ 127.8 million in 2013. mailing and shipping revenue , which includes service revenue , product revenue and insurance revenue , was $ 141.8 million in 2014 , an increase of 15 % from $ 123.1 million in 2013. photostamps revenue increased 16 % to $ 5.4 million in 2014 from $ 4.7 million in 2013. the following table sets forth the breakdown of revenue for 2014 and 2013 and the resulting percent change ( revenue in thousands ) : replace_table_token_6_th core mailing and shipping revenue in 2014 was $ 139.7 million , an increase of 16 % from $ 120.2 million in 2013. non-core mailing and shipping revenue in 2014 was $ 2.1 million , a decrease of 26 % from $ 2.9 million in 2013 . 29 the following table sets forth the breakdown of mailing and shipping revenue , which includes core mailing and shipping revenue and non-core mailing and shipping revenue for 2014 and 2013 and the resulting percent change ( revenue in thousands ) : replace_table_token_7_th the increase in core mailing and shipping revenue was driven by both an increase in annual average paid customers and an increase in annual average revenue per paid customer . annual average paid customers increased 7 % to 500,000 in 2014 from 466,000 in 2013. annual average revenue per paid customer increased 8 % to $ 280 in 2014 from $ 258 in 2013. the decrease in non-core mailing and shipping revenue was primarily attributable to lower marketing spend in the online enhanced promotion channel . we expect non-core mailing and shipping revenue will continue to be down in 2015 compared to 2014 as we expect to continue to minimize investments in these areas of our business . we define paid customers for the quarter as ones from whom we successfully collected service fees at least once during that quarter , and we define average paid customers for the year as the average of the paid customers for each of the four quarters during the year . the following table sets forth the number of paid customers in the period for our core mailing and shipping business ( in thousands ) : replace_table_token_8_th the following table sets forth the growth in paid customers and average annual revenue per paid customer for our core mailing and shipping business ( in thousands except average annual revenue per paid customer ) : replace_table_token_9_th the increase in paid customers is primarily driven by ( 1 ) a higher number of stamps.com new paid customers compared to the prior year as a result of our increased spending in core mailing and shipping marketing channels , ( 2 ) the addition of new paid customers from shipstation and shipworks as a result of our acquisitions in 2014 , and ( 3 ) our customer churn rates remained at levels that were consistent with the prior year . for our core mailing and shipping business , our average annual and monthly core mailing and shipping revenue per paid customer in 2014 was $ 280 and $ 23.27 , respectively , which increased by 8 % compared to $ 258 and $ 21.51 , respectively , in 2013. the increase in average revenue per paid customer ( “ arpu ” ) was primarily the result of the addition of new paid customers from our acquisitions of shipstation and shipworks where the arpu for those newly acquired paid customers is higher as compared to the arpu from the existing stamps.com small business customers as well as growth in stamps.com 's high volume shipping business . story_separator_special_tag 35 the following table sets forth the number of paid customers in the period for our core mailing and shipping business ( in thousands ) : replace_table_token_15_th the following table sets forth the growth in paid customers and average annual revenue per paid customer for our core mailing and shipping business ( in thousands except average annual revenue per paid customer ) : replace_table_token_16_th the increase in paid customers is primarily driven by an increased number of new customers acquired , which was driven by our increased spend in core mailing and shipping marketing channels , while our lost customer churn rates remained at levels that were consistent with the prior year . for our core mailing and shipping business , our average annual and monthly core mailing and shipping revenue per paid customer in 2013 was $ 258 and $ 21.51 respectively , which increased by 2 % compared to $ 254 and $ 21.18 , respectively in 2012. the increase in average revenue per paid customer was primarily attributable to higher service revenue per paid customer from our high volume shipping and enterprise customers and higher store revenue per paid customer from increased sales of netstamps labels ; partially offset by a reduction in revenue per paid customer from our amazon partnership . revenue by product the following table shows our components of revenue and their respective percentages of total revenue for the periods indicated ( in thousands except percentage ) : replace_table_token_17_th our revenue is derived primarily from five sources : ( 1 ) service revenue from subscription , transaction and other fees related to our mailing and shipping services and integrations ; ( 2 ) product revenue from the direct sale of consumables and supplies through our supplies store ; ( 3 ) insurance revenue from the sale of package insurance to our customers ; ( 4 ) photostamps revenue from selling sheets of photostamps postage ; and ( 5 ) other revenue , consisting primarily of advertising revenue derived from advertising programs with our existing customers . service revenue increased 12 % to $ 99.0 million in 2013 from $ 88.2 million in 2012. the 12 % increase in service revenue in 2013 consisted of a 12 % increase in service revenue from our core mailing and shipping business while the service revenue from our non-core mailing and shipping business decreased 5 % . the 12 % increase in our core mailing and shipping service revenue consisted of an 11 % increase in our annual average paid customers and a 2 % increase in our annual average revenue per paid customer . 36 product revenue increased 13 % to $ 16.6 million in 2013 from $ 14.7 million in 2012. the increase was primarily attributable to the following : ( 1 ) increase in netstamps label sales ; ( 2 ) growth in our paid customer base ; ( 3 ) the postal rate increase in january 2013 , which generated incremental label sales for the period of time around the rate increase ; ( 4 ) marketing our supplies store to our existing customer base ; and ( 5 ) growth in postage printed , which helps drive sales of consumable supplies such as labels . total postage printed by customers using our service in 2013 was $ 1.6 billion , a 36 % increase from the $ 1.1 billion printed in 2012. insurance revenue increased 6 % to $ 7.5 million in 2013 from $ 7.1 million in 2012. this increase was primarily attributable to increased insurance purchases by our high volume shippers , partially offset by a reduction in insurance revenue through our amazon partnership . we continued to reduce our photostamps sales and marketing spending in 2013 compared with 2012 , and plan to continue to reduce our sales and marketing spending on photostamps in future periods to maintain or improve profitability in that business , although we believe that there may be potential opportunities to grow the business in a better economic environment . as a result of this decision photostamps revenue decreased 17 % to $ 4.7 million in 2013 from $ 5.7 million in 2012. total photostamps sheets shipped in 2013 decreased 20 % to 255 thousand compared to 2012 and average revenue per photostamps sheet shipped increased 4 % to $ 18.50 in 2013 compared to 2012. the decrease in sheets shipped was primarily attributable to our lower marketing spend and the increase in average revenue per sheet shipped was primarily attributable to less discounting on custom negotiated pricing . cost of revenue the following table shows cost of revenues and cost of revenues as a percentage of its associated revenue for the periods indicated ( in thousands except percentage ) : replace_table_token_18_th cost of service revenue principally consists of the cost of customer service , certain promotional expenses , system operating costs , credit card processing fees and customer misprints that do not qualify for reimbursement from the usps . cost of product revenue principally consists of the cost of products sold through our mailing & shipping supplies store and the related costs of shipping and handling . the cost of insurance revenue principally consists of parcel insurance offering costs . cost of photostamps revenue principally consists of the face value of postage , customer service , image review costs , and printing and fulfillment costs . cost of service revenue decreased 2 % to $ 15.4 million in 2013 from $ 15.7 million in 2012. the decrease in cost of service revenue is primarily attributable to lower promotional expense as a result of a decrease in our coupon redemption rate , partially offset by higher system operating costs , credit card processing fees and customer service costs reflecting the growth in our business and our associated investments to support that growth . promotional expense , which represents a material portion of total cost of service revenue , is expensed in the period in which a
| liquidity and capital resources as of december 31 , 2014 and 2013 , we had $ 58 million and $ 87 million , respectively , in cash , cash equivalents and short-term and long-term investments . we invest available funds in short-term and long-term securities , including money market funds , corporate bonds , asset backed securities , and us government and agency bonds , and do not engage in hedging or speculative activities . net cash provided by operating activities was approximately $ 52 million and $ 36 million in 2014 and 2013 , respectively . the increase in net cash provided by operating activities was primarily attributable to the growth in our revenue and changes in our operating assets and liabilities . net cash used in investing activities was approximately $ 69 million and $ 9 million in 2014 and 2013 , respectively . the increase in net cash used in investing activities was primarily due to the acquisition of shipstation and shipworks ( see note 3 – “ acquisitions ” in our notes to consolidated financial statements ) . net cash used in financing activities was approximately $ 8 million in 2014. net cash provided by financing activities was approximately $ 10 million in 2013. the increase in net cash used in financing activities is primarily due to the increase of stock purchased through our stock repurchase program , partially offset by the decrease in proceeds from employee stock options exercises . the following table is a schedule of our significant contractual obligations and commercial commitments , which consist only of future minimum lease payment under operating leases as of december 31 , 2014 ( in thousands ) : replace_table_token_20_th we believe our available cash and marketable securities , together with the cash flow from operations , will be sufficient to fund our business for at least the next twelve months .
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replace_table_token_6_th our major strategic accomplishments during 2019 include the following : we continued to be an industry leader in on-time delivery of high quality materials and components as indicated by our ability to secure extensions on various important long-term agreements ( ltas ) in the hpmc segment in 2019. we extended supply agreements with ge aviation that are expected to generate $ 2.5 billion in revenues and which begin in january 2021 and are multi-year agreements . we extended our long-term agreement through 2029 with rolls-royce to supply rotating disc quality specialty materials for their trent engine family . this agreement covers the production of a wide-range of critical products used to make rolls-royce 's next-generation jet engines as well as spare parts for in-service engines . we also announced the expansion and 6.5 year extension of our lta with bwx technologies to supply materials for the manufacture of naval nuclear components . the frp segment achieved its third straight year of profitability despite the negative impacts from section 232 tariffs , elevated retirement benefit expense , and soft demand for our standard stainless products and related cost inefficiencies . we remain focused on continuous improvement and profitable growth in this segment . we extended and expanded our agreement with nlmk usa for one year , through december 2020 , to provide carbon steel hot-rolling conversion services at our world-class hrfp . this agreement includes significant guaranteed volumes and fixed fee-per-ton revenues . we generated $ 230 million in cash from operating activities in 2019 , which included $ 145 million in contributions to ati 's u.s. defined benefit pension trust , and we achieved our long-range managed working capital target at 30 % of annualized sales . we also generated $ 250 million in cash from non-core asset sales , including two transactions to monetize some of our long-held oil and gas rights and the divestitures of two non-core carbon steel forging facilities and our titanium investment castings business . overall , we ended the year with $ 491 million of cash on hand . in the fourth quarter 2019 , we reduced our total debt outstanding by $ 150 million and lowered our debt to adjusted ebitda ratio to 2.69 at december 31 , 2019 compared to 3.07 at year-end 2018 ( see the financial condition and liquidity section of management 's discussion and analysis for this calculation ) . we issued $ 350 million of 5.875 % senior notes due 2027 , the proceeds of which , along with cash on hand , were used to early redeem our $ 500 million 5.95 % senior notes due 2021. in recognition of these improving credit metrics , moody 's upgraded ati 's credit rating one notch to b1 . on september 30 , 2019 , we amended and restated our asset based lending ( abl ) credit facility , extending the facility through 2024 and increasing the revolving credit portion of the facility by $ 100 million . see financial condition and liquidity for further explanation . we continued to make capital investments to support our strategic growth initiatives and to have the installed asset base in service and qualified when needed for additional production capacity associated with extended and expanded long-term agreements , principally involving customers in the aerospace & defense markets , including our iso-thermal press and heat-treating capacity expansion at our iso-thermal forging center of excellence in cudahy , wi . we made further progress on our risk management strategy for retirement benefit obligations by completing a $ 96 million risk transfer through the purchase of an annuity contract with a nationally recognized insurance company . this annuity buyout removed 10 % of plan participants , bringing the total pension participant reduction to more than 50 % over the past seven years . 20 results of operations sales were $ 4.12 billion in 2019 , compared to $ 4.05 billion in 2018 , a 2 % increase , despite a 2 % negative impact from business divestitures . income before tax was $ 241.6 million in 2019 , compared to $ 247.7 million in 2018. net income attributable to ati in 2019 was $ 257.6 million , or $ 1.85 per share , compared to $ 222.4 million , or $ 1.61 per share , in 2018. results in 2019 include a $ 28.5 million income tax benefit , while 2018 results reflect $ 11.0 million of income tax expense . through december 31 , 2019 , we continued to maintain valuation allowances for u.s. federal and state deferred taxes , and results in all periods include impacts from income taxes that differ from the applicable standard tax rate , primarily related to these income tax valuation allowances . at december 31 , 2019 , we determined that a substantial portion of these income tax valuation allowances were no longer required , and a $ 45.1 million discrete tax benefit was recognized . in 2019 , we completed several strategic actions to improve future financial performance , liquidity and our financial condition . these items noted below are excluded from business segment results unless otherwise noted . during the second quarter of 2019 , we completed the sale of two non-core forging facilities in our hpmc segment for $ 37 million . sales from these two forging facilities in 2018 were $ 86 million . we received net cash proceeds of $ 33.0 million on the sale of this business and recognized an $ 8.1 million pre-tax loss in 2019 , including $ 10.4 million of allocated goodwill . during the third quarter of 2019 , we completed the sale of our cast products titanium investment castings business in our hpmc segment for $ 127 million . story_separator_special_tag on march 1 , 2018 , we announced the formation of the a & t stainless joint venture with tsingshan to produce 60-inch wide stainless sheet products for sale in north america . this joint venture utilizes tsingshan-supplied stainless steel slabs from its vertically integrated operations in indonesia . the tsingshan-supplied stainless steel slabs are hot-rolled into coils on the frp segment 's hrpf under a conversion agreement . the hot-rolled coils are finished into stainless steel sheet using ati 's previously-idled direct roll anneal and pickle production facility in midland , pa , which is ati 's major investment in the joint venture . in late march 2018 , ati filed for an exclusion from the section 232 tariffs on behalf of a & t stainless , which imports semi-finished stainless slab products from indonesia . in april 2019 , the company learned that this exclusion request was denied by the u.s. department of commerce . the a & t stainless jv filed a new request for exclusion in october 2019 , but will continue to be subject to the 25 % tariff levied on its imports of semi-finished stainless slab products from indonesia pending the outcome of this new request . results of a & t stainless have been and will continue to be negatively impacted by these tariffs on imported stainless slab products . the joint venture partners have continued to evaluate longer-term solutions to return this strategic initiative to profitability , and determined during the fourth quarter of 2019 that idling this facility is probable if a near-term tariff exclusion is not received . ati recognized an $ 11.4 million impairment charge in 2019 related to the a & t stainless jv , primarily related to ati 's equity-method share of the jv 's long-lived asset impairment charge for the midland facility , that is excluded from frp segment results . lifo and net realizable value reserves the net effect of changes in lifo and nrv inventory reserves was expense of $ 0.1 million and $ 0.7 million in 2019 and 2018 , respectively . falling inventory costs in 2019 resulted in a $ 25.5 million pretax lifo inventory valuation reserve benefit , which was offset by a $ 25.6 million pretax non-cash charge for nrv inventory reserves that are required to offset the company 's aggregate net debit lifo inventory balance that exceeds current inventory replacement cost . rising inventory costs in 2018 resulted in a $ 28.6 million pretax lifo inventory valuation reserve charge , which was offset by a $ 27.9 million pretax non-cash benefit for nrv inventory reserves . corporate expenses corporate expenses , which are included in selling and administrative expenses in the statement of operations , were $ 66.8 million in 2019 compared to $ 58.1 million in 2018 . this increase was due primarily due to higher incentive compensation expenses . 27 closed operations and other expenses closed operations and other expenses are presented primarily in selling and administrative expenses in the consolidated statements of operations , and include legal , environmental , retirement benefit and insurance obligations associated with closed operations . closed operations and other expenses were $ 25.5 million in 2019 , compared to $ 21.6 million in 2018 . these expenses were higher compared to 2018 primarily due to higher retirement benefit expenses . restructuring and other gains/charges a $ 4.5 million restructuring charge was recorded in the fourth quarter 2019 to streamline our salaried workforce , primarily to improve the cost competitiveness of the u.s.-based frp business . this restructuring charge is excluded from segment operating results . gain on joint venture deconsolidation on march 1 , 2018 , we announced the formation of a & t stainless , in which ati has a 50 % ownership interest . our joint venture partner purchased its 50 % joint venture interest during the first quarter of 2018 , and as a result of this sale and the subsequent deconsolidation of the a & t stainless entity , we recognized a $ 15.9 million gain in the first quarter of 2018. this gain is reported in other income , net , on the consolidated statement of operations for the year ended december 31 , 2018 and is excluded from frp segment results . joint venture impairment charge we recorded an $ 11.4 million impairment charge in 2019 for the a & t stainless joint venture , including ati 's share of a long-lived asset impairment charge recognized by the joint venture on the carrying value of its production facility in midland , pa. ati recognized a $ 7.1 million equity loss for its 50 % share of a $ 14.2 million long-lived asset impairment recognized by a & t stainless . in addition , as of december 31 , 2019 , ati had net receivables for working capital advances and administrative services from a & t stainless of $ 36.8 million that were also evaluated for collectability , and a $ 4.3 million reserve was recorded in december 2019 based ati 's share of the estimated fair value of the joint venture 's net assets . this charge is excluded from frp segment results . gains on asset sales , net during the third quarter of 2019 , we completed the sale of our cast products business for $ 127 million . this business produced titanium investment castings that are primarily used by aerospace & defense oems in the production of commercial jet airframes and engines . we recognized a $ 6.2 million gain in 2019 , which included a $ 10.2 million impairment charge on the carrying value of long-lived assets of the retained salem operation . during the second quarter of 2019 , we completed the sale of two non-core forging facilities , located in portland , in and lebanon , ky , that used primarily traditional forging methods to produce carbon steel forged products for use in the oil & gas , transportation
| liquidity and capital resources as of december 31 , 2014 and 2013 , we had $ 58 million and $ 87 million , respectively , in cash , cash equivalents and short-term and long-term investments . we invest available funds in short-term and long-term securities , including money market funds , corporate bonds , asset backed securities , and us government and agency bonds , and do not engage in hedging or speculative activities . net cash provided by operating activities was approximately $ 52 million and $ 36 million in 2014 and 2013 , respectively . the increase in net cash provided by operating activities was primarily attributable to the growth in our revenue and changes in our operating assets and liabilities . net cash used in investing activities was approximately $ 69 million and $ 9 million in 2014 and 2013 , respectively . the increase in net cash used in investing activities was primarily due to the acquisition of shipstation and shipworks ( see note 3 – “ acquisitions ” in our notes to consolidated financial statements ) . net cash used in financing activities was approximately $ 8 million in 2014. net cash provided by financing activities was approximately $ 10 million in 2013. the increase in net cash used in financing activities is primarily due to the increase of stock purchased through our stock repurchase program , partially offset by the decrease in proceeds from employee stock options exercises . the following table is a schedule of our significant contractual obligations and commercial commitments , which consist only of future minimum lease payment under operating leases as of december 31 , 2014 ( in thousands ) : replace_table_token_20_th we believe our available cash and marketable securities , together with the cash flow from operations , will be sufficient to fund our business for at least the next twelve months .
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replace_table_token_6_th our major strategic accomplishments during 2019 include the following : we continued to be an industry leader in on-time delivery of high quality materials and components as indicated by our ability to secure extensions on various important long-term agreements ( ltas ) in the hpmc segment in 2019. we extended supply agreements with ge aviation that are expected to generate $ 2.5 billion in revenues and which begin in january 2021 and are multi-year agreements . we extended our long-term agreement through 2029 with rolls-royce to supply rotating disc quality specialty materials for their trent engine family . this agreement covers the production of a wide-range of critical products used to make rolls-royce 's next-generation jet engines as well as spare parts for in-service engines . we also announced the expansion and 6.5 year extension of our lta with bwx technologies to supply materials for the manufacture of naval nuclear components . the frp segment achieved its third straight year of profitability despite the negative impacts from section 232 tariffs , elevated retirement benefit expense , and soft demand for our standard stainless products and related cost inefficiencies . we remain focused on continuous improvement and profitable growth in this segment . we extended and expanded our agreement with nlmk usa for one year , through december 2020 , to provide carbon steel hot-rolling conversion services at our world-class hrfp . this agreement includes significant guaranteed volumes and fixed fee-per-ton revenues . we generated $ 230 million in cash from operating activities in 2019 , which included $ 145 million in contributions to ati 's u.s. defined benefit pension trust , and we achieved our long-range managed working capital target at 30 % of annualized sales . we also generated $ 250 million in cash from non-core asset sales , including two transactions to monetize some of our long-held oil and gas rights and the divestitures of two non-core carbon steel forging facilities and our titanium investment castings business . overall , we ended the year with $ 491 million of cash on hand . in the fourth quarter 2019 , we reduced our total debt outstanding by $ 150 million and lowered our debt to adjusted ebitda ratio to 2.69 at december 31 , 2019 compared to 3.07 at year-end 2018 ( see the financial condition and liquidity section of management 's discussion and analysis for this calculation ) . we issued $ 350 million of 5.875 % senior notes due 2027 , the proceeds of which , along with cash on hand , were used to early redeem our $ 500 million 5.95 % senior notes due 2021. in recognition of these improving credit metrics , moody 's upgraded ati 's credit rating one notch to b1 . on september 30 , 2019 , we amended and restated our asset based lending ( abl ) credit facility , extending the facility through 2024 and increasing the revolving credit portion of the facility by $ 100 million . see financial condition and liquidity for further explanation . we continued to make capital investments to support our strategic growth initiatives and to have the installed asset base in service and qualified when needed for additional production capacity associated with extended and expanded long-term agreements , principally involving customers in the aerospace & defense markets , including our iso-thermal press and heat-treating capacity expansion at our iso-thermal forging center of excellence in cudahy , wi . we made further progress on our risk management strategy for retirement benefit obligations by completing a $ 96 million risk transfer through the purchase of an annuity contract with a nationally recognized insurance company . this annuity buyout removed 10 % of plan participants , bringing the total pension participant reduction to more than 50 % over the past seven years . 20 results of operations sales were $ 4.12 billion in 2019 , compared to $ 4.05 billion in 2018 , a 2 % increase , despite a 2 % negative impact from business divestitures . income before tax was $ 241.6 million in 2019 , compared to $ 247.7 million in 2018. net income attributable to ati in 2019 was $ 257.6 million , or $ 1.85 per share , compared to $ 222.4 million , or $ 1.61 per share , in 2018. results in 2019 include a $ 28.5 million income tax benefit , while 2018 results reflect $ 11.0 million of income tax expense . through december 31 , 2019 , we continued to maintain valuation allowances for u.s. federal and state deferred taxes , and results in all periods include impacts from income taxes that differ from the applicable standard tax rate , primarily related to these income tax valuation allowances . at december 31 , 2019 , we determined that a substantial portion of these income tax valuation allowances were no longer required , and a $ 45.1 million discrete tax benefit was recognized . in 2019 , we completed several strategic actions to improve future financial performance , liquidity and our financial condition . these items noted below are excluded from business segment results unless otherwise noted . during the second quarter of 2019 , we completed the sale of two non-core forging facilities in our hpmc segment for $ 37 million . sales from these two forging facilities in 2018 were $ 86 million . we received net cash proceeds of $ 33.0 million on the sale of this business and recognized an $ 8.1 million pre-tax loss in 2019 , including $ 10.4 million of allocated goodwill . during the third quarter of 2019 , we completed the sale of our cast products titanium investment castings business in our hpmc segment for $ 127 million . story_separator_special_tag on march 1 , 2018 , we announced the formation of the a & t stainless joint venture with tsingshan to produce 60-inch wide stainless sheet products for sale in north america . this joint venture utilizes tsingshan-supplied stainless steel slabs from its vertically integrated operations in indonesia . the tsingshan-supplied stainless steel slabs are hot-rolled into coils on the frp segment 's hrpf under a conversion agreement . the hot-rolled coils are finished into stainless steel sheet using ati 's previously-idled direct roll anneal and pickle production facility in midland , pa , which is ati 's major investment in the joint venture . in late march 2018 , ati filed for an exclusion from the section 232 tariffs on behalf of a & t stainless , which imports semi-finished stainless slab products from indonesia . in april 2019 , the company learned that this exclusion request was denied by the u.s. department of commerce . the a & t stainless jv filed a new request for exclusion in october 2019 , but will continue to be subject to the 25 % tariff levied on its imports of semi-finished stainless slab products from indonesia pending the outcome of this new request . results of a & t stainless have been and will continue to be negatively impacted by these tariffs on imported stainless slab products . the joint venture partners have continued to evaluate longer-term solutions to return this strategic initiative to profitability , and determined during the fourth quarter of 2019 that idling this facility is probable if a near-term tariff exclusion is not received . ati recognized an $ 11.4 million impairment charge in 2019 related to the a & t stainless jv , primarily related to ati 's equity-method share of the jv 's long-lived asset impairment charge for the midland facility , that is excluded from frp segment results . lifo and net realizable value reserves the net effect of changes in lifo and nrv inventory reserves was expense of $ 0.1 million and $ 0.7 million in 2019 and 2018 , respectively . falling inventory costs in 2019 resulted in a $ 25.5 million pretax lifo inventory valuation reserve benefit , which was offset by a $ 25.6 million pretax non-cash charge for nrv inventory reserves that are required to offset the company 's aggregate net debit lifo inventory balance that exceeds current inventory replacement cost . rising inventory costs in 2018 resulted in a $ 28.6 million pretax lifo inventory valuation reserve charge , which was offset by a $ 27.9 million pretax non-cash benefit for nrv inventory reserves . corporate expenses corporate expenses , which are included in selling and administrative expenses in the statement of operations , were $ 66.8 million in 2019 compared to $ 58.1 million in 2018 . this increase was due primarily due to higher incentive compensation expenses . 27 closed operations and other expenses closed operations and other expenses are presented primarily in selling and administrative expenses in the consolidated statements of operations , and include legal , environmental , retirement benefit and insurance obligations associated with closed operations . closed operations and other expenses were $ 25.5 million in 2019 , compared to $ 21.6 million in 2018 . these expenses were higher compared to 2018 primarily due to higher retirement benefit expenses . restructuring and other gains/charges a $ 4.5 million restructuring charge was recorded in the fourth quarter 2019 to streamline our salaried workforce , primarily to improve the cost competitiveness of the u.s.-based frp business . this restructuring charge is excluded from segment operating results . gain on joint venture deconsolidation on march 1 , 2018 , we announced the formation of a & t stainless , in which ati has a 50 % ownership interest . our joint venture partner purchased its 50 % joint venture interest during the first quarter of 2018 , and as a result of this sale and the subsequent deconsolidation of the a & t stainless entity , we recognized a $ 15.9 million gain in the first quarter of 2018. this gain is reported in other income , net , on the consolidated statement of operations for the year ended december 31 , 2018 and is excluded from frp segment results . joint venture impairment charge we recorded an $ 11.4 million impairment charge in 2019 for the a & t stainless joint venture , including ati 's share of a long-lived asset impairment charge recognized by the joint venture on the carrying value of its production facility in midland , pa. ati recognized a $ 7.1 million equity loss for its 50 % share of a $ 14.2 million long-lived asset impairment recognized by a & t stainless . in addition , as of december 31 , 2019 , ati had net receivables for working capital advances and administrative services from a & t stainless of $ 36.8 million that were also evaluated for collectability , and a $ 4.3 million reserve was recorded in december 2019 based ati 's share of the estimated fair value of the joint venture 's net assets . this charge is excluded from frp segment results . gains on asset sales , net during the third quarter of 2019 , we completed the sale of our cast products business for $ 127 million . this business produced titanium investment castings that are primarily used by aerospace & defense oems in the production of commercial jet airframes and engines . we recognized a $ 6.2 million gain in 2019 , which included a $ 10.2 million impairment charge on the carrying value of long-lived assets of the retained salem operation . during the second quarter of 2019 , we completed the sale of two non-core forging facilities , located in portland , in and lebanon , ky , that used primarily traditional forging methods to produce carbon steel forged products for use in the oil & gas , transportation
| cash flow and working capital cash provided by operations for 2019 was $ 230.1 million , including cash provided by an $ 88.4 million reduction in managed working capital balances . this was despite $ 29 million in short-term working capital advances to the a & t stainless joint venture for 2019 and $ 145 million of cash contributions to ati 's u.s. qualified defined benefit pension plans in 2019. cash provided by operations was $ 392.8 million in 2018 , which included a $ 74.1 million reduction in managed working capital balances and was partially offset by $ 40 million in cash contributions to ati 's u.s. qualified defined benefit pension plans and $ 11 million in short-term working capital advances to the a & t stainless joint venture . as part of managing the liquidity of our business , we focus on controlling managed working capital , which is defined as gross accounts receivable , short-term contract assets and gross inventories , less accounts payable and short-term contract liabilities . in measuring performance in controlling this managed working capital , we exclude the effects of lifo and other inventory valuation reserves , and reserves for uncollectible accounts receivable which , due to their nature , are managed separately . we measure managed working capital as a percentage of the prior three months annualized sales to evaluate our performance based on recent levels of business volume . in 2019 , managed working capital decreased to 30.0 % of annualized total ati sales compared to 31.6 % of annualized sales at december 31 , 2018 , a 160 basis point reduction despite year-over-year business growth . the $ 88.4 million decrease in managed working capital in 2019 resulted from a $ 12.7 million decrease in short-term contract assets , a $ 70.9 million decrease in inventory , a $ 22.4 million increase in accounts payable and $ 7.3 million increase in short-term contract liabilities , partially offset by a $ 24.9 million increase in accounts receivable .
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20 summary of operations transitioning to a lower risk business model during 2019 , the company migrated from a 90 % franchised business model to one that is 96 % franchised . changes in restaurant counts are as follows : replace_table_token_8_th the sale of 113 company restaurants in 2019 and 2018 with attached development commitments created an opportunity for development-focused franchisees to expand their businesses . in addition to stimulating domestic restaurant development , this transition yielded a smaller portfolio of higher volume company restaurants . the smaller number of company restaurants will require lower remodel and maintenance-related capital expenditures and general and administrative support costs . further , we expect to benefit from reduced exposure to volatility in costs of company restaurant sales along with greater stability in royalties and fees from restaurants operated by our franchisees . we generated approximately $ 119.0 million of cash proceeds from the sale of company restaurants in 2019. growing and revitalizing the brand over the last five years , our growth initiatives have led to 194 new restaurant openings . during 2019 , our franchisees opened 30 restaurants of which 14 are international franchised locations including three each in canada , the philippines , and the united arab emirates . our goal is to increase net restaurant growth through both domestic and international avenues . domestic growth will focus on markets in which we have modest penetration . development agreements related to the sale of 113 of our company restaurants during 2018 and 2019 and recently enhanced development agreements in canada and the philippines are expected to stimulate both domestic and international growth over the next several years . our current standard franchise agreement includes a royalty rate of up to the current rate of 4.5 % . approximately 66 % of our franchised restaurants were operating under this agreement as of december 25 , 2019 , and we expect over 75 % to be operating under this agreement by the end of 2020. we anticipate that existing franchisees will elect to migrate to the new fee structure over the next decade as incentives under previous franchise agreements expire . due to the long-term migration of existing franchisees , we will not see the full benefit of the higher royalty rate for some time . for 2019 , our average contractual domestic royalty rate was approximately 4.18 % , compared to 4.17 % for 2018 and 4.14 % for 2017. a total of 144 remodels were completed during 2019 , comprised of 141 at franchised restaurants and three at company restaurants . these remodels were in our heritage image , which we launched in late 2013. this updated look reflects a more contemporary diner feel to further reinforce our america 's diner positioning . as of the end of 2019 , approximately 89 % of the restaurants in the system have been remodeled to the most current image . 21 consistently growing same-store sales during 2019 , we achieved domestic system-wide same-store sales ( 1 ) growth of 2.0 % , comprised of a 1.9 % increase at company restaurants and a 2.0 % increase at domestic franchised restaurants , marking the ninth consecutive year of positive domestic system-wide same-store sales . balancing the use of cash we are focused on balancing the use of cash between reinvesting in our base of company restaurants , growing and strengthening the brand and returning cash to shareholders . during 2019 , cash capital expenditures were $ 25.3 million , comprised of $ 14.0 million in capital expenditures and real estate acquisition costs of $ 11.3 million . our real estate strategy is to redeploy proceeds from the sale of certain pieces of our owned real estate to acquire higher quality real estate underlying company and franchised restaurants . to date , we have generated $ 10.7 million of cash proceeds from the sale of real estate , the majority of which qualified for like-kind exchange treatment related to real estate acquired . during 2019 , including shares delivered under a previous accelerated share repurchase agreement , we repurchased a total of 5.3 million shares of our common stock for $ 103.0 million . since initiating our share repurchase programs in november 2010 , we have repurchased a total of 52.3 million shares of our common stock for $ 519.8 million . in december 2019 , the board approved a new share repurchase authorization for $ 250 million . as of december 25 , 2019 , there was $ 282.2 million remaining under current repurchase authorizations . factors impacting comparability impact of new leases standard effective december 27 , 2018 , the first day of fiscal 2019 , we adopted accounting standards update ( “ asu ” ) 2016-02 , “ leases ( topic 842 ) ” and all subsequent asus that modified topic 842. upon adoption of topic 842 , we recorded operating lease liabilities of $ 101.3 million and right-of-use ( “ rou ” ) assets of $ 94.2 million related to existing operating leases . in addition , we recorded a cumulative effect adjustment increasing opening deficit by $ 0.4 million and deferred tax assets by $ 0.1 million . the lease liabilities were based on the present value of remaining rental payments under current leasing standards for existing operating leases primarily related to real estate leases . exit cost and straight-line lease liabilities that existed at the adoption date were reclassified against the rou assets upon adoption . the amount recorded to opening deficit represents the initial impairment of rou assets , net of the deferred tax impact . we elected to apply the modified retrospective transition approach as of the effective date as the date of initial application without restating comparative period financial statements ( the “ effective date method ” ) . story_separator_special_tag net cash flows provided by operating activities were $ 73.7 million for the year ended december 26 , 2018 compared to $ 78.3 million for the year ended december 27 , 2017. the decrease in cash flows provided by operating activities was primarily due to the timing of receiving credit card receivables . we believe that our estimated cash flows from operations for 2020 , combined with our capacity for additional borrowings under our credit facility , will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months . story_separator_special_tag > the credit facility is available for working capital , capital expenditures and other general corporate purposes . the credit facility is guaranteed by denny 's and its material subsidiaries and is secured by assets of denny 's and its subsidiaries , including the stock of its subsidiaries ( other than our insurance captive subsidiary ) . it includes negative covenants that are usual for facilities and transactions of this type . the credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio . we were in compliance with all financial covenants as of december 25 , 2019 . 30 interest rate hedges we have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt . see part ii item 7a . quantitative and qualitative disclosures about market risk for details on our interest rate swaps . contractual obligations our future contractual obligations and commitments at december 25 , 2019 consisted of the following : replace_table_token_19_th ( a ) interest obligations represent payments related to our long-term debt outstanding at december 25 , 2019 . for long-term debt with variable rates , we have used the rate applicable at december 25 , 2019 to project interest over the periods presented in the table above , taking into consideration the impact of the interest rate swaps for the applicable periods . the finance lease obligation amounts above are inclusive of interest . ( b ) purchase obligations include amounts payable under purchase contracts for food and non-food products . many of these agreements do not obligate us to purchase any specific volumes and include provisions that would allow us to cancel such agreements with appropriate notice . for agreements with cancellation provisions , amounts included in the table above represent our estimate of purchase obligations during the periods presented if we were to cancel these contracts with appropriate notice . ( c ) unrecognized tax benefits are related to uncertain tax positions . as we are not able to reasonably estimate the timing or amount of these payments , the related balances have not been reflected in this table . off-balance sheet arrangements we do not have any off-balance sheet arrangements . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates , including those related to self-insurance liabilities , impairment of long-lived assets and income taxes . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions ; however , we believe that our estimates , including those for the above-described items , are reasonable . our significant accounting policies , including the critical accounting policies listed below , are fully described in note 2 to our consolidated financial statements included in part ii , item 8 of this report . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : 31 self-insurance liabilities . we are self-insured for a portion of our losses related to certain medical plans , workers ' compensation , general , product and automobile insurance liability . in estimating these liabilities , we utilize independent actuarial estimates of expected losses , which are based on statistical analysis of historical data . our estimates of expected losses are adjusted over time based on changes to the actual costs of the underlying claims , which could result in additional expense or reversal of expense previously recorded . impairment of long-lived assets . we evaluate our long-lived assets for impairment at the restaurant level on a quarterly basis , when assets are identified as held for sale or whenever changes or events indicate that the carrying value may not be recoverable . for assets identified as held for sale , we use the market approach and consider proceeds from similar asset sales . we assess impairment of restaurant-level assets based on the operating cash flows of the restaurant , expected proceeds from the sale of assets and our plans for restaurant closings . generally , all restaurants with negative cash flows from operations for the most recent twelve months at each quarter end are included in our assessment . for underperforming assets , we use the income approach to determine both the recoverability and estimated fair value of the assets . to estimate future cash flows , we make certain assumptions about expected future operating performance , such as revenue growth , operating margins , risk-adjusted discount rates , and future economic and market conditions . if the long-lived assets of a restaurant are not recoverable based upon estimated future , undiscounted cash
| cash flow and working capital cash provided by operations for 2019 was $ 230.1 million , including cash provided by an $ 88.4 million reduction in managed working capital balances . this was despite $ 29 million in short-term working capital advances to the a & t stainless joint venture for 2019 and $ 145 million of cash contributions to ati 's u.s. qualified defined benefit pension plans in 2019. cash provided by operations was $ 392.8 million in 2018 , which included a $ 74.1 million reduction in managed working capital balances and was partially offset by $ 40 million in cash contributions to ati 's u.s. qualified defined benefit pension plans and $ 11 million in short-term working capital advances to the a & t stainless joint venture . as part of managing the liquidity of our business , we focus on controlling managed working capital , which is defined as gross accounts receivable , short-term contract assets and gross inventories , less accounts payable and short-term contract liabilities . in measuring performance in controlling this managed working capital , we exclude the effects of lifo and other inventory valuation reserves , and reserves for uncollectible accounts receivable which , due to their nature , are managed separately . we measure managed working capital as a percentage of the prior three months annualized sales to evaluate our performance based on recent levels of business volume . in 2019 , managed working capital decreased to 30.0 % of annualized total ati sales compared to 31.6 % of annualized sales at december 31 , 2018 , a 160 basis point reduction despite year-over-year business growth . the $ 88.4 million decrease in managed working capital in 2019 resulted from a $ 12.7 million decrease in short-term contract assets , a $ 70.9 million decrease in inventory , a $ 22.4 million increase in accounts payable and $ 7.3 million increase in short-term contract liabilities , partially offset by a $ 24.9 million increase in accounts receivable .
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20 summary of operations transitioning to a lower risk business model during 2019 , the company migrated from a 90 % franchised business model to one that is 96 % franchised . changes in restaurant counts are as follows : replace_table_token_8_th the sale of 113 company restaurants in 2019 and 2018 with attached development commitments created an opportunity for development-focused franchisees to expand their businesses . in addition to stimulating domestic restaurant development , this transition yielded a smaller portfolio of higher volume company restaurants . the smaller number of company restaurants will require lower remodel and maintenance-related capital expenditures and general and administrative support costs . further , we expect to benefit from reduced exposure to volatility in costs of company restaurant sales along with greater stability in royalties and fees from restaurants operated by our franchisees . we generated approximately $ 119.0 million of cash proceeds from the sale of company restaurants in 2019. growing and revitalizing the brand over the last five years , our growth initiatives have led to 194 new restaurant openings . during 2019 , our franchisees opened 30 restaurants of which 14 are international franchised locations including three each in canada , the philippines , and the united arab emirates . our goal is to increase net restaurant growth through both domestic and international avenues . domestic growth will focus on markets in which we have modest penetration . development agreements related to the sale of 113 of our company restaurants during 2018 and 2019 and recently enhanced development agreements in canada and the philippines are expected to stimulate both domestic and international growth over the next several years . our current standard franchise agreement includes a royalty rate of up to the current rate of 4.5 % . approximately 66 % of our franchised restaurants were operating under this agreement as of december 25 , 2019 , and we expect over 75 % to be operating under this agreement by the end of 2020. we anticipate that existing franchisees will elect to migrate to the new fee structure over the next decade as incentives under previous franchise agreements expire . due to the long-term migration of existing franchisees , we will not see the full benefit of the higher royalty rate for some time . for 2019 , our average contractual domestic royalty rate was approximately 4.18 % , compared to 4.17 % for 2018 and 4.14 % for 2017. a total of 144 remodels were completed during 2019 , comprised of 141 at franchised restaurants and three at company restaurants . these remodels were in our heritage image , which we launched in late 2013. this updated look reflects a more contemporary diner feel to further reinforce our america 's diner positioning . as of the end of 2019 , approximately 89 % of the restaurants in the system have been remodeled to the most current image . 21 consistently growing same-store sales during 2019 , we achieved domestic system-wide same-store sales ( 1 ) growth of 2.0 % , comprised of a 1.9 % increase at company restaurants and a 2.0 % increase at domestic franchised restaurants , marking the ninth consecutive year of positive domestic system-wide same-store sales . balancing the use of cash we are focused on balancing the use of cash between reinvesting in our base of company restaurants , growing and strengthening the brand and returning cash to shareholders . during 2019 , cash capital expenditures were $ 25.3 million , comprised of $ 14.0 million in capital expenditures and real estate acquisition costs of $ 11.3 million . our real estate strategy is to redeploy proceeds from the sale of certain pieces of our owned real estate to acquire higher quality real estate underlying company and franchised restaurants . to date , we have generated $ 10.7 million of cash proceeds from the sale of real estate , the majority of which qualified for like-kind exchange treatment related to real estate acquired . during 2019 , including shares delivered under a previous accelerated share repurchase agreement , we repurchased a total of 5.3 million shares of our common stock for $ 103.0 million . since initiating our share repurchase programs in november 2010 , we have repurchased a total of 52.3 million shares of our common stock for $ 519.8 million . in december 2019 , the board approved a new share repurchase authorization for $ 250 million . as of december 25 , 2019 , there was $ 282.2 million remaining under current repurchase authorizations . factors impacting comparability impact of new leases standard effective december 27 , 2018 , the first day of fiscal 2019 , we adopted accounting standards update ( “ asu ” ) 2016-02 , “ leases ( topic 842 ) ” and all subsequent asus that modified topic 842. upon adoption of topic 842 , we recorded operating lease liabilities of $ 101.3 million and right-of-use ( “ rou ” ) assets of $ 94.2 million related to existing operating leases . in addition , we recorded a cumulative effect adjustment increasing opening deficit by $ 0.4 million and deferred tax assets by $ 0.1 million . the lease liabilities were based on the present value of remaining rental payments under current leasing standards for existing operating leases primarily related to real estate leases . exit cost and straight-line lease liabilities that existed at the adoption date were reclassified against the rou assets upon adoption . the amount recorded to opening deficit represents the initial impairment of rou assets , net of the deferred tax impact . we elected to apply the modified retrospective transition approach as of the effective date as the date of initial application without restating comparative period financial statements ( the “ effective date method ” ) . story_separator_special_tag net cash flows provided by operating activities were $ 73.7 million for the year ended december 26 , 2018 compared to $ 78.3 million for the year ended december 27 , 2017. the decrease in cash flows provided by operating activities was primarily due to the timing of receiving credit card receivables . we believe that our estimated cash flows from operations for 2020 , combined with our capacity for additional borrowings under our credit facility , will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months . story_separator_special_tag > the credit facility is available for working capital , capital expenditures and other general corporate purposes . the credit facility is guaranteed by denny 's and its material subsidiaries and is secured by assets of denny 's and its subsidiaries , including the stock of its subsidiaries ( other than our insurance captive subsidiary ) . it includes negative covenants that are usual for facilities and transactions of this type . the credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio . we were in compliance with all financial covenants as of december 25 , 2019 . 30 interest rate hedges we have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt . see part ii item 7a . quantitative and qualitative disclosures about market risk for details on our interest rate swaps . contractual obligations our future contractual obligations and commitments at december 25 , 2019 consisted of the following : replace_table_token_19_th ( a ) interest obligations represent payments related to our long-term debt outstanding at december 25 , 2019 . for long-term debt with variable rates , we have used the rate applicable at december 25 , 2019 to project interest over the periods presented in the table above , taking into consideration the impact of the interest rate swaps for the applicable periods . the finance lease obligation amounts above are inclusive of interest . ( b ) purchase obligations include amounts payable under purchase contracts for food and non-food products . many of these agreements do not obligate us to purchase any specific volumes and include provisions that would allow us to cancel such agreements with appropriate notice . for agreements with cancellation provisions , amounts included in the table above represent our estimate of purchase obligations during the periods presented if we were to cancel these contracts with appropriate notice . ( c ) unrecognized tax benefits are related to uncertain tax positions . as we are not able to reasonably estimate the timing or amount of these payments , the related balances have not been reflected in this table . off-balance sheet arrangements we do not have any off-balance sheet arrangements . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates , including those related to self-insurance liabilities , impairment of long-lived assets and income taxes . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions ; however , we believe that our estimates , including those for the above-described items , are reasonable . our significant accounting policies , including the critical accounting policies listed below , are fully described in note 2 to our consolidated financial statements included in part ii , item 8 of this report . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : 31 self-insurance liabilities . we are self-insured for a portion of our losses related to certain medical plans , workers ' compensation , general , product and automobile insurance liability . in estimating these liabilities , we utilize independent actuarial estimates of expected losses , which are based on statistical analysis of historical data . our estimates of expected losses are adjusted over time based on changes to the actual costs of the underlying claims , which could result in additional expense or reversal of expense previously recorded . impairment of long-lived assets . we evaluate our long-lived assets for impairment at the restaurant level on a quarterly basis , when assets are identified as held for sale or whenever changes or events indicate that the carrying value may not be recoverable . for assets identified as held for sale , we use the market approach and consider proceeds from similar asset sales . we assess impairment of restaurant-level assets based on the operating cash flows of the restaurant , expected proceeds from the sale of assets and our plans for restaurant closings . generally , all restaurants with negative cash flows from operations for the most recent twelve months at each quarter end are included in our assessment . for underperforming assets , we use the income approach to determine both the recoverability and estimated fair value of the assets . to estimate future cash flows , we make certain assumptions about expected future operating performance , such as revenue growth , operating margins , risk-adjusted discount rates , and future economic and market conditions . if the long-lived assets of a restaurant are not recoverable based upon estimated future , undiscounted cash
| net cash flows provided by investing activities were $ 105.0 million for the year ended december 25 , 2019 . these cash flows are primarily comprised of $ 129.7 million of proceeds from the sale of assets , including $ 119.0 million from the sale of 105 restaurants and $ 10.7 million from the sale of real estate . these cash flows are offset by capital expenditures of $ 14.0 million and acquisitions of real estate of $ 11.3 million . net cash flows used in investing activities were $ 32.0 million for the year ended december 26 , 2018. these cash flows are primarily comprised of capital expenditures of $ 22.0 million and acquisitions of restaurants and real estate of $ 10.4 million . cash flows for acquisitions include $ 8.1 million for the reacquisition of six franchised restaurants , $ 1.8 million for real estate and $ 0.5 million related to a prior year acquisition . net cash flows used in investing activities were $ 27.1 million for the year ended december 27 , 2017. these cash flows are primarily comprised of capital expenditures of $ 18.8 million and acquisitions of restaurants and real estate of $ 12.4 million . 29 our principal capital requirements have been largely associated with the following : replace_table_token_18_th capital expenditures for fiscal 2020 are expected to be between $ 28 million and $ 33 million , including between $ 13 million and $ 18 million of anticipated real estate acquisitions through like-kind exchanges .
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our most robust period of growth occurred in the three years following the onset of the financial crisis in 2008 , when many industry sector managing directors sought to transition from highly regulated , large , diversified financial institutions to independent advisory firms such as greenhill . while we continue to focus on managing our business in a disciplined manner , and over the past three years have recruited fewer managing directors as compared to the period from 2008 through 2010 , we intend to continue our efforts to recruit new managing directors with industry sector experience and or geographic reach who can help expand our advisory capabilities . we had 66 client facing managing directors as of january 1 , 2015 , and added one additional managing director and announced the addition of 2 more managing directors ( through february 24 , 2015 ) and will add 8 more managing directors when we complete the acquisition of cogent , which is anticipated to occur around the end of the first quarter of 2015. prior to 2011 , we also engaged in merchant banking activities , consisting primarily of management of and investment in greenhill 's merchant banking funds , gcp i , gcp ii , gcp iii , gsavp and gcp europe , which are families of merchant banking funds . at the time of our exit from such activities an entity principally owned by former greenhill employees and independent from greenhill , took over the management of our merchant banking funds . since our exit from the merchant banking business , we have sought to realize value from our remaining principal investments and have sold or transferred substantially all of our investments in previously sponsored merchant banking funds and our previous investment in iridium . beginning in 2011 , as a result of our exit from the management of the merchant banking funds , we no longer generated management fees . since 2011 , our investment revenues consist entirely of gains ( or losses ) realized on the sale of our investments in the merchant banking funds and iridium , and changes in the unrealized value of the estimated fair market value and quoted values of such investments . as a result of the monetization of substantially all of our investments , we do not expect to report meaningful investment revenues or losses in future periods . at december 31 , 2014 , we held remaining investments in merchant banking funds with an estimated fair value of $ 4.2 million . at december 31 , 2014 , we employed 305 people . we strive to maintain a work environment that fosters professionalism , excellence , diversity , and cooperation among our employees worldwide . we utilize a comprehensive evaluation process at the 25 end of each year to measure performance , determine compensation and provide guidance on opportunities for continued development . business environment economic and global financial market conditions can materially affect our financial performance . in addition , revenues and net income in any period may not be indicative of full-year results or the results of any other period and may vary significantly from year to year and quarter to quarter . see “ risk factors . ” our advisory revenues were $ 280.5 million in the year ended december 31 , 2014 compared to $ 287.0 million in the year ended december 31 , 2013 , which represents a decrease of 2 % . this decrease resulted principally from a decrease in transaction completion fees , which were generally smaller in scale than 2013. at the same time , on a global basis , the number of completed transactions was up only 8 % for the year and completed transaction volume was up 17 % ( 1 ) . while the m & a market improved in 2014 , we had an essentially flat revenue outcome . there were several factors that led to this revenue outcome , including the fact that our important foreign markets saw less improvement than the u.s. market , a strong dollar that diminished the value of overseas fees and the impact of some personnel changes that we believe will enhance the long term potential of the firm . we do not regard this revenue outcome as reflective of our longer term growth potential . in 2014 , we advised on transactions for the first time for such leading companies around the world as aa limited , anixter international inc. , boart longyear ltd. , cerner corporation , dillard 's inc. , london stock exchange group plc , mannkind corporation , nippon television holdings , reckitt benckiser and voya financial , inc. we also advised on new transactions in all major markets for clients for whom we had previous engagements such as actavis plc , alcoa inc. , at & t inc. , gannett co. , inc. , tesco plc , tui ag and validus holdings , ltd. by geographic region in 2014 , our advisory revenues were relatively well dispersed throughout the regional markets in which we operate with an increased contribution from north america , where we generated in excess of 59 % of our revenues , which is consistent with the increase in transaction activity generally in that region . most of our other 2014 advisory revenues were generated in europe , where we derived 30 % of our revenues , which was a slight decline from the strong prior year level of contribution . in australia , the scale of transactions on which we advised declined from the prior year . by industry in 2014 , improved performance in the communications & media , consumer & retail and general industrials sectors generally offset a decline in activity in the technology , real estate and financial sectors . while merger and acquisition assignments continued to be our largest revenue source , we benefited from a significant increase in revenue from financing and restructuring advisory assignments . story_separator_special_tag as a result of the sale of substantially all of our investments , we do not expect to report significant investment revenues in future periods . we recognize revenue on investments in merchant banking funds based on our allocable share of realized and unrealized gains ( or losses ) reported by such funds on a quarterly basis . investments held by merchant banking funds are recorded at estimated fair value . because of the inherent uncertainty of valuations as well as the discounts applied , the estimated fair value of investments in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed . see “ item 2. management 's discussion and analysis of financial condition and results of operations — critical accounting policies and estimates — revenue recognition — investment revenues ” . during our period of ownership of iridium , which ended in december 2013 , we recognized gains or losses from our investment in iridium from marking to market our holdings at the end of each period to record unrealized gains or losses based upon the quoted market price for iridium common stock . to the extent we sold our share holdings in iridium for a price above or below our mark for the previous reported period , we recognized realized gains or losses on such sales during the period of sale . for our remaining investments in the merchant banking funds , the size and timing of changes in the fair value are tied to a number of different factors , including the performance of the particular portfolio companies , general economic conditions in the debt and equity markets and other factors which affect the industries in which the funds are invested . we will continue to record realized and unrealized changes in the fair value of our investments on a quarterly basis until such investments are fully liquidated . adverse changes in general economic conditions , commodity prices , credit and public equity markets could negatively impact the amount of investment revenues we record in any period . 2014 versus 2013 . for the year ended december 31 , 2014 , we recorded an investment loss of $ 5.2 million compared to an investment gain of $ 0.2 million for the year ended december 31 , 2013 . the investment loss for 2014 principally resulted from the sales at a loss of portfolio company investments in our previously sponsored merchant banking fund investments . the net investment gain for 2013 principally resulted from interest income and an increase in the quoted market value of our investment in iridium , offset in part by an investment loss related to our previously sponsored merchant banking funds . 2013 versus 2012 . for the year ended december 31 , 2013 , we recorded an investment gain of $ 0.2 million compared to an investment loss of $ 6.4 million for the year ended december 31 , 2012 . the net gain of $ 6.6 million principally resulted from improved share price performance in the quoted value of iridium , which was marked to market , during 2013 compared to 2012 . during 2013 , we completed the sale of our investment in iridium , selling 5,084,016 common shares at an average price of $ 6.73 per share for proceeds of $ 34.2 million . we recognized a gain of $ 0.8 million on our 2013 sales as compared to a loss of $ 5.0 million in 2012. operating expenses we classify operating expenses as employee compensation and benefits expense and non-compensation expenses . operating expenses include travel , office space , communications , information services , depreciation , professional services and interest expense . a portion of certain costs are reimbursed by clients under the terms of client engagements . for the year ended december 31 , 2014 , total operating expenses were $ 207.8 million compared to $ 215.9 million of total operating expenses in 2013 . the decrease of $ 8.1 million , or 4 % , related to a decrease in our compensation and benefits expenses , as described in more detail below . our pre-tax income margin for 2014 and 2013 remained constant at 25 % . for the year ended december 31 , 2013 , total operating expenses were $ 215.9 million compared to $ 214.6 million of total operating expenses in 2012 . the increase of $ 1.3 million , or 1 % , related to an increase in our compensation and benefits expenses , partially offset by a decrease in non-compensation expenses as described in more detail below . our pre-tax income margin for 2013 and 2012 remained constant at 25 % . the following table sets forth information relating to our operating expenses , which are reported net of reimbursements of certain expenses by our clients : 31 replace_table_token_9_th compensation and benefits expenses the principal component of our operating expenses is employee compensation and benefits expenses , which we determine annually based on a percentage of revenues . the actual percentage of revenue is determined by management in consultation with the compensation committee at each year-end and based on such factors as the relative level of revenues , anticipated compensation requirements to retain and reward our employees , the cost to recruit and exit employees , the charge for amortization of restricted stock awards and related forfeitures and other relevant factors . the ratio of compensation to revenues has remained relatively constant over the past three years during which it has ranged from 53 % to 54 % . our compensation and benefits expenses principally consist of ( i ) base salary and benefits , ( ii ) amortization of long-term incentive compensation awards of restricted stock units and ( iii ) annual incentive compensation payable as cash bonus awards . base salary and benefits are paid ratably throughout the year . awards of restricted stock units are discretionary
| net cash flows provided by investing activities were $ 105.0 million for the year ended december 25 , 2019 . these cash flows are primarily comprised of $ 129.7 million of proceeds from the sale of assets , including $ 119.0 million from the sale of 105 restaurants and $ 10.7 million from the sale of real estate . these cash flows are offset by capital expenditures of $ 14.0 million and acquisitions of real estate of $ 11.3 million . net cash flows used in investing activities were $ 32.0 million for the year ended december 26 , 2018. these cash flows are primarily comprised of capital expenditures of $ 22.0 million and acquisitions of restaurants and real estate of $ 10.4 million . cash flows for acquisitions include $ 8.1 million for the reacquisition of six franchised restaurants , $ 1.8 million for real estate and $ 0.5 million related to a prior year acquisition . net cash flows used in investing activities were $ 27.1 million for the year ended december 27 , 2017. these cash flows are primarily comprised of capital expenditures of $ 18.8 million and acquisitions of restaurants and real estate of $ 12.4 million . 29 our principal capital requirements have been largely associated with the following : replace_table_token_18_th capital expenditures for fiscal 2020 are expected to be between $ 28 million and $ 33 million , including between $ 13 million and $ 18 million of anticipated real estate acquisitions through like-kind exchanges .
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our most robust period of growth occurred in the three years following the onset of the financial crisis in 2008 , when many industry sector managing directors sought to transition from highly regulated , large , diversified financial institutions to independent advisory firms such as greenhill . while we continue to focus on managing our business in a disciplined manner , and over the past three years have recruited fewer managing directors as compared to the period from 2008 through 2010 , we intend to continue our efforts to recruit new managing directors with industry sector experience and or geographic reach who can help expand our advisory capabilities . we had 66 client facing managing directors as of january 1 , 2015 , and added one additional managing director and announced the addition of 2 more managing directors ( through february 24 , 2015 ) and will add 8 more managing directors when we complete the acquisition of cogent , which is anticipated to occur around the end of the first quarter of 2015. prior to 2011 , we also engaged in merchant banking activities , consisting primarily of management of and investment in greenhill 's merchant banking funds , gcp i , gcp ii , gcp iii , gsavp and gcp europe , which are families of merchant banking funds . at the time of our exit from such activities an entity principally owned by former greenhill employees and independent from greenhill , took over the management of our merchant banking funds . since our exit from the merchant banking business , we have sought to realize value from our remaining principal investments and have sold or transferred substantially all of our investments in previously sponsored merchant banking funds and our previous investment in iridium . beginning in 2011 , as a result of our exit from the management of the merchant banking funds , we no longer generated management fees . since 2011 , our investment revenues consist entirely of gains ( or losses ) realized on the sale of our investments in the merchant banking funds and iridium , and changes in the unrealized value of the estimated fair market value and quoted values of such investments . as a result of the monetization of substantially all of our investments , we do not expect to report meaningful investment revenues or losses in future periods . at december 31 , 2014 , we held remaining investments in merchant banking funds with an estimated fair value of $ 4.2 million . at december 31 , 2014 , we employed 305 people . we strive to maintain a work environment that fosters professionalism , excellence , diversity , and cooperation among our employees worldwide . we utilize a comprehensive evaluation process at the 25 end of each year to measure performance , determine compensation and provide guidance on opportunities for continued development . business environment economic and global financial market conditions can materially affect our financial performance . in addition , revenues and net income in any period may not be indicative of full-year results or the results of any other period and may vary significantly from year to year and quarter to quarter . see “ risk factors . ” our advisory revenues were $ 280.5 million in the year ended december 31 , 2014 compared to $ 287.0 million in the year ended december 31 , 2013 , which represents a decrease of 2 % . this decrease resulted principally from a decrease in transaction completion fees , which were generally smaller in scale than 2013. at the same time , on a global basis , the number of completed transactions was up only 8 % for the year and completed transaction volume was up 17 % ( 1 ) . while the m & a market improved in 2014 , we had an essentially flat revenue outcome . there were several factors that led to this revenue outcome , including the fact that our important foreign markets saw less improvement than the u.s. market , a strong dollar that diminished the value of overseas fees and the impact of some personnel changes that we believe will enhance the long term potential of the firm . we do not regard this revenue outcome as reflective of our longer term growth potential . in 2014 , we advised on transactions for the first time for such leading companies around the world as aa limited , anixter international inc. , boart longyear ltd. , cerner corporation , dillard 's inc. , london stock exchange group plc , mannkind corporation , nippon television holdings , reckitt benckiser and voya financial , inc. we also advised on new transactions in all major markets for clients for whom we had previous engagements such as actavis plc , alcoa inc. , at & t inc. , gannett co. , inc. , tesco plc , tui ag and validus holdings , ltd. by geographic region in 2014 , our advisory revenues were relatively well dispersed throughout the regional markets in which we operate with an increased contribution from north america , where we generated in excess of 59 % of our revenues , which is consistent with the increase in transaction activity generally in that region . most of our other 2014 advisory revenues were generated in europe , where we derived 30 % of our revenues , which was a slight decline from the strong prior year level of contribution . in australia , the scale of transactions on which we advised declined from the prior year . by industry in 2014 , improved performance in the communications & media , consumer & retail and general industrials sectors generally offset a decline in activity in the technology , real estate and financial sectors . while merger and acquisition assignments continued to be our largest revenue source , we benefited from a significant increase in revenue from financing and restructuring advisory assignments . story_separator_special_tag as a result of the sale of substantially all of our investments , we do not expect to report significant investment revenues in future periods . we recognize revenue on investments in merchant banking funds based on our allocable share of realized and unrealized gains ( or losses ) reported by such funds on a quarterly basis . investments held by merchant banking funds are recorded at estimated fair value . because of the inherent uncertainty of valuations as well as the discounts applied , the estimated fair value of investments in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed . see “ item 2. management 's discussion and analysis of financial condition and results of operations — critical accounting policies and estimates — revenue recognition — investment revenues ” . during our period of ownership of iridium , which ended in december 2013 , we recognized gains or losses from our investment in iridium from marking to market our holdings at the end of each period to record unrealized gains or losses based upon the quoted market price for iridium common stock . to the extent we sold our share holdings in iridium for a price above or below our mark for the previous reported period , we recognized realized gains or losses on such sales during the period of sale . for our remaining investments in the merchant banking funds , the size and timing of changes in the fair value are tied to a number of different factors , including the performance of the particular portfolio companies , general economic conditions in the debt and equity markets and other factors which affect the industries in which the funds are invested . we will continue to record realized and unrealized changes in the fair value of our investments on a quarterly basis until such investments are fully liquidated . adverse changes in general economic conditions , commodity prices , credit and public equity markets could negatively impact the amount of investment revenues we record in any period . 2014 versus 2013 . for the year ended december 31 , 2014 , we recorded an investment loss of $ 5.2 million compared to an investment gain of $ 0.2 million for the year ended december 31 , 2013 . the investment loss for 2014 principally resulted from the sales at a loss of portfolio company investments in our previously sponsored merchant banking fund investments . the net investment gain for 2013 principally resulted from interest income and an increase in the quoted market value of our investment in iridium , offset in part by an investment loss related to our previously sponsored merchant banking funds . 2013 versus 2012 . for the year ended december 31 , 2013 , we recorded an investment gain of $ 0.2 million compared to an investment loss of $ 6.4 million for the year ended december 31 , 2012 . the net gain of $ 6.6 million principally resulted from improved share price performance in the quoted value of iridium , which was marked to market , during 2013 compared to 2012 . during 2013 , we completed the sale of our investment in iridium , selling 5,084,016 common shares at an average price of $ 6.73 per share for proceeds of $ 34.2 million . we recognized a gain of $ 0.8 million on our 2013 sales as compared to a loss of $ 5.0 million in 2012. operating expenses we classify operating expenses as employee compensation and benefits expense and non-compensation expenses . operating expenses include travel , office space , communications , information services , depreciation , professional services and interest expense . a portion of certain costs are reimbursed by clients under the terms of client engagements . for the year ended december 31 , 2014 , total operating expenses were $ 207.8 million compared to $ 215.9 million of total operating expenses in 2013 . the decrease of $ 8.1 million , or 4 % , related to a decrease in our compensation and benefits expenses , as described in more detail below . our pre-tax income margin for 2014 and 2013 remained constant at 25 % . for the year ended december 31 , 2013 , total operating expenses were $ 215.9 million compared to $ 214.6 million of total operating expenses in 2012 . the increase of $ 1.3 million , or 1 % , related to an increase in our compensation and benefits expenses , partially offset by a decrease in non-compensation expenses as described in more detail below . our pre-tax income margin for 2013 and 2012 remained constant at 25 % . the following table sets forth information relating to our operating expenses , which are reported net of reimbursements of certain expenses by our clients : 31 replace_table_token_9_th compensation and benefits expenses the principal component of our operating expenses is employee compensation and benefits expenses , which we determine annually based on a percentage of revenues . the actual percentage of revenue is determined by management in consultation with the compensation committee at each year-end and based on such factors as the relative level of revenues , anticipated compensation requirements to retain and reward our employees , the cost to recruit and exit employees , the charge for amortization of restricted stock awards and related forfeitures and other relevant factors . the ratio of compensation to revenues has remained relatively constant over the past three years during which it has ranged from 53 % to 54 % . our compensation and benefits expenses principally consist of ( i ) base salary and benefits , ( ii ) amortization of long-term incentive compensation awards of restricted stock units and ( iii ) annual incentive compensation payable as cash bonus awards . base salary and benefits are paid ratably throughout the year . awards of restricted stock units are discretionary
| cash and cash equivalents decreased by $ 7.6 million from december 31 , 2012 , including a decrease of $ 1.0 million resulting from the effect of the translation of foreign currency amounts into u.s. dollars at the year-end foreign currency conversion rates . we generated $ 67.8 million from operating activities , which consisted of $ 100.8 million from net income after giving effect to the non-cash items and a net increase in working capital of $ 33.0 million ( primarily due to an increase in advisory fees receivable due to a number of large transaction closings shortly prior to december 31 , 2013 ) . we generated $ 35.8 million from investing activities , which consisted of proceeds from the sale of iridium of $ 34.2 million , distributions from merchant banking fund investments of $ 1.3 million , partially offset by $ 0.6 million used to fund capital calls for our merchant banking fund investments and $ 1.2 million for the build out of office space and other capital needs . we used $ 110.2 million in financing activities , including $ 56.2 million for the payment of dividends , $ 42.5 million for open market repurchases of our common stock and $ 12.9 million for the repurchase of our common stock from employees in conjunction with the payment of tax liabilities in settlement of restricted stock units and $ 0.3 million for distributions to non-controlling interests , partially offset by net borrowings on our revolving loan facility of $ 1.7 million . 2012 . cash and cash equivalents decreased by $ 11.7 million from december 31 , 2011 , net of an increase of $ 0.2 million resulting from the effect of the translation of foreign currency amounts into u.s. dollars at the year-end foreign currency conversion rates . we generated $ 94.8 million from operating activities , which consisted of $ 93.4 million from net income after giving effect to the non-cash items and a net decrease in working capital of $ 1.3 million .
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36 in furtherance of our goal of delivering affordable solar electricity , we are continually focused on reducing pv solar system costs in four primary areas : module manufacturing , balance of systems ( “ bos ” ) costs ( consisting of the costs of the components of a solar power system other than the solar modules , such as inverters , mounting hardware , trackers , grid interconnection equipment , wiring and other devices , and installation labor costs ) , project development costs , and the cost of capital . first , with respect to our module manufacturing costs , our advanced technology has allowed us to reduce our average module manufacturing costs to among the lowest in the world for modules produced on a commercial scale , based on publicly available information . in 2012 , our total average manufacturing costs were $ 0.73 per watt , which is competitive on a comparable basis with those of traditional crystalline silicon solar module manufacturers , based on publicly available information . by continuing to improve conversion efficiency , production line throughput , and lower material costs , we believe that we can further reduce our manufacturing costs per watt and maintain cost competitiveness with traditional crystalline silicon solar module manufacturers . second , with respect to our bos cost reduction roadmap , we have aggressive programs which target key improvements in components and system design , which when combined with continued improvements in conversion efficiency , volume procurement around standardized hardware platforms , use of innovative installation techniques and know how , and accelerated installation times , are expected to result in substantial reductions to our bos costs enabling a lower system levelized cost of energy . third , with respect to our project development costs , we seek optimal site locations in an effort to minimize transmission and permitting costs , and to accelerate lead times to electricity generation . finally , with respect to the cost of capital , by continuing to demonstrate the financial viability and operational performance of our utility-scale pv solar power plants and increasing our pv solar power system operating experience , we believe we can continue to lower the cost of capital associated with our pv solar power systems , thereby further enhancing the economic viability of our projects and lowering the cost of electricity generated by pv solar power systems that incorporate our modules and technology . we believe that combining our reliable , low-cost module manufacturing capability with our systems business enables us to more rapidly reduce the price of solar electricity , accelerate the adoption of our technology in utility-scale pv solar power systems , and identify and remove constraints to the successful migration to sustainable solar markets around the world . our vertically integrated capabilities enable us to maximize value and mitigate risk for our customers and thereby deliver meaningful pv energy solutions to varied energy problems worldwide . we offer leadership across the entire solar value chain , resulting in more reliable and cost effective pv energy solutions for our customers , and furthering our mission to create enduring value by enabling a world powered by clean , affordable solar electricity . we operate our business in two segments . our components segment involves the design , manufacture , and sale of solar modules which convert sunlight into electricity . third-party customers of our components segment include project developers , system integrators , and operators of renewable energy projects . our second segment is our fully integrated systems business ( “ systems segment ” ) , through which we provide complete turn-key pv solar power systems , or solar solutions that draw upon our capabilities , which include ( i ) project development , ( ii ) engineering , procurement , and construction ( “ epc ” ) services , ( iii ) operating and maintenance ( “ o & m ” ) services , and ( iv ) project finance expertise , all as described in more detail below . we may provide our full epc services or any combination of individual products and services within our epc capabilities depending upon the customer and market opportunity . all of our systems segment products and services are for pv solar power systems which use our solar modules , and such products and services are sold directly to investor owned utilities , independent power developers and producers , commercial and industrial companies , and other system owners . market overview the solar industry experienced a challenging environment in 2012 , categorized by intense pricing competition , both at the pv module and system level , with many solar companies generating little or no operating income . in the aggregate , manufacturers of solar modules and cells have installed production capacity that significantly exceeds global demand . we believe this structural imbalance between supply and demand ( i.e . , where production capacity significantly exceeds current global demand ) may continue for the foreseeable future , and we expect it will continue to put pressure on pricing and our results of operations in 2013. we further believe that this structural imbalance will remain unfavorable for solar companies that are primarily module manufacturers , but that companies with established expertise and meaningful solutions in other areas of the solar value chain , such as project development , epc capabilities , and o & m services , are more likely to develop economically sustainable businesses . in light of such market realities , we continue to execute on our long term strategic plan described below under which we are focusing on our competitive strengths . a key core strength is our differentiated vertically integrated business model that enables us to provide utility-scale pv generation solutions to sustainable geographic markets that have an immediate need for mass-scale pv electricity . story_separator_special_tag north america however , will continue to represent a significant portion of our net sales , operating income and cash flows as a significant portion of our advance stage project pipeline , after excluding the four projects above , is comprised of projects in north america . manufacturing capacity as of december 31 , 2012 , we had 28 installed production lines with an annual global manufacturing capacity of approximately 1.9 gw at our manufacturing plants in perrysburg , ohio , and kulim , malaysia . our manufacturing operations in frankfurt ( oder ) , germany closed at the end of 2012. production at one or more of our manufacturing plants has and may in the future be idled temporarily to better align production with expected market demand and to allow us to implement upgraded process technologies as part of our conversion efficiency improvement initiatives . 2008-2009 manufacturing excursion during the period from june 2008 to june 2009 , a manufacturing excursion occurred whereby certain modules manufactured during that time period may experience premature power loss once installed in the field . the root cause of the manufacturing excursion was identified and addressed in june 2009. beginning in 2009 , we initiated a voluntary remediation program beyond our standard limited warranty pursuant to which we made commitments to customers with systems containing modules manufactured during the relevant period that we would cover certain costs of remediation efforts . these remediation efforts included module removal , replacement and logistical services and additional compensation payments to customers under certain circumstances . our best estimate for costs of our voluntary remediation program , as of and in each fiscal period in question , has been based on evaluation and consideration of the then-currently available information , including the estimated number of affected modules in the field , historical experience related to our voluntary remediation efforts , customer-provided data related to potentially affected systems and the estimated costs of performing the logistical services covered under our remediation program . 40 as we continued remediation efforts under our voluntary remediation program , we learned that , in light of the impracticality of identifying and replacing individual affected models , in order to remediate the energy loss impact at a system level , we are required to remove and replace several modules in the aggregate , including modules that might not have been affected by the manufacturing excursion . removed modules are returned to us and are further tested to determine if the module can be resold or whether the module should be recycled . we have expensed $ 271.2 million total through december 31 , 2012 for the estimated costs of remediating systems affected by modules manufactured during the relevant period , including $ 178.5 million for remediation expenses beyond our limited warranty obligations and $ 92.7 million in product warranty expense reflecting the net increase in the expected number of replacement modules required in connection with our remediation efforts . as part of our overall remediation strategy , we have reached commercial settlements with impacted customers mostly during the fourth quarter of 2012 and we expect to reach additional commercial settlements in the future . such commercial settlements typically include us making a cash payment to a customer in lieu of actually remediating the customer 's affected sites and in exchange the customer agrees that no further claims against us related to the manufacturing excursion can be made . the commercial settlements are beneficial to our customers as they benefit from a timely and fair settlement of their claims and we are able to eliminate the risk of uncertainty related to the ultimate cost of actual remediation efforts associated with identifying and replacing individual modules . for additional information regarding accrued expenses in excess of normal product warranty liability and related expenses , see note 9 . “ consolidated balance sheet details , ” to our consolidated financial statements included in this annual report on form 10-k. our voluntary remediation program , and the related manufacturing excursion , also resulted in changes in estimates to our product warranty liability . for additional information regarding these changes , see note 17 . “ commitments and contingencies , ” to our consolidated financial statements included in this annual report on form 10-k. restructuring we have undertaken a series of restructuring initiatives as further described in note 4 . “ restructuring , ” to our consolidated financial statements included in this annual report on form 10-k. in december 2011 , february 2012 and april 2012 , respectively , we announced restructuring initiatives intended to ( i ) align the organization with our long term strategic plan , including expected sustainable market opportunities , ( ii ) accelerate operating cost reductions and improve overall operating efficiency , and ( iii ) better align production capacity and geographic location of such capacity with expected geographic market requirements and demand . such restructuring initiatives resulted in charges to restructuring expense of $ 469.1 million in 2012 and $ 60.4 million in 2011. the most significant actions taken as part of these restructuring activities were the decisions to close our manufacturing operations in frankfurt ( oder ) , germany at the end of 2012 due to the lack of policy support for utility-scale solar projects in europe and to not proceed with our 4-line manufacturing plant in vietnam or a 2-line manufacturing plant in france , based upon expected future market demand and our focus on providing utility-scale pv generation solutions primarily to sustainable geographic markets . the annual cost savings expected from these restructuring initiatives in 2013 and beyond are expected to be between $ 70 million and $ 120 million , reducing both cost of sales and selling , general and administrative expenses in approximately equal amounts . the amount of cost savings realized will in part be impacted by the actual capacity utilization in a given year . these cost savings may be offset by increases in operating
| cash and cash equivalents decreased by $ 7.6 million from december 31 , 2012 , including a decrease of $ 1.0 million resulting from the effect of the translation of foreign currency amounts into u.s. dollars at the year-end foreign currency conversion rates . we generated $ 67.8 million from operating activities , which consisted of $ 100.8 million from net income after giving effect to the non-cash items and a net increase in working capital of $ 33.0 million ( primarily due to an increase in advisory fees receivable due to a number of large transaction closings shortly prior to december 31 , 2013 ) . we generated $ 35.8 million from investing activities , which consisted of proceeds from the sale of iridium of $ 34.2 million , distributions from merchant banking fund investments of $ 1.3 million , partially offset by $ 0.6 million used to fund capital calls for our merchant banking fund investments and $ 1.2 million for the build out of office space and other capital needs . we used $ 110.2 million in financing activities , including $ 56.2 million for the payment of dividends , $ 42.5 million for open market repurchases of our common stock and $ 12.9 million for the repurchase of our common stock from employees in conjunction with the payment of tax liabilities in settlement of restricted stock units and $ 0.3 million for distributions to non-controlling interests , partially offset by net borrowings on our revolving loan facility of $ 1.7 million . 2012 . cash and cash equivalents decreased by $ 11.7 million from december 31 , 2011 , net of an increase of $ 0.2 million resulting from the effect of the translation of foreign currency amounts into u.s. dollars at the year-end foreign currency conversion rates . we generated $ 94.8 million from operating activities , which consisted of $ 93.4 million from net income after giving effect to the non-cash items and a net decrease in working capital of $ 1.3 million .
| 0 |
36 in furtherance of our goal of delivering affordable solar electricity , we are continually focused on reducing pv solar system costs in four primary areas : module manufacturing , balance of systems ( “ bos ” ) costs ( consisting of the costs of the components of a solar power system other than the solar modules , such as inverters , mounting hardware , trackers , grid interconnection equipment , wiring and other devices , and installation labor costs ) , project development costs , and the cost of capital . first , with respect to our module manufacturing costs , our advanced technology has allowed us to reduce our average module manufacturing costs to among the lowest in the world for modules produced on a commercial scale , based on publicly available information . in 2012 , our total average manufacturing costs were $ 0.73 per watt , which is competitive on a comparable basis with those of traditional crystalline silicon solar module manufacturers , based on publicly available information . by continuing to improve conversion efficiency , production line throughput , and lower material costs , we believe that we can further reduce our manufacturing costs per watt and maintain cost competitiveness with traditional crystalline silicon solar module manufacturers . second , with respect to our bos cost reduction roadmap , we have aggressive programs which target key improvements in components and system design , which when combined with continued improvements in conversion efficiency , volume procurement around standardized hardware platforms , use of innovative installation techniques and know how , and accelerated installation times , are expected to result in substantial reductions to our bos costs enabling a lower system levelized cost of energy . third , with respect to our project development costs , we seek optimal site locations in an effort to minimize transmission and permitting costs , and to accelerate lead times to electricity generation . finally , with respect to the cost of capital , by continuing to demonstrate the financial viability and operational performance of our utility-scale pv solar power plants and increasing our pv solar power system operating experience , we believe we can continue to lower the cost of capital associated with our pv solar power systems , thereby further enhancing the economic viability of our projects and lowering the cost of electricity generated by pv solar power systems that incorporate our modules and technology . we believe that combining our reliable , low-cost module manufacturing capability with our systems business enables us to more rapidly reduce the price of solar electricity , accelerate the adoption of our technology in utility-scale pv solar power systems , and identify and remove constraints to the successful migration to sustainable solar markets around the world . our vertically integrated capabilities enable us to maximize value and mitigate risk for our customers and thereby deliver meaningful pv energy solutions to varied energy problems worldwide . we offer leadership across the entire solar value chain , resulting in more reliable and cost effective pv energy solutions for our customers , and furthering our mission to create enduring value by enabling a world powered by clean , affordable solar electricity . we operate our business in two segments . our components segment involves the design , manufacture , and sale of solar modules which convert sunlight into electricity . third-party customers of our components segment include project developers , system integrators , and operators of renewable energy projects . our second segment is our fully integrated systems business ( “ systems segment ” ) , through which we provide complete turn-key pv solar power systems , or solar solutions that draw upon our capabilities , which include ( i ) project development , ( ii ) engineering , procurement , and construction ( “ epc ” ) services , ( iii ) operating and maintenance ( “ o & m ” ) services , and ( iv ) project finance expertise , all as described in more detail below . we may provide our full epc services or any combination of individual products and services within our epc capabilities depending upon the customer and market opportunity . all of our systems segment products and services are for pv solar power systems which use our solar modules , and such products and services are sold directly to investor owned utilities , independent power developers and producers , commercial and industrial companies , and other system owners . market overview the solar industry experienced a challenging environment in 2012 , categorized by intense pricing competition , both at the pv module and system level , with many solar companies generating little or no operating income . in the aggregate , manufacturers of solar modules and cells have installed production capacity that significantly exceeds global demand . we believe this structural imbalance between supply and demand ( i.e . , where production capacity significantly exceeds current global demand ) may continue for the foreseeable future , and we expect it will continue to put pressure on pricing and our results of operations in 2013. we further believe that this structural imbalance will remain unfavorable for solar companies that are primarily module manufacturers , but that companies with established expertise and meaningful solutions in other areas of the solar value chain , such as project development , epc capabilities , and o & m services , are more likely to develop economically sustainable businesses . in light of such market realities , we continue to execute on our long term strategic plan described below under which we are focusing on our competitive strengths . a key core strength is our differentiated vertically integrated business model that enables us to provide utility-scale pv generation solutions to sustainable geographic markets that have an immediate need for mass-scale pv electricity . story_separator_special_tag north america however , will continue to represent a significant portion of our net sales , operating income and cash flows as a significant portion of our advance stage project pipeline , after excluding the four projects above , is comprised of projects in north america . manufacturing capacity as of december 31 , 2012 , we had 28 installed production lines with an annual global manufacturing capacity of approximately 1.9 gw at our manufacturing plants in perrysburg , ohio , and kulim , malaysia . our manufacturing operations in frankfurt ( oder ) , germany closed at the end of 2012. production at one or more of our manufacturing plants has and may in the future be idled temporarily to better align production with expected market demand and to allow us to implement upgraded process technologies as part of our conversion efficiency improvement initiatives . 2008-2009 manufacturing excursion during the period from june 2008 to june 2009 , a manufacturing excursion occurred whereby certain modules manufactured during that time period may experience premature power loss once installed in the field . the root cause of the manufacturing excursion was identified and addressed in june 2009. beginning in 2009 , we initiated a voluntary remediation program beyond our standard limited warranty pursuant to which we made commitments to customers with systems containing modules manufactured during the relevant period that we would cover certain costs of remediation efforts . these remediation efforts included module removal , replacement and logistical services and additional compensation payments to customers under certain circumstances . our best estimate for costs of our voluntary remediation program , as of and in each fiscal period in question , has been based on evaluation and consideration of the then-currently available information , including the estimated number of affected modules in the field , historical experience related to our voluntary remediation efforts , customer-provided data related to potentially affected systems and the estimated costs of performing the logistical services covered under our remediation program . 40 as we continued remediation efforts under our voluntary remediation program , we learned that , in light of the impracticality of identifying and replacing individual affected models , in order to remediate the energy loss impact at a system level , we are required to remove and replace several modules in the aggregate , including modules that might not have been affected by the manufacturing excursion . removed modules are returned to us and are further tested to determine if the module can be resold or whether the module should be recycled . we have expensed $ 271.2 million total through december 31 , 2012 for the estimated costs of remediating systems affected by modules manufactured during the relevant period , including $ 178.5 million for remediation expenses beyond our limited warranty obligations and $ 92.7 million in product warranty expense reflecting the net increase in the expected number of replacement modules required in connection with our remediation efforts . as part of our overall remediation strategy , we have reached commercial settlements with impacted customers mostly during the fourth quarter of 2012 and we expect to reach additional commercial settlements in the future . such commercial settlements typically include us making a cash payment to a customer in lieu of actually remediating the customer 's affected sites and in exchange the customer agrees that no further claims against us related to the manufacturing excursion can be made . the commercial settlements are beneficial to our customers as they benefit from a timely and fair settlement of their claims and we are able to eliminate the risk of uncertainty related to the ultimate cost of actual remediation efforts associated with identifying and replacing individual modules . for additional information regarding accrued expenses in excess of normal product warranty liability and related expenses , see note 9 . “ consolidated balance sheet details , ” to our consolidated financial statements included in this annual report on form 10-k. our voluntary remediation program , and the related manufacturing excursion , also resulted in changes in estimates to our product warranty liability . for additional information regarding these changes , see note 17 . “ commitments and contingencies , ” to our consolidated financial statements included in this annual report on form 10-k. restructuring we have undertaken a series of restructuring initiatives as further described in note 4 . “ restructuring , ” to our consolidated financial statements included in this annual report on form 10-k. in december 2011 , february 2012 and april 2012 , respectively , we announced restructuring initiatives intended to ( i ) align the organization with our long term strategic plan , including expected sustainable market opportunities , ( ii ) accelerate operating cost reductions and improve overall operating efficiency , and ( iii ) better align production capacity and geographic location of such capacity with expected geographic market requirements and demand . such restructuring initiatives resulted in charges to restructuring expense of $ 469.1 million in 2012 and $ 60.4 million in 2011. the most significant actions taken as part of these restructuring activities were the decisions to close our manufacturing operations in frankfurt ( oder ) , germany at the end of 2012 due to the lack of policy support for utility-scale solar projects in europe and to not proceed with our 4-line manufacturing plant in vietnam or a 2-line manufacturing plant in france , based upon expected future market demand and our focus on providing utility-scale pv generation solutions primarily to sustainable geographic markets . the annual cost savings expected from these restructuring initiatives in 2013 and beyond are expected to be between $ 70 million and $ 120 million , reducing both cost of sales and selling , general and administrative expenses in approximately equal amounts . the amount of cost savings realized will in part be impacted by the actual capacity utilization in a given year . these cost savings may be offset by increases in operating
| cash provided by operating activities was $ 762.2 million during 2012 , compared with cash used in operating activities of $ 33.5 million during 2011 and cash provided by operating activities of $ 705.5 million during 2010. the increase in operating cash flows during 2012 was primarily due to higher net cash received from customers in 2012 , as compared to 2011 and 2010. this increase was partially offset by an increase in net cash paid to suppliers during 2012 , as compared to 2011 and 2010. in addition , income taxes paid , net of refunds decreased from payments of $ 80.1 million and $ 46.2 million in 2010 and 2011 , respectively , to a net refund of $ 21.5 million in 2012 , primarily due to certain german income tax refunds received during 2012. the remaining increase in cash provided by operating activities was the result of net differences in excess tax benefits from share-based compensation arrangements , interest received and interest paid in 2012 compared to 2011 and 2010. investing activities cash used in investing activities was $ 383.7 million during 2012 , compared with $ 676.5 million during 2011 and $ 742.1 million during 2010. cash used in investing activities during 2012 included capital expenditures of $ 379.2 million , compared to $ 731.8 million and $ 588.9 million in 2011 and 2010 , respectively . the decrease in capital expenditures was primarily due to a lower amount of capital expenditures during 2012 related to our previously planned manufacturing plants in vietnam and mesa , arizona compared to capital expenditures made during 2011 and 2010 related to manufacturing plant expansions primarily in malaysia and germany .
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the company 's airlines have been providing passenger and cargo airlift services to the u.s. dod since the mid 1990 's . contracts with the ustc are typically for a one-year period , however , the current passenger international charter contract has a two-year term with option periods , at the election of the dod , through september 2024 and the contract with ati to provide combi aircraft operations , runs through december 2021. due to the acquisition of oai , the dod comprises a larger portion of our 2020 and 2019 consolidated revenues compared to previous years . revenues from our commercial arrangements with asi comprised approximately 30 % , 23 % and 27 % of our consolidated revenues during the years ended december 31 , 2020 , 2019 and 2018 , respectively . on march 8 , 2016 , we entered into an air transportation services agreement ( as amended , the “ atsa ” ) with asi pursuant to which we lease boeing 767 freighter aircraft to asi , operate the aircraft via our airline subsidiaries and provide ground 30 handling services by our subsidiary , lgstx . under the atsa , we operate aircraft based on pre-defined fees scaled for the number of aircraft hours flown , aircraft scheduled and flight crews provided to asi for its network . the operating term of the atsa runs through march of 2024 and is thereafter subject to renewal provisions . the aircraft lease terms range from 5 to 10 years . for more information about the atsa , including its amendments , see item 1 of this report . the table below summarizes aircraft lease placements and commitments with amazon as of december 31 , 2020. replace_table_token_4_th in conjunction with the execution of the atsa and its amendments , the company and amazon entered into an investment agreement and a stockholders agreement on march 8 , 2016 ( the 2016 investment agreement ) and a second investment agreement on december 20 , 2018 ( the 2018 investment agreement ) . pursuant to these investment agreements , the company issued warrants to amazon in conjunction with aircraft leases . through the 2016 and 2018 investment agreements and the exercise of the warrants granted thereunder , amazon could potentially own approximately 39.9 % of the company if all the issued and issuable warrants vest and are settled in full with cash . our accounting for the warrants issued to amazon has been determined in accordance with the financial reporting guidance for financial instruments . the fair value of the warrants issued or issuable to amazon are recorded as a lease incentive asset and are amortized against revenues over the duration of the aircraft leases . the warrants are accounted for as financial instruments , and accordingly , the fair value of the outstanding warrants are measured and classified in liabilities at the end of each reporting period . the company 's earnings are impacted by the fair value re-measurement of the amazon warrants classified in liabilities at the end of each reporting period , customer incentive amortization and the related income tax effects . for income tax calculations , the value and timing of related tax deductions will differ from the guidance described below for financial reporting . for additional information about the warrants , see note d to the accompanying consolidated financial statements in this report . dhl accounted for 12 % , 14 % and 26 % of the company 's consolidated revenues , excluding directly reimbursed revenues , during the years ended december 31 , 2020 , 2019 and 2018 , respectively . under a cmi agreement with dhl , abx operates and maintains aircraft based on pre-defined fees scaled for the number of aircraft hours flown , aircraft scheduled and flight crews provided to dhl for its network . under the pricing structure of the cmi agreement , abx is responsible for complying with faa airworthiness directives , the cost of boeing 767 airframe maintenance and certain engine maintenance events for the aircraft leased to dhl that it operates . as of december 31 , 2020 , the company , through cam , leased 14 boeing 767 aircraft to dhl comprised of seven boeing 767-200 aircraft and seven boeing 767-300 aircraft , expiring between 2021 and 2024. eight of the 14 boeing 767 aircraft were being operated by the company 's airlines for dhl . we also operated four cam-owned boeing 757 aircraft under other operating arrangements with dhl during 2019 and the first half of 2020. during 2020 , dhl terminated operating agreements for three of the boeing 757 aircraft . the decline in the percentage of revenues from dhl primarily reflects the removal of the boeing 757 operations and increased revenues from other customers compared to last year . 31 results of operations revenue and earnings summary external customer revenues from continuing operations increased by $ 118.4 million , or 8 % , to $ 1,570.6 million during 2020 compared to 2019. customer revenues increased in 2020 for contracted airline services , charter flights , aircraft leasing and aviation fuel sales , compared to the previous year periods . beginning in late february 2020 , our revenues were disrupted due to the covid-19 pandemic . the dod and other customers began canceling scheduled passenger flights as a result of the pandemic . the decline in revenues from these cancellations was offset by an increase in flying for our customers ' package delivery networks and charter flight operations during 2020. revenues for 2018 were $ 892.3 million and included only a few weeks of revenue for oai which was acquired on november 9 , 2018. the consolidated net earnings from continuing operations were $ 25.1 million for 2020 compared to $ 60.0 million for 2019 and $ 67.9 million for 2018. the pre-tax earnings from continuing operations were $ 41.4 million for 2020 compared to $ 71.6 million for 2019 and $ 87.5 million for story_separator_special_tag expenses from continuing operations salaries , wages and benefits expense increased $ 85.4 million , or 20 % during 2020 compared to 2019 driven by higher employee headcount for flight operations , maintenance operations and package sorting services . the total headcount increased 20 % as of december 31 , 2020 compared to december 31 , 2019. the increases during 2020 include additional flight crewmembers , aircraft maintenance technicians and other personnel to support increased block hours . depreciation and amortization expense increased $ 20.5 million during 2020 compared to 2019. the increase reflects incremental depreciation for eleven boeing 767-300 aircraft and additional aircraft engines added to the operating fleet since the beginning of 2020 , as well as capitalized heavy maintenance and navigation technology upgrades . we expect depreciation expense to increase during future periods in conjunction with our fleet expansion and capital spending plans . maintenance , materials and repairs expense increased by $ 9.2 million during 2020 compared to 2019. increased maintenance expense for 2020 was driven by increased flight hours and higher costs for unscheduled engine repairs at our airlines . the aircraft maintenance and material expenses can vary among periods due to the number of maintenance events and the scope of airframe checks that are performed . 37 fuel expense decreased by $ 6.7 million during 2020 compared to 2019. fuel expense includes the cost of fuel to operate dod charters , fuel used to position aircraft for service and for maintenance purposes , as well as the cost of fuel sales . fuel expense decreased during 2020 compared to 2019 due to lower prices for aviation fuel during the pandemic . contracted ground and aviation services expense includes navigational services , aircraft and cargo handling services , baggage handling services and other airport services . contracted ground and aviation services decreased $ 0.5 million during 2020 compared to 2019. since mid-2019 , certain customers chose to in-source some ground services that we had been performing on their behalf . travel expense decreased by $ 13.6 million during 2020 compared to 2019. the decrease in travel expense was due to less employee travel and the lower costs of air travel during the pandemic . landing and ramp expense , which includes the cost of deicing chemicals , increased by $ 1.3 million during 2020 compared to 2019 , driven by increased block hours and network locations . rent expense increased by $ 3.3 million during 2020 compared to 2019 due to an additional aircraft partially offset by lower facility rents during 2020. insurance expense increased by $ 2.6 million during 2020 compared to 2019. aircraft fleet insurance has increased due to additional aircraft operations and higher insurance rates during 2020 compared to 2019. other operating expenses decreased by $ 4.0 million during 2020 compared to 2019. other operating expenses include professional fees , employee training , utilities , commission expense to our craf team for dod revenues and other expenses . asset impairment charges were recorded during the second quarter of 2020 , in conjunction with management 's decision to retire four boeing 757 freighter aircraft . three of the 757 airframes have been removed from service and are available for sale . one remains in service through the first quarter of 2021. impairment charges totaling $ 39.1 million were recorded , primarily reflecting the fair value of these assets as well as other surplus engines and parts . operating results included a pre-tax contra expense of $ 47.2 million during 2020 to recognize grants received from the u.s. government under the cares act . for additional information about the cares act grants , see note i of the unaudited condensed consolidated financial statements included in this report . non operating income , adjustments and expense s interest expense decreased by $ 3.8 million during 2020 compared to 2019. interest expense during 2020 decreased compared to the previous year due to lower interest rates on our borrowings under the senior credit agreement and lower debt balances outstanding during the year . the company recorded unrealized pre-tax losses on financial instruments re-measurements of $ 100.8 million during the year ended december 31 , 2020 , compared to $ 12.3 million for 2019. the gains and losses include the results of re-valuing , as of december 31 , 2020 and 2019 , the fair value of the stock warrants granted to amazon . generally , the warrant value increases or decreases with corresponding increases or decreases in the atsg share price during the measurement period . warrant losses for 2020 reflect a 34 % increase in the traded price of atsg shares . additionally , the value of certain warrants depend partially on the probability that warrants will vest upon the execution of aircraft leases . increases in the traded value of atsg shares and increases in the probability of vested warrants each result in an increase to the warrant value and resulted in warrant losses recorded to financial instruments for 2020. non service components of retiree benefits were a net loss of $ 12.0 million for 2020 compared to a net gain of $ 9.4 million for 2019. the non service component gain and losses of retiree benefits are actuarially determined and include the amortization of unrecognized gain and loss stemming from changes in assumptions regarding discount rates , expected investment returns and other retirement plan assumptions . non service components of retiree benefits can vary significantly from one year to the next based on investment results and changes in discount rates used to account for defined benefit retirement plans . income tax expense from earnings from continuing operations decreased $ 4.7 million for 2020 compared to 2019. income taxes included deferred income tax effects for the gains and losses from warrant re-measurements and the amortization of the customer incentive . the income tax effects of the warrant re-measurements and the 38 amortization of the customer incentive are different than the book expenses and benefits required
| cash provided by operating activities was $ 762.2 million during 2012 , compared with cash used in operating activities of $ 33.5 million during 2011 and cash provided by operating activities of $ 705.5 million during 2010. the increase in operating cash flows during 2012 was primarily due to higher net cash received from customers in 2012 , as compared to 2011 and 2010. this increase was partially offset by an increase in net cash paid to suppliers during 2012 , as compared to 2011 and 2010. in addition , income taxes paid , net of refunds decreased from payments of $ 80.1 million and $ 46.2 million in 2010 and 2011 , respectively , to a net refund of $ 21.5 million in 2012 , primarily due to certain german income tax refunds received during 2012. the remaining increase in cash provided by operating activities was the result of net differences in excess tax benefits from share-based compensation arrangements , interest received and interest paid in 2012 compared to 2011 and 2010. investing activities cash used in investing activities was $ 383.7 million during 2012 , compared with $ 676.5 million during 2011 and $ 742.1 million during 2010. cash used in investing activities during 2012 included capital expenditures of $ 379.2 million , compared to $ 731.8 million and $ 588.9 million in 2011 and 2010 , respectively . the decrease in capital expenditures was primarily due to a lower amount of capital expenditures during 2012 related to our previously planned manufacturing plants in vietnam and mesa , arizona compared to capital expenditures made during 2011 and 2010 related to manufacturing plant expansions primarily in malaysia and germany .
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the company 's airlines have been providing passenger and cargo airlift services to the u.s. dod since the mid 1990 's . contracts with the ustc are typically for a one-year period , however , the current passenger international charter contract has a two-year term with option periods , at the election of the dod , through september 2024 and the contract with ati to provide combi aircraft operations , runs through december 2021. due to the acquisition of oai , the dod comprises a larger portion of our 2020 and 2019 consolidated revenues compared to previous years . revenues from our commercial arrangements with asi comprised approximately 30 % , 23 % and 27 % of our consolidated revenues during the years ended december 31 , 2020 , 2019 and 2018 , respectively . on march 8 , 2016 , we entered into an air transportation services agreement ( as amended , the “ atsa ” ) with asi pursuant to which we lease boeing 767 freighter aircraft to asi , operate the aircraft via our airline subsidiaries and provide ground 30 handling services by our subsidiary , lgstx . under the atsa , we operate aircraft based on pre-defined fees scaled for the number of aircraft hours flown , aircraft scheduled and flight crews provided to asi for its network . the operating term of the atsa runs through march of 2024 and is thereafter subject to renewal provisions . the aircraft lease terms range from 5 to 10 years . for more information about the atsa , including its amendments , see item 1 of this report . the table below summarizes aircraft lease placements and commitments with amazon as of december 31 , 2020. replace_table_token_4_th in conjunction with the execution of the atsa and its amendments , the company and amazon entered into an investment agreement and a stockholders agreement on march 8 , 2016 ( the 2016 investment agreement ) and a second investment agreement on december 20 , 2018 ( the 2018 investment agreement ) . pursuant to these investment agreements , the company issued warrants to amazon in conjunction with aircraft leases . through the 2016 and 2018 investment agreements and the exercise of the warrants granted thereunder , amazon could potentially own approximately 39.9 % of the company if all the issued and issuable warrants vest and are settled in full with cash . our accounting for the warrants issued to amazon has been determined in accordance with the financial reporting guidance for financial instruments . the fair value of the warrants issued or issuable to amazon are recorded as a lease incentive asset and are amortized against revenues over the duration of the aircraft leases . the warrants are accounted for as financial instruments , and accordingly , the fair value of the outstanding warrants are measured and classified in liabilities at the end of each reporting period . the company 's earnings are impacted by the fair value re-measurement of the amazon warrants classified in liabilities at the end of each reporting period , customer incentive amortization and the related income tax effects . for income tax calculations , the value and timing of related tax deductions will differ from the guidance described below for financial reporting . for additional information about the warrants , see note d to the accompanying consolidated financial statements in this report . dhl accounted for 12 % , 14 % and 26 % of the company 's consolidated revenues , excluding directly reimbursed revenues , during the years ended december 31 , 2020 , 2019 and 2018 , respectively . under a cmi agreement with dhl , abx operates and maintains aircraft based on pre-defined fees scaled for the number of aircraft hours flown , aircraft scheduled and flight crews provided to dhl for its network . under the pricing structure of the cmi agreement , abx is responsible for complying with faa airworthiness directives , the cost of boeing 767 airframe maintenance and certain engine maintenance events for the aircraft leased to dhl that it operates . as of december 31 , 2020 , the company , through cam , leased 14 boeing 767 aircraft to dhl comprised of seven boeing 767-200 aircraft and seven boeing 767-300 aircraft , expiring between 2021 and 2024. eight of the 14 boeing 767 aircraft were being operated by the company 's airlines for dhl . we also operated four cam-owned boeing 757 aircraft under other operating arrangements with dhl during 2019 and the first half of 2020. during 2020 , dhl terminated operating agreements for three of the boeing 757 aircraft . the decline in the percentage of revenues from dhl primarily reflects the removal of the boeing 757 operations and increased revenues from other customers compared to last year . 31 results of operations revenue and earnings summary external customer revenues from continuing operations increased by $ 118.4 million , or 8 % , to $ 1,570.6 million during 2020 compared to 2019. customer revenues increased in 2020 for contracted airline services , charter flights , aircraft leasing and aviation fuel sales , compared to the previous year periods . beginning in late february 2020 , our revenues were disrupted due to the covid-19 pandemic . the dod and other customers began canceling scheduled passenger flights as a result of the pandemic . the decline in revenues from these cancellations was offset by an increase in flying for our customers ' package delivery networks and charter flight operations during 2020. revenues for 2018 were $ 892.3 million and included only a few weeks of revenue for oai which was acquired on november 9 , 2018. the consolidated net earnings from continuing operations were $ 25.1 million for 2020 compared to $ 60.0 million for 2019 and $ 67.9 million for 2018. the pre-tax earnings from continuing operations were $ 41.4 million for 2020 compared to $ 71.6 million for 2019 and $ 87.5 million for story_separator_special_tag expenses from continuing operations salaries , wages and benefits expense increased $ 85.4 million , or 20 % during 2020 compared to 2019 driven by higher employee headcount for flight operations , maintenance operations and package sorting services . the total headcount increased 20 % as of december 31 , 2020 compared to december 31 , 2019. the increases during 2020 include additional flight crewmembers , aircraft maintenance technicians and other personnel to support increased block hours . depreciation and amortization expense increased $ 20.5 million during 2020 compared to 2019. the increase reflects incremental depreciation for eleven boeing 767-300 aircraft and additional aircraft engines added to the operating fleet since the beginning of 2020 , as well as capitalized heavy maintenance and navigation technology upgrades . we expect depreciation expense to increase during future periods in conjunction with our fleet expansion and capital spending plans . maintenance , materials and repairs expense increased by $ 9.2 million during 2020 compared to 2019. increased maintenance expense for 2020 was driven by increased flight hours and higher costs for unscheduled engine repairs at our airlines . the aircraft maintenance and material expenses can vary among periods due to the number of maintenance events and the scope of airframe checks that are performed . 37 fuel expense decreased by $ 6.7 million during 2020 compared to 2019. fuel expense includes the cost of fuel to operate dod charters , fuel used to position aircraft for service and for maintenance purposes , as well as the cost of fuel sales . fuel expense decreased during 2020 compared to 2019 due to lower prices for aviation fuel during the pandemic . contracted ground and aviation services expense includes navigational services , aircraft and cargo handling services , baggage handling services and other airport services . contracted ground and aviation services decreased $ 0.5 million during 2020 compared to 2019. since mid-2019 , certain customers chose to in-source some ground services that we had been performing on their behalf . travel expense decreased by $ 13.6 million during 2020 compared to 2019. the decrease in travel expense was due to less employee travel and the lower costs of air travel during the pandemic . landing and ramp expense , which includes the cost of deicing chemicals , increased by $ 1.3 million during 2020 compared to 2019 , driven by increased block hours and network locations . rent expense increased by $ 3.3 million during 2020 compared to 2019 due to an additional aircraft partially offset by lower facility rents during 2020. insurance expense increased by $ 2.6 million during 2020 compared to 2019. aircraft fleet insurance has increased due to additional aircraft operations and higher insurance rates during 2020 compared to 2019. other operating expenses decreased by $ 4.0 million during 2020 compared to 2019. other operating expenses include professional fees , employee training , utilities , commission expense to our craf team for dod revenues and other expenses . asset impairment charges were recorded during the second quarter of 2020 , in conjunction with management 's decision to retire four boeing 757 freighter aircraft . three of the 757 airframes have been removed from service and are available for sale . one remains in service through the first quarter of 2021. impairment charges totaling $ 39.1 million were recorded , primarily reflecting the fair value of these assets as well as other surplus engines and parts . operating results included a pre-tax contra expense of $ 47.2 million during 2020 to recognize grants received from the u.s. government under the cares act . for additional information about the cares act grants , see note i of the unaudited condensed consolidated financial statements included in this report . non operating income , adjustments and expense s interest expense decreased by $ 3.8 million during 2020 compared to 2019. interest expense during 2020 decreased compared to the previous year due to lower interest rates on our borrowings under the senior credit agreement and lower debt balances outstanding during the year . the company recorded unrealized pre-tax losses on financial instruments re-measurements of $ 100.8 million during the year ended december 31 , 2020 , compared to $ 12.3 million for 2019. the gains and losses include the results of re-valuing , as of december 31 , 2020 and 2019 , the fair value of the stock warrants granted to amazon . generally , the warrant value increases or decreases with corresponding increases or decreases in the atsg share price during the measurement period . warrant losses for 2020 reflect a 34 % increase in the traded price of atsg shares . additionally , the value of certain warrants depend partially on the probability that warrants will vest upon the execution of aircraft leases . increases in the traded value of atsg shares and increases in the probability of vested warrants each result in an increase to the warrant value and resulted in warrant losses recorded to financial instruments for 2020. non service components of retiree benefits were a net loss of $ 12.0 million for 2020 compared to a net gain of $ 9.4 million for 2019. the non service component gain and losses of retiree benefits are actuarially determined and include the amortization of unrecognized gain and loss stemming from changes in assumptions regarding discount rates , expected investment returns and other retirement plan assumptions . non service components of retiree benefits can vary significantly from one year to the next based on investment results and changes in discount rates used to account for defined benefit retirement plans . income tax expense from earnings from continuing operations decreased $ 4.7 million for 2020 compared to 2019. income taxes included deferred income tax effects for the gains and losses from warrant re-measurements and the amortization of the customer incentive . the income tax effects of the warrant re-measurements and the 38 amortization of the customer incentive are different than the book expenses and benefits required
| cash flows net cash generated from operating activities totaled $ 512.3 million , $ 396.9 million and $ 298.0 million in 2020 , 2019 and 2018 , respectively . improved cash flows generated from operating activities during 2020 and 2019 included additional aircraft leases to customers and increased operating levels of the acmi services segment . operating cash flows for 2020 include the receipt of $ 75.8 million of grant funds from the cares act . cash outlays for pension contributions were $ 10.8 million , $ 5.4 million and $ 22.2 million in 2020 , 2019 and 2018 , respectively . capital spending levels were primarily the result of aircraft modification costs and the acquisition of aircraft for freighter modification . cash payments for capital expenditures were $ 510.4 million , $ 453.5 million and $ 292.9 million in 2020 , 2019 and 2018 , respectively . capital expenditures in 2020 included $ 353.4 million for the acquisition of eleven boeing 767-300 aircraft and freighter modification costs ; $ 76.0 million for required heavy maintenance ; and $ 81.0 million for other equipment , including purchases of aircraft engines and rotables . capital expenditures in 2019 included $ 328.0 million for the acquisition of eleven boeing 767-300 aircraft and freighter modification costs ; $ 76.1 million for required heavy maintenance ; and $ 49.4 million for other equipment , including the purchases of aircraft engines and rotables . our capital expenditures in 2018 included $ 197.1 million for the acquisition of eight boeing 767-300 aircraft and freighter modification costs ; $ 61.7 million for required heavy maintenance ; and $ 34.1 million for other equipment , including purchases of aircraft engines and rotables . cash proceeds of $ 24.6 million , $ 10.8 million and $ 17.6 million were received in 2020 , 2019 and 2018 , respectively , for the sale of aircraft engines and airframes . during 2020 , 2019 and 2018 , we spent $ 13.3 million , $ 24.4 million and $ 866.6 million , respectively , for acquisitions and investments in other businesses .
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future utilization of our net operating loss , or nol , carryforwards may be subject to a substantial annual limitation due to the “ change in ownership ” provisions of the internal revenue code . the annual limitation may result in the expiration of nol carryforwards before utilization . due to our history of losses , a valuation allowance sufficient to fully offset our nol and other deferred tax assets has been established under current accounting pronouncements , and this valuation allowance will be maintained unless sufficient positive evidence develops to support its reversal . 10 seasonality and variations in interim quarterly results our quarterly net revenues , gross profit , and operating income from sales of products are impacted significantly by the seasonality of the retail selling season and the timing of the release of new titles . sales of our catalog and other products are generally higher in the first and fourth quarters of our fiscal year ( ending january 31 and october 31 , respectively ) due to increased retail sales during the holiday season . sales and gross profit as a percentage of sales also generally increase in quarters in which we release significant new titles because of increased sales volume as retailers make purchases to stock their shelves and meet initial demand for the new release . these quarters also benefit from the higher selling prices that we are able to achieve early in the product 's life cycle . therefore , sales results in any one quarter are not necessarily indicative of expected results for subsequent quarters during the fiscal year . critical accounting estimates our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues , and expenses , and related disclosure of contingent assets and liabilities . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results could differ materially from these estimates under different assumptions or conditions . we have identified the policies below as critical to our business operations and to the understanding of our financial results . the impact and any associated risks related to these policies on our business operations is discussed throughout management 's discussion and analysis of financial condition and results of operations when such policies affect our reported and expected financial results . revenue recognition . we recognized revenue on the sale of packaged goods upon the shipment of our product when : ( 1 ) risks and rewards of ownership are transferred ; ( 2 ) persuasive evidence of an arrangement exists ; ( 3 ) we have no continuing obligations to the customer ; and ( 4 ) the collection of related accounts receivable is probable . certain products are sold to customers with a street date ( the earliest date these products may be resold by retailers ) . revenue for sales of these products is not recognized prior to their street date . some of our software products provide limited online features at no additional cost to the consumer . generally , we have considered such features to be incidental to our overall product offerings and an inconsequential deliverable . accordingly , we do not defer any revenue related to products containing these limited online features . however , in instances where online features or additional functionality is considered a substantive deliverable in addition to the software product , such characteristics will be taken into account when applying our revenue recognition policy . to date , the company has not earned significant revenues from such features . in addition , some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee . revenue from product downloads is generally recognized when the download is made available ( assuming all other recognition criteria are met ) . when we enter into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts , revenue is recognized in accordance with the terms of the agreements , generally upon delivery of a master copy , assuming our performance obligations are complete and all other recognition criteria are met , or as per-copy royalties are earned on sales of games . price protection and other allowances . we generally sold our products on a no-return basis , although in certain instances , we provide price protection or other allowances on certain unsold products in accordance with industry practices . price protection , when granted and applicable , allows customers a partial credit with respect to merchandise unsold by them . revenue is recognized net of estimates of these allowances . sales incentives and other consideration that represent costs incurred by us for benefits received , such as the appearance of our products in a customer 's national circular advertisement , are generally reflected as selling and marketing expenses . we estimate potential future product price protection and other discounts related to current period product revenue . in addition , some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee . revenue from product downloads is generally recognized when the download is made available ( assuming all other recognition criteria are met ) . story_separator_special_tag in addition , in the event the company issues or sells , or is deemed to issue or sell , shares of common stock at a per share price that is less than the conversion price then in effect , the conversion price shall be reduced to such lower price , subject to certain exceptions . notwithstanding the foregoing , until such time as the company obtains the required shareholder approval pursuant to the rules of the nasdaq stock market , llc , the conversion price of the series c preferred shares shall not be adjusted to a per share price below $ 0.86. the company is prohibited from effecting a conversion of the series c preferred shares to the extent that , as a result of such conversion , such holder would beneficially own more than 4.99 % of the number of shares of common stock subject to increase , up to 9.99 % . each holder is entitled to vote on all matters submitted to stockholders of the company , on an “ as converted basis ” , subject to the beneficial ownership limitation , based on a conversion price of $ 1.30 per share . the series c preferred shares bear no interest and shall rank junior to the company 's series a preferred shares but senior to the company 's series b preferred shares . the may warrants are exercisable , immediately , at a price of $ 1.40 per share , subject to adjustment , and expire three years from the date of issuance . the holders may , subject to certain limitations , exercise the may warrants on a cashless basis . the company is prohibited from effecting an exercise of any may warrant to the extent that , as a result of any such exercise , the holder would beneficially own more than 4.99 % of the number of shares of common stock outstanding . the proceeds of the may private placement along with certificates evidencing the series c preferred shares and series c warrants were deposited into an escrow accounts . on the may closing date , twenty percent ( 20 % ) of the proceeds of the may private placement ( $ 1.01 million ) and a corresponding number of series c preferred shares and series c warrants were released to the company and the investors , respectively . the remaining eighty percent ( 80 % ) of the proceeds from the may private placement ( $ 4.04 million ) and the corresponding percentage of series c preferred shares and series c warrants were released to the company and the investors , respectively , in september 2015 in connection with amendments to the may subscription agreements . september 2015 on september 25 , 2015 , we entered into amendment agreements to amend the terms of our subscription agreements for the private offerings closed december 17 , 2014 and may 15 , 2015 to provide for the consent of the lead investor in such offerings to release of all remaining escrowed funds to the company ( $ 5.0 million under the december private placement and $ 4.04 under the may private placement ) upon the satisfaction of certain obligations , which the company satisfied . pursuant to the amendment agreements , the company was , among other things , required to increase the size of its board of directors and appoint thereto , individuals deemed acceptable to the lead investor and approved by the nasdaq stock market , llc ; appoint a new chief executive officer and a new chief financial officer and exchange the series c warrants , as described further below . on september 30 , 2015 the company received $ 9.04 million in proceeds from the foregoing release of escrowed funds and the corresponding securities were released to the investors . 16 in accordance with the aforementioned escrow release conditions , we entered into exchange agreements with holders of our outstanding series c warrants pursuant to which each holder received .4 shares of our common stock for each 1 warrant share exchanged for cancellation . at the election of any holder who would , as a result of receipt of the common stock hold in excess of certain beneficial ownership thresholds of the company 's issued and outstanding common stock , such holder could receive shares of our newly designated 0 % series d convertible preferred stock ( the “ series d preferred shares ” ) . pursuant to the foregoing exchanges , on september 25 , 2015 , the company issued 0 shares of common stock and 168,333 series d preferred shares convertible into 1,683,330 shares of common stock in exchange for the cancellation of series c warrants to purchase 4,208,337 shares of common stock . certain of our officers and directors who held series c warrants participated in the exchange . the series d preferred shares are convertible into shares of common stock based on a conversion ratio equal to the stated value ( $ 1,000.00 per share ) of such series d preferred shares to be converted , plus all accrued and unpaid dividends , if any , divided by the conversion price ( $ 100.00 per share , subject to adjustment ) . the company is prohibited from effecting a conversion of the series d preferred shares to the extent that , as a result of such conversion , such holder would beneficially own more than 4.99 % of the number of shares of common stock outstanding , subject to increase , up to , 9.99 % . the series d preferred shares bear no interest and rank senior to the company 's common stock but junior to series a preferred shares , series b preferred shares and series c preferred shares . on october 15 , 2015 , our board of directors approved a revised version of the certificate of designations , preferences and rights of the company 's 0 % series d convertible
| cash flows net cash generated from operating activities totaled $ 512.3 million , $ 396.9 million and $ 298.0 million in 2020 , 2019 and 2018 , respectively . improved cash flows generated from operating activities during 2020 and 2019 included additional aircraft leases to customers and increased operating levels of the acmi services segment . operating cash flows for 2020 include the receipt of $ 75.8 million of grant funds from the cares act . cash outlays for pension contributions were $ 10.8 million , $ 5.4 million and $ 22.2 million in 2020 , 2019 and 2018 , respectively . capital spending levels were primarily the result of aircraft modification costs and the acquisition of aircraft for freighter modification . cash payments for capital expenditures were $ 510.4 million , $ 453.5 million and $ 292.9 million in 2020 , 2019 and 2018 , respectively . capital expenditures in 2020 included $ 353.4 million for the acquisition of eleven boeing 767-300 aircraft and freighter modification costs ; $ 76.0 million for required heavy maintenance ; and $ 81.0 million for other equipment , including purchases of aircraft engines and rotables . capital expenditures in 2019 included $ 328.0 million for the acquisition of eleven boeing 767-300 aircraft and freighter modification costs ; $ 76.1 million for required heavy maintenance ; and $ 49.4 million for other equipment , including the purchases of aircraft engines and rotables . our capital expenditures in 2018 included $ 197.1 million for the acquisition of eight boeing 767-300 aircraft and freighter modification costs ; $ 61.7 million for required heavy maintenance ; and $ 34.1 million for other equipment , including purchases of aircraft engines and rotables . cash proceeds of $ 24.6 million , $ 10.8 million and $ 17.6 million were received in 2020 , 2019 and 2018 , respectively , for the sale of aircraft engines and airframes . during 2020 , 2019 and 2018 , we spent $ 13.3 million , $ 24.4 million and $ 866.6 million , respectively , for acquisitions and investments in other businesses .
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future utilization of our net operating loss , or nol , carryforwards may be subject to a substantial annual limitation due to the “ change in ownership ” provisions of the internal revenue code . the annual limitation may result in the expiration of nol carryforwards before utilization . due to our history of losses , a valuation allowance sufficient to fully offset our nol and other deferred tax assets has been established under current accounting pronouncements , and this valuation allowance will be maintained unless sufficient positive evidence develops to support its reversal . 10 seasonality and variations in interim quarterly results our quarterly net revenues , gross profit , and operating income from sales of products are impacted significantly by the seasonality of the retail selling season and the timing of the release of new titles . sales of our catalog and other products are generally higher in the first and fourth quarters of our fiscal year ( ending january 31 and october 31 , respectively ) due to increased retail sales during the holiday season . sales and gross profit as a percentage of sales also generally increase in quarters in which we release significant new titles because of increased sales volume as retailers make purchases to stock their shelves and meet initial demand for the new release . these quarters also benefit from the higher selling prices that we are able to achieve early in the product 's life cycle . therefore , sales results in any one quarter are not necessarily indicative of expected results for subsequent quarters during the fiscal year . critical accounting estimates our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues , and expenses , and related disclosure of contingent assets and liabilities . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results could differ materially from these estimates under different assumptions or conditions . we have identified the policies below as critical to our business operations and to the understanding of our financial results . the impact and any associated risks related to these policies on our business operations is discussed throughout management 's discussion and analysis of financial condition and results of operations when such policies affect our reported and expected financial results . revenue recognition . we recognized revenue on the sale of packaged goods upon the shipment of our product when : ( 1 ) risks and rewards of ownership are transferred ; ( 2 ) persuasive evidence of an arrangement exists ; ( 3 ) we have no continuing obligations to the customer ; and ( 4 ) the collection of related accounts receivable is probable . certain products are sold to customers with a street date ( the earliest date these products may be resold by retailers ) . revenue for sales of these products is not recognized prior to their street date . some of our software products provide limited online features at no additional cost to the consumer . generally , we have considered such features to be incidental to our overall product offerings and an inconsequential deliverable . accordingly , we do not defer any revenue related to products containing these limited online features . however , in instances where online features or additional functionality is considered a substantive deliverable in addition to the software product , such characteristics will be taken into account when applying our revenue recognition policy . to date , the company has not earned significant revenues from such features . in addition , some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee . revenue from product downloads is generally recognized when the download is made available ( assuming all other recognition criteria are met ) . when we enter into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts , revenue is recognized in accordance with the terms of the agreements , generally upon delivery of a master copy , assuming our performance obligations are complete and all other recognition criteria are met , or as per-copy royalties are earned on sales of games . price protection and other allowances . we generally sold our products on a no-return basis , although in certain instances , we provide price protection or other allowances on certain unsold products in accordance with industry practices . price protection , when granted and applicable , allows customers a partial credit with respect to merchandise unsold by them . revenue is recognized net of estimates of these allowances . sales incentives and other consideration that represent costs incurred by us for benefits received , such as the appearance of our products in a customer 's national circular advertisement , are generally reflected as selling and marketing expenses . we estimate potential future product price protection and other discounts related to current period product revenue . in addition , some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee . revenue from product downloads is generally recognized when the download is made available ( assuming all other recognition criteria are met ) . story_separator_special_tag in addition , in the event the company issues or sells , or is deemed to issue or sell , shares of common stock at a per share price that is less than the conversion price then in effect , the conversion price shall be reduced to such lower price , subject to certain exceptions . notwithstanding the foregoing , until such time as the company obtains the required shareholder approval pursuant to the rules of the nasdaq stock market , llc , the conversion price of the series c preferred shares shall not be adjusted to a per share price below $ 0.86. the company is prohibited from effecting a conversion of the series c preferred shares to the extent that , as a result of such conversion , such holder would beneficially own more than 4.99 % of the number of shares of common stock subject to increase , up to 9.99 % . each holder is entitled to vote on all matters submitted to stockholders of the company , on an “ as converted basis ” , subject to the beneficial ownership limitation , based on a conversion price of $ 1.30 per share . the series c preferred shares bear no interest and shall rank junior to the company 's series a preferred shares but senior to the company 's series b preferred shares . the may warrants are exercisable , immediately , at a price of $ 1.40 per share , subject to adjustment , and expire three years from the date of issuance . the holders may , subject to certain limitations , exercise the may warrants on a cashless basis . the company is prohibited from effecting an exercise of any may warrant to the extent that , as a result of any such exercise , the holder would beneficially own more than 4.99 % of the number of shares of common stock outstanding . the proceeds of the may private placement along with certificates evidencing the series c preferred shares and series c warrants were deposited into an escrow accounts . on the may closing date , twenty percent ( 20 % ) of the proceeds of the may private placement ( $ 1.01 million ) and a corresponding number of series c preferred shares and series c warrants were released to the company and the investors , respectively . the remaining eighty percent ( 80 % ) of the proceeds from the may private placement ( $ 4.04 million ) and the corresponding percentage of series c preferred shares and series c warrants were released to the company and the investors , respectively , in september 2015 in connection with amendments to the may subscription agreements . september 2015 on september 25 , 2015 , we entered into amendment agreements to amend the terms of our subscription agreements for the private offerings closed december 17 , 2014 and may 15 , 2015 to provide for the consent of the lead investor in such offerings to release of all remaining escrowed funds to the company ( $ 5.0 million under the december private placement and $ 4.04 under the may private placement ) upon the satisfaction of certain obligations , which the company satisfied . pursuant to the amendment agreements , the company was , among other things , required to increase the size of its board of directors and appoint thereto , individuals deemed acceptable to the lead investor and approved by the nasdaq stock market , llc ; appoint a new chief executive officer and a new chief financial officer and exchange the series c warrants , as described further below . on september 30 , 2015 the company received $ 9.04 million in proceeds from the foregoing release of escrowed funds and the corresponding securities were released to the investors . 16 in accordance with the aforementioned escrow release conditions , we entered into exchange agreements with holders of our outstanding series c warrants pursuant to which each holder received .4 shares of our common stock for each 1 warrant share exchanged for cancellation . at the election of any holder who would , as a result of receipt of the common stock hold in excess of certain beneficial ownership thresholds of the company 's issued and outstanding common stock , such holder could receive shares of our newly designated 0 % series d convertible preferred stock ( the “ series d preferred shares ” ) . pursuant to the foregoing exchanges , on september 25 , 2015 , the company issued 0 shares of common stock and 168,333 series d preferred shares convertible into 1,683,330 shares of common stock in exchange for the cancellation of series c warrants to purchase 4,208,337 shares of common stock . certain of our officers and directors who held series c warrants participated in the exchange . the series d preferred shares are convertible into shares of common stock based on a conversion ratio equal to the stated value ( $ 1,000.00 per share ) of such series d preferred shares to be converted , plus all accrued and unpaid dividends , if any , divided by the conversion price ( $ 100.00 per share , subject to adjustment ) . the company is prohibited from effecting a conversion of the series d preferred shares to the extent that , as a result of such conversion , such holder would beneficially own more than 4.99 % of the number of shares of common stock outstanding , subject to increase , up to , 9.99 % . the series d preferred shares bear no interest and rank senior to the company 's common stock but junior to series a preferred shares , series b preferred shares and series c preferred shares . on october 15 , 2015 , our board of directors approved a revised version of the certificate of designations , preferences and rights of the company 's 0 % series d convertible
| liquidity and capital resources as of october 31 , 2015 , our cash and cash equivalents balance was $ 17.1 million and our working capital was approximately $ 15.6 million , compared to cash and equivalents of $ 7.2 million and working capital of $ 5.4 million at october 31 , 2014. the increase in cash primarily reflects the sale of preferred stock and warrants in december 2014 and may 2015 , which together resulted in net proceeds of approximately $ 10.8 million , as well as the sale of inventory and collection of accounts receivable during fiscal 2015. in fiscal 2013 , 2014 and 2015 , we experienced net cash outflows from operations , generally to fund operating losses due to declining revenues which we attribute to three factors : 1 ) the introduction of competing “ freemium ” games on competing handheld devices such as the apple iphone or itouch , and android powered devices ; 2 ) a shift in game distribution from retail to digital downloads ; and 3 ) a decline in the popularity of motion based fitness games including games we publish under the zumba fitness brand . as a result of these factors we have reduced our operating expenses , including the reduction of game production and marketing personnel , and have eliminated substantially all of our new game development activities . we are evaluating various strategic alternatives to maximize company value including the acquisition of businesses that are not related to our existing video game operations . additionally , we have entered into financing transactions for which we have received approximately $ 10.8 million in cash . additionally , the terms of the private placements restrict us from seeking funding from other sources as long as the preferred shares are outstanding , without the required consent of the holders of such shares . in july 2015 , we transferred our retail distribution activities to zift and transferred related assets and liabilities , including accounts receivable , inventory , customer credits and certain other liabilities .
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as part of our solution , we also develop cloud-based , real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency . although we operate as a single unit through our subsidiaries , we approach our development through two divisions , automotive and aviation . we are currently focused on our core competency of bringing the n-gen electric cargo van to market and fulfilling our existing backlog of orders . we are also exploring other opportunities in monetizing our intellectual property which could include a sale , license or other arrangement of assets that are outside of our core focus . workhorse electric delivery vans are currently in production and are in use by our customers on u.s. roads . our delivery customers include companies such as ups , fedex express , alpha baking and w.b . mason . data from our in-house developed telematics system demonstrates our vehicles on the road are averaging approximately a 500 % increase in fuel economy as compared to conventional gasoline-based trucks of the same size and duty cycle . in addition to improved fuel economy , we anticipate that the performance of our vehicles on-route will reduce long-term vehicle maintenance expense by approximately 50 % as compared to fossil-fueled trucks . we are an oem capable of manufacturing class 3-6 commercial-grade , medium-duty truck chassis at our union city , indiana facility , marketed under the workhorse® brand . all workhorse last mile delivery vans are assembled in the union city assembly facility . from our development modeling and the existing performance of our electric vehicles on american roads , we estimate that our e-gen range-extended electric delivery vans will save over $ 150,000 in fuel and maintenance savings over the 20-year life of the vehicle . due to the positive return-on-investment , we place a premium price for our vehicles when selling to major fleet buyers . we expect that fleet buyers will be able to achieve a four-year or better return-on-investment ( without government incentives ) , which we believe justifies the higher acquisition cost of our vehicles . our goal is to continue to increase sales and production , while executing on our cost-down strategy to a point that will enable us to achieve gross margin profitability of the last mile-delivery van platform . as a key strategy , we have developed the workhorse n-gen platform , which has been accelerated from our development efforts on the usps ngdv program . 27 the workhorse n-gen electric cargo van platform will be available in multiple size configurations , 450 , 700 and 1,000 cubic feet . we intend to initiate the launch with the 450 cubic foot configuration where it is designed to compete with the sprinter , transit and ram gasoline/diesel trucks in the commercial sector with an emphasis on last-mile delivery and other service-oriented businesses , such as telecom . this ultra-low floor platform incorporates state-of-the-art safety features , economy and performance : we expect these vehicles to achieve a fuel economy of approximately 60 mpge and offer fleet operators the most favorable total cost-of-ownership of any comparable vehicle available today . we believe we are the first american oem to market a u.s. built electric cargo van , and early indications of fleet interest are significant . we expect the n-gen trucks will be supported by our ryder systems partnership . using n-gen light duty prototypes , we delivered over 100,000 packages in san francisco and ohio during our testing . during the period we achieved 50 mpge and successfully demonstrated the role the vehicle can have in last mile delivery . as a direct result of the usps award and development efforts , workhorse has begun development on the workhorse w-15 , a medium- and light-duty pickup truck platform aimed at commercial fleets . the w-15 pickup truck powertrain is a smaller version of its sister vehicle , the medium-duty battery electric powertrain , and will have two purpose-built variants , a w-15 work truck ( pickup ) and an n-gen cargo van . either of these two variants will appeal to delivery fleets , utility companies , telecom companies , municipalities and more . our horsefly delivery drone is a custom designed , purpose-built drone that is fully integrated in our electric trucks . horsefly is an octocopter designed with a maximum gross weight of 30 lbs . , a 10 lb . payload and a maximum air speed of 50 mph . it is designed and built to be rugged and consisting of redundant systems to further meet the faa 's required rules and regulations . surefly is our entry into the emerging vtol market . it is designed to be a two-person , 400-pound payload aircraft with a hybrid internal combustion/electric power generation system . our approach in the design is to build the safest and simplest way to fly rotary wing aircraft in the world . we believe it is a practical answer to personal flight , as well as , commercial transportation segments , including air taxi series , agriculture and beyond . the faa to-date has granted 14 separate experimental airworthiness certifications , registered as n834lw , for the aircraft . these certifications come after an extensive design review and inspection of the aircraft with each renewed certificate . in november 2018 , workhorse signed cooperative research and development agreement with a branch of the u.s. military to test surefly with a specific focus on military applications . this further expands the potential market for the aircraft . story_separator_special_tag the increase during 2018 was primarily due to cash interest and the amortization of debt issuance costs and discounts associated with the arosa loan as well as the amortization of the discount associated with the senior secured notes . story_separator_special_tag the foreseeable future . unless we are able to generate a sufficient amount of revenue and reduce our costs , we expect to finance future cash needs through public and or private offerings of equity securities and or debt financings . with the exception of contingent and royalty payments that we may receive under our existing collaborations , we do not currently have any committed future funding . to the extent we raise additional capital by issuing equity securities , our stockholders could at that time experience substantial dilution . any debt financing that we are able to obtain may involve operating covenants that restrict our business . our future funding requirements will depend upon many factors , including , but not limited to : ● our ability to acquire or license other technologies or compounds that we may seek to pursue ; ● our ability to manage our growth ; ● competing technological and market developments ; ● the costs and timing of obtaining , enforcing and defending our patent and other intellectual property rights ; and ● expenses associated with any unforeseen litigation . insufficient funds have required a reduction in business activity . additional delay in funding will continue to defer , scale back or eliminate some or all of our research or development programs , limit our sales activities , limit or cease production or negatively impact our operations . for the years ended december 31 , 2018 and 2017 , we maintained an investment in a bank money market fund . cash in excess of immediate requirements is invested with regard to liquidity and capital preservation . wherever possible , we seek to minimize the potential effects of concentration and degrees of risk . we will continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary . summary of cash flows replace_table_token_4_th cash flows from operating activities our cash flows from operating activities are affected by our cash investments to support the business in research and development , manufacturing , selling , general and administration . our operating cash flows are also affected by our working capital needs to support fluctuations in inventory , personnel expenses , accounts payable and other current assets and liabilities . during the year ended december 31 , 2018 and 2017 , cash used in operating activities was $ 21.8 million and $ 38.7 million , respectively . the decrease in net cash used in operations in 2018 as compared to 2017 was mainly due to a lower net loss for the period as well as increases in inventory and warranty reserves and accrued liabilities . cash flows from financing activities during the years ended december 31 , 2018 and 2017 , net cash provided by financing activities was $ 19.2 million and $ 42.4 million , respectively . cash flows from financing activities during the year ended december 31 , 2018 consisted primarily of shares issued related to the company 's august 2018 offering with national securities , the cowen agreement , the april 2018 closed subscription agreements and the marathon credit facility . cash flows from financing activities for the period ended december 31 , 2017 consisted primarily of a net $ 37.0 million from a public stock offering . the company may seek to raise additional capital through public or private debt or equity financings in order to fund its operations . off-balance sheet arrangements the company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company 's financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that are material to investors . federal tax credit qualification by the irs the company has been qualified by the irs for a vehicle federal tax credit of up to $ 7,500 on vehicles whose gross vehicle rate weighting is less than 14,000 lbs . the company joins a list of plug-in electric drive motor vehicle manufacturers , including ford motor company , general motors corporation , tesla , toyota , and 13 ev manufacturers in all , qualifying purchasers for up to a $ 7,500 tax credit when purchasing an electric vehicle . additionally , many states offer additional sales tax exemptions and zero emission tax credits of up to $ 5,000 that can also be applied to the purchase . 32 california air resources board approval on february 20 , 2013 , carb approved the company 's e-100 all-electric commercial truck for sale in the state of california . most other states use this approval for sale of vehicles in their state . critical accounting policies and estimates the following accounting principles and practices of the company are set forth to facilitate the understanding of data presented in the consolidated financial statements : nature of operations we are a technology company focused on providing sustainable and cost-effective solutions to the commercial transportation sector . as an american manufacturer we design and build high performance battery-electric electric vehicles and aircraft that make movement of people and goods more efficient and less harmful to the environment . as part of our solution , we also develop cloud-based , real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency . although we operate as a single unit through our subsidiaries , we approach our development through two divisions , automotive and aviation . our core products , under development and or in manufacture , are the medium duty step van , the light duty pickup , the
| liquidity and capital resources as of october 31 , 2015 , our cash and cash equivalents balance was $ 17.1 million and our working capital was approximately $ 15.6 million , compared to cash and equivalents of $ 7.2 million and working capital of $ 5.4 million at october 31 , 2014. the increase in cash primarily reflects the sale of preferred stock and warrants in december 2014 and may 2015 , which together resulted in net proceeds of approximately $ 10.8 million , as well as the sale of inventory and collection of accounts receivable during fiscal 2015. in fiscal 2013 , 2014 and 2015 , we experienced net cash outflows from operations , generally to fund operating losses due to declining revenues which we attribute to three factors : 1 ) the introduction of competing “ freemium ” games on competing handheld devices such as the apple iphone or itouch , and android powered devices ; 2 ) a shift in game distribution from retail to digital downloads ; and 3 ) a decline in the popularity of motion based fitness games including games we publish under the zumba fitness brand . as a result of these factors we have reduced our operating expenses , including the reduction of game production and marketing personnel , and have eliminated substantially all of our new game development activities . we are evaluating various strategic alternatives to maximize company value including the acquisition of businesses that are not related to our existing video game operations . additionally , we have entered into financing transactions for which we have received approximately $ 10.8 million in cash . additionally , the terms of the private placements restrict us from seeking funding from other sources as long as the preferred shares are outstanding , without the required consent of the holders of such shares . in july 2015 , we transferred our retail distribution activities to zift and transferred related assets and liabilities , including accounts receivable , inventory , customer credits and certain other liabilities .
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as part of our solution , we also develop cloud-based , real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency . although we operate as a single unit through our subsidiaries , we approach our development through two divisions , automotive and aviation . we are currently focused on our core competency of bringing the n-gen electric cargo van to market and fulfilling our existing backlog of orders . we are also exploring other opportunities in monetizing our intellectual property which could include a sale , license or other arrangement of assets that are outside of our core focus . workhorse electric delivery vans are currently in production and are in use by our customers on u.s. roads . our delivery customers include companies such as ups , fedex express , alpha baking and w.b . mason . data from our in-house developed telematics system demonstrates our vehicles on the road are averaging approximately a 500 % increase in fuel economy as compared to conventional gasoline-based trucks of the same size and duty cycle . in addition to improved fuel economy , we anticipate that the performance of our vehicles on-route will reduce long-term vehicle maintenance expense by approximately 50 % as compared to fossil-fueled trucks . we are an oem capable of manufacturing class 3-6 commercial-grade , medium-duty truck chassis at our union city , indiana facility , marketed under the workhorse® brand . all workhorse last mile delivery vans are assembled in the union city assembly facility . from our development modeling and the existing performance of our electric vehicles on american roads , we estimate that our e-gen range-extended electric delivery vans will save over $ 150,000 in fuel and maintenance savings over the 20-year life of the vehicle . due to the positive return-on-investment , we place a premium price for our vehicles when selling to major fleet buyers . we expect that fleet buyers will be able to achieve a four-year or better return-on-investment ( without government incentives ) , which we believe justifies the higher acquisition cost of our vehicles . our goal is to continue to increase sales and production , while executing on our cost-down strategy to a point that will enable us to achieve gross margin profitability of the last mile-delivery van platform . as a key strategy , we have developed the workhorse n-gen platform , which has been accelerated from our development efforts on the usps ngdv program . 27 the workhorse n-gen electric cargo van platform will be available in multiple size configurations , 450 , 700 and 1,000 cubic feet . we intend to initiate the launch with the 450 cubic foot configuration where it is designed to compete with the sprinter , transit and ram gasoline/diesel trucks in the commercial sector with an emphasis on last-mile delivery and other service-oriented businesses , such as telecom . this ultra-low floor platform incorporates state-of-the-art safety features , economy and performance : we expect these vehicles to achieve a fuel economy of approximately 60 mpge and offer fleet operators the most favorable total cost-of-ownership of any comparable vehicle available today . we believe we are the first american oem to market a u.s. built electric cargo van , and early indications of fleet interest are significant . we expect the n-gen trucks will be supported by our ryder systems partnership . using n-gen light duty prototypes , we delivered over 100,000 packages in san francisco and ohio during our testing . during the period we achieved 50 mpge and successfully demonstrated the role the vehicle can have in last mile delivery . as a direct result of the usps award and development efforts , workhorse has begun development on the workhorse w-15 , a medium- and light-duty pickup truck platform aimed at commercial fleets . the w-15 pickup truck powertrain is a smaller version of its sister vehicle , the medium-duty battery electric powertrain , and will have two purpose-built variants , a w-15 work truck ( pickup ) and an n-gen cargo van . either of these two variants will appeal to delivery fleets , utility companies , telecom companies , municipalities and more . our horsefly delivery drone is a custom designed , purpose-built drone that is fully integrated in our electric trucks . horsefly is an octocopter designed with a maximum gross weight of 30 lbs . , a 10 lb . payload and a maximum air speed of 50 mph . it is designed and built to be rugged and consisting of redundant systems to further meet the faa 's required rules and regulations . surefly is our entry into the emerging vtol market . it is designed to be a two-person , 400-pound payload aircraft with a hybrid internal combustion/electric power generation system . our approach in the design is to build the safest and simplest way to fly rotary wing aircraft in the world . we believe it is a practical answer to personal flight , as well as , commercial transportation segments , including air taxi series , agriculture and beyond . the faa to-date has granted 14 separate experimental airworthiness certifications , registered as n834lw , for the aircraft . these certifications come after an extensive design review and inspection of the aircraft with each renewed certificate . in november 2018 , workhorse signed cooperative research and development agreement with a branch of the u.s. military to test surefly with a specific focus on military applications . this further expands the potential market for the aircraft . story_separator_special_tag the increase during 2018 was primarily due to cash interest and the amortization of debt issuance costs and discounts associated with the arosa loan as well as the amortization of the discount associated with the senior secured notes . story_separator_special_tag the foreseeable future . unless we are able to generate a sufficient amount of revenue and reduce our costs , we expect to finance future cash needs through public and or private offerings of equity securities and or debt financings . with the exception of contingent and royalty payments that we may receive under our existing collaborations , we do not currently have any committed future funding . to the extent we raise additional capital by issuing equity securities , our stockholders could at that time experience substantial dilution . any debt financing that we are able to obtain may involve operating covenants that restrict our business . our future funding requirements will depend upon many factors , including , but not limited to : ● our ability to acquire or license other technologies or compounds that we may seek to pursue ; ● our ability to manage our growth ; ● competing technological and market developments ; ● the costs and timing of obtaining , enforcing and defending our patent and other intellectual property rights ; and ● expenses associated with any unforeseen litigation . insufficient funds have required a reduction in business activity . additional delay in funding will continue to defer , scale back or eliminate some or all of our research or development programs , limit our sales activities , limit or cease production or negatively impact our operations . for the years ended december 31 , 2018 and 2017 , we maintained an investment in a bank money market fund . cash in excess of immediate requirements is invested with regard to liquidity and capital preservation . wherever possible , we seek to minimize the potential effects of concentration and degrees of risk . we will continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary . summary of cash flows replace_table_token_4_th cash flows from operating activities our cash flows from operating activities are affected by our cash investments to support the business in research and development , manufacturing , selling , general and administration . our operating cash flows are also affected by our working capital needs to support fluctuations in inventory , personnel expenses , accounts payable and other current assets and liabilities . during the year ended december 31 , 2018 and 2017 , cash used in operating activities was $ 21.8 million and $ 38.7 million , respectively . the decrease in net cash used in operations in 2018 as compared to 2017 was mainly due to a lower net loss for the period as well as increases in inventory and warranty reserves and accrued liabilities . cash flows from financing activities during the years ended december 31 , 2018 and 2017 , net cash provided by financing activities was $ 19.2 million and $ 42.4 million , respectively . cash flows from financing activities during the year ended december 31 , 2018 consisted primarily of shares issued related to the company 's august 2018 offering with national securities , the cowen agreement , the april 2018 closed subscription agreements and the marathon credit facility . cash flows from financing activities for the period ended december 31 , 2017 consisted primarily of a net $ 37.0 million from a public stock offering . the company may seek to raise additional capital through public or private debt or equity financings in order to fund its operations . off-balance sheet arrangements the company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company 's financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that are material to investors . federal tax credit qualification by the irs the company has been qualified by the irs for a vehicle federal tax credit of up to $ 7,500 on vehicles whose gross vehicle rate weighting is less than 14,000 lbs . the company joins a list of plug-in electric drive motor vehicle manufacturers , including ford motor company , general motors corporation , tesla , toyota , and 13 ev manufacturers in all , qualifying purchasers for up to a $ 7,500 tax credit when purchasing an electric vehicle . additionally , many states offer additional sales tax exemptions and zero emission tax credits of up to $ 5,000 that can also be applied to the purchase . 32 california air resources board approval on february 20 , 2013 , carb approved the company 's e-100 all-electric commercial truck for sale in the state of california . most other states use this approval for sale of vehicles in their state . critical accounting policies and estimates the following accounting principles and practices of the company are set forth to facilitate the understanding of data presented in the consolidated financial statements : nature of operations we are a technology company focused on providing sustainable and cost-effective solutions to the commercial transportation sector . as an american manufacturer we design and build high performance battery-electric electric vehicles and aircraft that make movement of people and goods more efficient and less harmful to the environment . as part of our solution , we also develop cloud-based , real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency . although we operate as a single unit through our subsidiaries , we approach our development through two divisions , automotive and aviation . our core products , under development and or in manufacture , are the medium duty step van , the light duty pickup , the
| liquidity and capital resources cash requirements from inception , we have financed our operations primarily through sales of equity securities . we have utilized this capital in our research and development of five truck-based platforms ( i.e. , e-gen , e-100 , w-15 pickup truck , usps prototype and n-gen ) and two aviation platforms ( horsefly and surefly ) and to fund designing , building and delivering our vehicles to our customer base and for working capital purposes . as of december 31 , 2018 , we had approximately $ 1.5 million in cash , cash equivalents and short-term investments , compared to approximately $ 4.1 million as of december 31 , 2017 , a decrease of $ 2.6 million . the decrease in cash and cash equivalents was primarily attributable to the operating loss for the period partially offset by the issuance of common stock during the period . on december 31 , 2018 , the company entered into a credit agreement ( the “ credit agreement ” ) , among the company , as borrower , marathon asset management , lp , on behalf of certain entities it manages , as lenders ( collectively , with their permitted successors and assignees , the “ lenders ” ) , and wilmington trust , national association , as the agent ( “ wilmington ” ) . the credit agreement provided the company with a $ 10 million tranche of term loans ( the “ tranche one loans ” ) which may not be re-borrowed following repayment and ( ii ) a $ 25 million tranche of term loans which may be re-borrowed following repayment ( the “ tranche two loans ” together with the tranche one loans , the “ loans ” ) . the company used the proceeds for the tranche one loans ( x ) to pay off a loan provided by arosa opportunistic fund lp ( “ arosa ” ) in the principal amount of $ 7.8 million plus interest and ( y ) for working capital purposes . draws from the tranche two loans will be used in connection with vehicle production and are subject to the company 's receipt of purchase orders .
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in many cases , the structure will include us holding title to or a priority or controlling position in the equipment or other asset . although the final composition of our portfolio can not be determined at this stage , we expect to invest in equipment and other assets that are considered essential use or core to a business or operation in the agricultural , energy , environmental , medical , manufacturing , technology , and transportation industries . our investment manager may identify other assets or industries that meet our investment objectives . we expect to invest in equipment , other assets and project financings located primarily within the united states of america and the european union but may also make investments in other parts of the world . we are currently in the liquidation period . the offering period concluded on april 2 , 2016 , which is three years from the date we were declared effective by the sec . during the operating period , we will invest most of the net proceeds from our offering in business-essential , revenue-producing ( or cost-saving ) equipment , other physical assets with substantial economic lives and , in many cases , associated revenue streams and project financings . the operating period began on the date of our initial closing , which occurred on may 29 , 2013 and concluded on may 29 , 2017. the liquidation period , which began on may 30 , 2017 , is the period in which we will sell our assets in the ordinary course of business and will last two years , unless it is extended , at the sole discretion of the general partner . our general partner , our investment manager and their affiliates , including securities in its capacity as our selling agent and certain non-affiliates ( namely , selling dealers ) received fees and compensation from the offering of our units , including the following , with any and all compensation paid to our general partner solely in cash . we paid an underwriting fee of 3 % of the gross proceeds of this offering ( excluding proceeds , if any , we received from the sale of our units to our general partner or its affiliates ) to our selling agent or selling agents . our general partner receives an organizational and offering expense allowance of up to 2 % of our offering proceeds to reimburse it for expenses incurred in preparing us for registration or qualification under federal and state securities laws and subsequently offering and selling our units . the organizational and offering expense allowance will be paid out of the proceeds of this offering . the organizational and offering expense allowance will not exceed the actual fees and expenses incurred by our general partner and its affiliates . because organizational and offering expenses will be paid as and to the extent they are incurred , organizational and offering expenses may be drawn disproportionately to the gross proceeds of each closing . during our operating period and our liquidation period , our investment manager receives a management fee in an amount equal to the greater of ( i ) 2.5 % per annum of the aggregate offering proceeds , or ( ii ) $ 125,000 , payable monthly , until such time as an amount equal to at least 15 % of our limited partners ' capital contributions has been returned to them , after which the monthly management fee will equal 100 % of the management fee as initially calculated above , less 1 % for each additional 1 % of our limited partners ' capital contributions returned to them , such amounts to be measured on the last day of each month . our general partner will initially receive 1 % of all distributed distributable cash . our general partner has a promotional interest in us equal to 20 % of all distributed distributable cash after we have provided a return to our limited partners of their respective capital contributions plus an 8 % per annum , compounded annually , cumulative return on their capital contributions . 19 current business environment and outlook we believe that 2018 will continue to present attractive opportunities for equipment lease and asset finance investments . the federal reserve board increased its benchmark interest rate several times in 2017 , and is expected to further increase rates in 2018 making our financing more cost competitive with banks . while we expect interest rates to increase further during 2018 , increases in interest rates generally result in increased returns on asset based investments . as lending institutions , such as banks , raise the interest rates they charge borrowers , the financing provided by us will become more cost competitive , and our market for potential investments will broaden . although increase in interest rates will increase the cost of leverage , we do not expect a significant net effect on our gross margins because we do not plan on utilizing significant leverage in our portfolio . our single investor leases and loans should benefit from any increase in interest rates over the long term . the competitive environment is firming up with a few large participants exiting the market , but with a growing number of well capitalized new participants prepared to absorb market share . as the market settles , we believe there is more opportunity than there has been in years to acquire seasoned portfolios of equipment leases and loans . we also believe that there may be opportunity for consolidation in the next year or two . overall we think that businesses have a positive outlook for growth in 2018 and we anticipate capital asset and equipment acquisition will be an essential part of that growth . story_separator_special_tag we received cash contributions of $ 72,504,327 and applied $ 2,460,737 which would have otherwise been paid as sales commission to the purchase of 2,460.74 additional units . for the years ended december 31 , 2017 and 2016 , we paid or accrued an underwriting fee to securities totaling $ 0 and $ 1,949,907 , respectively . our revenue for the years ended december 31 , 2017 and 2016 is summarized as follows : replace_table_token_1_th for the year ended december 31 , 2017 , we earned $ 1,594,436 in rental income primarily from two operating leases of aircraft rotable parts equipment . we also recognized $ 5,224,118 in interest income , the majority of which was generated by the equipment notes and collateralized loans receivable . we recognized $ 2,159,570 in finance income from various finance leases . we also recognized income of $ 15,416,243 from our equipment investment through spv . we also incurred a provision for lease , note , and loan losses of $ 3,001,573 as a result of an impairment loss on a finance lease , equipment notes receivables and an equity method investment during the year ended december 31 , 2017. the increase in total revenue in 2017 as compared to 2016 is primarily a result of the income from the subsidiary sqn helo , llc ( “ sqn helo ” ) which was not included in the consolidated financial statements in 2016. the increase in finance and interest income in 2017 as compared to 2016 is a result of the increase in finance leases and equipment notes and collateralized loans receivable in 2017 as compared to 2016 . 23 for the year ended december 31 , 2016 , we earned $ 329,931 in rental income primarily from two operating leases of aircraft rotable parts equipment . we also recognized $ 4,448,049 in interest income , the majority of which was generated by the equipment notes and collateralized loans receivable . we recognized $ 1,112,846 in finance income from various finance leases . we also recognized an investment loss of $ 932,193 from our equity method investments . we also recognized income of $ 16,422,922 from our equipment investment through spv . our expenses for the years ended december 31 , 2017 and 2016 are summarized as follows : replace_table_token_2_th for the year ended december 31 , 2017 , we incurred $ 30,948,233 in total expenses . there was no increase in management fees paid to our investment manager in 2017 as compared to 2016. we pay our investment manager a management fee during the liquidation period equal to the greater of , ( i ) 2.5 % per annum of the aggregate offering proceeds , or ( ii ) $ 125,000 , payable monthly , until such time as an amount equal to at least 15 % of our limited partners ' capital contributions have been returned to them , after which the monthly management fee will equal 100 % of the management fee as initially calculated above , less 1 % for each additional 1 % of the partnership 's limited partners ' capital contributions returned to them , such amounts to be measured on the last day of each month . we recognized $ 4,861,808 and $ 2,622,678 in interest expense and depreciation and amortization expense , respectively . the increase in interest expense and depreciation and amortization expense in 2017 as compared to 2016 is primarily a result of the subsidiary sqn helo , which was not included in the consolidated financial statements in 2016. we also incurred $ 545,417 in professional fees , which is primarily due to consolidation of sqn helo . we also incurred expenses of $ 21,246,550 from our equipment investment through spv . for the year ended december 31 , 2016 , we incurred $ 23,968,127 in total expenses . there was no increase in management fees paid to our investment manager in 2016 as compared to 2015. we recognized $ 418,968 in depreciation and amortization expense . we also incurred $ 220,883 in professional fees , which is consistent with prior year . in conjunction with the marine and the various juliet transactions , we assumed approximately $ 17,104,000 and $ 26,100,000 , respectively in loans payable with various third parties which resulted in $ 3,208,312 in interest expense during the year ended december 31 , 2016. we also incurred expenses of $ 18,235,637 from our equipment investment through spv . 24 net loss as a result of the factors discussed above , we reported a net loss for the year ended december 31 , 2017 of $ 8,947,762 , prior to the allocation for non-controlling interest , as compared to a net loss of $ 3,807,749 for the year ended december 31 , 2016. the non-controlling interest represents the 67.5 % investment by sqn pac in the alpha transaction and the 10 % investment by a third party in the cont feeder transaction . for the year ended december 31 , 2017 , the non-controlling interest recognized net income of $ 1,811 due to its interest in alpha and a net loss of $ 583,031 due to its interest in cont feeder . liquidity and capital resources sources and uses of cash replace_table_token_3_th story_separator_special_tag respectively ; and accrued $ 29,565 and $ 57,256 , respectively , for distributions due to the general partner which resulted in a distributions payable to general partner of $ 114,681 and $ 85,116 at december 31 , 2017 and 2016 , respectively . commitments and contingencies and off-balance sheet transactions commitment and contingencies our income , losses and distributions are allocated 99 % to our limited partners and 1 % to our general partner until the limited partners have received total distributions equal to each limited partners ' capital contribution plus an 8 % , compounded annually , cumulative return on each limited partners ' capital contribution . after such time , income , losses and distributions will be
| liquidity and capital resources cash requirements from inception , we have financed our operations primarily through sales of equity securities . we have utilized this capital in our research and development of five truck-based platforms ( i.e. , e-gen , e-100 , w-15 pickup truck , usps prototype and n-gen ) and two aviation platforms ( horsefly and surefly ) and to fund designing , building and delivering our vehicles to our customer base and for working capital purposes . as of december 31 , 2018 , we had approximately $ 1.5 million in cash , cash equivalents and short-term investments , compared to approximately $ 4.1 million as of december 31 , 2017 , a decrease of $ 2.6 million . the decrease in cash and cash equivalents was primarily attributable to the operating loss for the period partially offset by the issuance of common stock during the period . on december 31 , 2018 , the company entered into a credit agreement ( the “ credit agreement ” ) , among the company , as borrower , marathon asset management , lp , on behalf of certain entities it manages , as lenders ( collectively , with their permitted successors and assignees , the “ lenders ” ) , and wilmington trust , national association , as the agent ( “ wilmington ” ) . the credit agreement provided the company with a $ 10 million tranche of term loans ( the “ tranche one loans ” ) which may not be re-borrowed following repayment and ( ii ) a $ 25 million tranche of term loans which may be re-borrowed following repayment ( the “ tranche two loans ” together with the tranche one loans , the “ loans ” ) . the company used the proceeds for the tranche one loans ( x ) to pay off a loan provided by arosa opportunistic fund lp ( “ arosa ” ) in the principal amount of $ 7.8 million plus interest and ( y ) for working capital purposes . draws from the tranche two loans will be used in connection with vehicle production and are subject to the company 's receipt of purchase orders .
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in many cases , the structure will include us holding title to or a priority or controlling position in the equipment or other asset . although the final composition of our portfolio can not be determined at this stage , we expect to invest in equipment and other assets that are considered essential use or core to a business or operation in the agricultural , energy , environmental , medical , manufacturing , technology , and transportation industries . our investment manager may identify other assets or industries that meet our investment objectives . we expect to invest in equipment , other assets and project financings located primarily within the united states of america and the european union but may also make investments in other parts of the world . we are currently in the liquidation period . the offering period concluded on april 2 , 2016 , which is three years from the date we were declared effective by the sec . during the operating period , we will invest most of the net proceeds from our offering in business-essential , revenue-producing ( or cost-saving ) equipment , other physical assets with substantial economic lives and , in many cases , associated revenue streams and project financings . the operating period began on the date of our initial closing , which occurred on may 29 , 2013 and concluded on may 29 , 2017. the liquidation period , which began on may 30 , 2017 , is the period in which we will sell our assets in the ordinary course of business and will last two years , unless it is extended , at the sole discretion of the general partner . our general partner , our investment manager and their affiliates , including securities in its capacity as our selling agent and certain non-affiliates ( namely , selling dealers ) received fees and compensation from the offering of our units , including the following , with any and all compensation paid to our general partner solely in cash . we paid an underwriting fee of 3 % of the gross proceeds of this offering ( excluding proceeds , if any , we received from the sale of our units to our general partner or its affiliates ) to our selling agent or selling agents . our general partner receives an organizational and offering expense allowance of up to 2 % of our offering proceeds to reimburse it for expenses incurred in preparing us for registration or qualification under federal and state securities laws and subsequently offering and selling our units . the organizational and offering expense allowance will be paid out of the proceeds of this offering . the organizational and offering expense allowance will not exceed the actual fees and expenses incurred by our general partner and its affiliates . because organizational and offering expenses will be paid as and to the extent they are incurred , organizational and offering expenses may be drawn disproportionately to the gross proceeds of each closing . during our operating period and our liquidation period , our investment manager receives a management fee in an amount equal to the greater of ( i ) 2.5 % per annum of the aggregate offering proceeds , or ( ii ) $ 125,000 , payable monthly , until such time as an amount equal to at least 15 % of our limited partners ' capital contributions has been returned to them , after which the monthly management fee will equal 100 % of the management fee as initially calculated above , less 1 % for each additional 1 % of our limited partners ' capital contributions returned to them , such amounts to be measured on the last day of each month . our general partner will initially receive 1 % of all distributed distributable cash . our general partner has a promotional interest in us equal to 20 % of all distributed distributable cash after we have provided a return to our limited partners of their respective capital contributions plus an 8 % per annum , compounded annually , cumulative return on their capital contributions . 19 current business environment and outlook we believe that 2018 will continue to present attractive opportunities for equipment lease and asset finance investments . the federal reserve board increased its benchmark interest rate several times in 2017 , and is expected to further increase rates in 2018 making our financing more cost competitive with banks . while we expect interest rates to increase further during 2018 , increases in interest rates generally result in increased returns on asset based investments . as lending institutions , such as banks , raise the interest rates they charge borrowers , the financing provided by us will become more cost competitive , and our market for potential investments will broaden . although increase in interest rates will increase the cost of leverage , we do not expect a significant net effect on our gross margins because we do not plan on utilizing significant leverage in our portfolio . our single investor leases and loans should benefit from any increase in interest rates over the long term . the competitive environment is firming up with a few large participants exiting the market , but with a growing number of well capitalized new participants prepared to absorb market share . as the market settles , we believe there is more opportunity than there has been in years to acquire seasoned portfolios of equipment leases and loans . we also believe that there may be opportunity for consolidation in the next year or two . overall we think that businesses have a positive outlook for growth in 2018 and we anticipate capital asset and equipment acquisition will be an essential part of that growth . story_separator_special_tag we received cash contributions of $ 72,504,327 and applied $ 2,460,737 which would have otherwise been paid as sales commission to the purchase of 2,460.74 additional units . for the years ended december 31 , 2017 and 2016 , we paid or accrued an underwriting fee to securities totaling $ 0 and $ 1,949,907 , respectively . our revenue for the years ended december 31 , 2017 and 2016 is summarized as follows : replace_table_token_1_th for the year ended december 31 , 2017 , we earned $ 1,594,436 in rental income primarily from two operating leases of aircraft rotable parts equipment . we also recognized $ 5,224,118 in interest income , the majority of which was generated by the equipment notes and collateralized loans receivable . we recognized $ 2,159,570 in finance income from various finance leases . we also recognized income of $ 15,416,243 from our equipment investment through spv . we also incurred a provision for lease , note , and loan losses of $ 3,001,573 as a result of an impairment loss on a finance lease , equipment notes receivables and an equity method investment during the year ended december 31 , 2017. the increase in total revenue in 2017 as compared to 2016 is primarily a result of the income from the subsidiary sqn helo , llc ( “ sqn helo ” ) which was not included in the consolidated financial statements in 2016. the increase in finance and interest income in 2017 as compared to 2016 is a result of the increase in finance leases and equipment notes and collateralized loans receivable in 2017 as compared to 2016 . 23 for the year ended december 31 , 2016 , we earned $ 329,931 in rental income primarily from two operating leases of aircraft rotable parts equipment . we also recognized $ 4,448,049 in interest income , the majority of which was generated by the equipment notes and collateralized loans receivable . we recognized $ 1,112,846 in finance income from various finance leases . we also recognized an investment loss of $ 932,193 from our equity method investments . we also recognized income of $ 16,422,922 from our equipment investment through spv . our expenses for the years ended december 31 , 2017 and 2016 are summarized as follows : replace_table_token_2_th for the year ended december 31 , 2017 , we incurred $ 30,948,233 in total expenses . there was no increase in management fees paid to our investment manager in 2017 as compared to 2016. we pay our investment manager a management fee during the liquidation period equal to the greater of , ( i ) 2.5 % per annum of the aggregate offering proceeds , or ( ii ) $ 125,000 , payable monthly , until such time as an amount equal to at least 15 % of our limited partners ' capital contributions have been returned to them , after which the monthly management fee will equal 100 % of the management fee as initially calculated above , less 1 % for each additional 1 % of the partnership 's limited partners ' capital contributions returned to them , such amounts to be measured on the last day of each month . we recognized $ 4,861,808 and $ 2,622,678 in interest expense and depreciation and amortization expense , respectively . the increase in interest expense and depreciation and amortization expense in 2017 as compared to 2016 is primarily a result of the subsidiary sqn helo , which was not included in the consolidated financial statements in 2016. we also incurred $ 545,417 in professional fees , which is primarily due to consolidation of sqn helo . we also incurred expenses of $ 21,246,550 from our equipment investment through spv . for the year ended december 31 , 2016 , we incurred $ 23,968,127 in total expenses . there was no increase in management fees paid to our investment manager in 2016 as compared to 2015. we recognized $ 418,968 in depreciation and amortization expense . we also incurred $ 220,883 in professional fees , which is consistent with prior year . in conjunction with the marine and the various juliet transactions , we assumed approximately $ 17,104,000 and $ 26,100,000 , respectively in loans payable with various third parties which resulted in $ 3,208,312 in interest expense during the year ended december 31 , 2016. we also incurred expenses of $ 18,235,637 from our equipment investment through spv . 24 net loss as a result of the factors discussed above , we reported a net loss for the year ended december 31 , 2017 of $ 8,947,762 , prior to the allocation for non-controlling interest , as compared to a net loss of $ 3,807,749 for the year ended december 31 , 2016. the non-controlling interest represents the 67.5 % investment by sqn pac in the alpha transaction and the 10 % investment by a third party in the cont feeder transaction . for the year ended december 31 , 2017 , the non-controlling interest recognized net income of $ 1,811 due to its interest in alpha and a net loss of $ 583,031 due to its interest in cont feeder . liquidity and capital resources sources and uses of cash replace_table_token_3_th story_separator_special_tag respectively ; and accrued $ 29,565 and $ 57,256 , respectively , for distributions due to the general partner which resulted in a distributions payable to general partner of $ 114,681 and $ 85,116 at december 31 , 2017 and 2016 , respectively . commitments and contingencies and off-balance sheet transactions commitment and contingencies our income , losses and distributions are allocated 99 % to our limited partners and 1 % to our general partner until the limited partners have received total distributions equal to each limited partners ' capital contribution plus an 8 % , compounded annually , cumulative return on each limited partners ' capital contribution . after such time , income , losses and distributions will be
| sources of liquidity we are currently in the liquidation period . the liquidation period is the time-frame in which we sell equipment under lease in the normal course of business . during this time period we anticipate that a substantial portion of our cash outflows will be from operating activities and the majority of our cash inflows are expected to be from operating and investing activities . we believe that the cash inflows will be sufficient to finance our liquidity requirements for the foreseeable future , including semi-annual distributions to our limited partners , general and administrative expenses , and fees paid to our investment manager . operating activities cash used in operating activities for the year ended december 31 , 2017 was $ 826,865 and was primarily driven by the following factors ; ( i ) a net loss for the year ended december 31 , 2017 of $ 8,947,762 , ( ii ) a decline in finance income of $ 1,046,724 , ( iii ) an increase in foreign currency transactions of $ 1,840,424 , and ( iv ) a decline in other assets of $ 1,677,048. offsetting these fluctuations was an increase in minimum rents receivable of $ 2,186,878 , an increase in provision for lease , note and loan losses of $ 3,001,573 , an increase in depreciation and amortization of $ 2,203,710 , and an increase of $ 940,440 in accounts payable and accrued expenses .
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sufficient information does not yet exist to accurately assess the time required to resolve the concerns raised in the fda 's complete response letter . in january 2011 , we announced that the fda had accepted our ind for abuse-resistant oxymorphone and that we had received a $ 5.0 million milestone payment under the king agreements for this milestone . all of our collaboration , contract and milestone revenues are recognized pursuant to payments we 've received from the king agreements , including : replace_table_token_4_th we will receive a $ 15.0 million cash milestone payment from king upon regulatory approval of remoxy in the united states . we could also receive from king up to $ 105.0 million in additional milestone payments in the course of clinical development of the other abuse-resistant opioid painkillers under the strategic alliance . in addition , subject to certain limitations , king is obligated to fund development expenses incurred by us pursuant to the collaboration agreement . king is obligated to fund the commercialization expenses of , and has the 33 exclusive right to market and sell , drugs developed in connection with the strategic alliance . the royalty rate for net sales of remoxy and other products covered by the strategic alliance with king in the united states is 20 % , except as to the first $ 1.0 billion in cumulative net sales in the united states , for which the royalty is set at 15 % . the royalty rate for net sales of products covered by the strategic alliance with king outside the united states is 10 % on all of net sales . although we were profitable in 2006 , 2007 and 2008 based on payments received from king and interest income , we have yet to generate any revenues from product sales . we have recorded an accumulated deficit of $ 132.2 million at december 31 , 2011. 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 trials as well as clinical supplies associated with our drug 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 and enrollment rates of clinical trials for our drug candidates and our need for clinical supplies . 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 : continue to conduct preclinical and clinical trials for our drug candidates ; seek regulatory approvals for our drug candidates ; develop , formulate , manufacture and commercialize our drug 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 drug candidates . if our development efforts result in regulatory approval and successful commercialization of our drug 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 , contract research organizations and clinical research sites for a significant portion of our product development efforts . we focus substantially all our research and development efforts on the research and development of drugs for the treatment of pain , metastatic melanoma and hemophilia . the following table summarizes expenses by category for research and development efforts ( in thousands ) : replace_table_token_5_th ( 1 ) contractor fees generally include expenses for preclinical studies and clinical trials . ( 2 ) supplies generally include costs for formulation and manufacturing activities . ( 3 ) other generally includes the allocation of common costs such as facilities . 34 our technology has been applied across certain of our portfolio of drug candidates . data , know-how , personnel , clinical results , research results and other matters related to the research and development of any one of our drug candidates also relate to , and further the development of , our other drug candidates . for example , we expect that results of non-clinical studies , such as pharmacokinetics , toxicology and other studies , regarding certain components of our drug candidate remoxy to be applicable to the other potential drug candidates that may arise out of our collaboration with king since all such potential drug candidates are expected to utilize such components . as a result , costs allocated to a specific drug candidate may not necessarily reflect the actual costs surrounding research and development of that drug candidate due to cross application of the foregoing . our contractor fees and supplies expenses in 2011 related to programs outside of the king agreements were limited to approximately $ 0.4 million . in july 2011 , we terminated our license to certain technology from albert einstein college of medicine , including technology we used in our monoclonal antibody program for the treatment of metastatic melanoma . we did not incur any expenses as a result of this termination . story_separator_special_tag research and development expense decreased to $ 8.3 million in 2011 from $ 15.7 million in 2010. the decrease was primarily due to decreases in non-cash stock related compensation costs as well as the timing of development activities for our product candidates , offset in part by the reduction in research and development costs in 2010 for grants awarded to us by the u.s. government . research and development expenses included non-cash stock related compensation costs of $ 2.7 million in 2011 and $ 10.3 million in 2010. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. we expect our development efforts to result in our drug candidates progressing through various stages of clinical trials , including current and potential clinical trials for our other abuse-resistant drug candidates , as well as further clinical development of our product candidates in metastatic melanoma and hemophilia . pfizer reimburses certain development expenses for our abuse-resistant drug candidates pursuant to our collaboration agreement . 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 trials and preclinical studies . general and administrative expense general and administrative expenses consist primarily of compensation and other general corporate expenses . general and administrative expenses decreased to $ 6.7 million in 2011 from $ 14.8 million in 2010. the decrease was primarily due to decreased non-cash stock-related compensation costs in 2011 as compared to 2010. general and administrative expenses included non-cash stock related compensation costs of $ 2.8 million in 2011 and $ 9.9 million in 2010. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. we expect other general and administrative expenses to increase over the next several years in connection with support of precommercialization and commercialization activities for our drug candidates . the increase may fluctuate from period to period due to the timing and scope of these activities and the results of clinical trials and preclinical studies . interest and other income , net interest and other income , net , decreased to $ 0.9 million in 2011 from $ 1.7 million in 2010. this decrease was primarily due to decreased average balances of marketable securities . we expect our interest income to decrease in the future as we use cash to fund our operations . provision for income taxes we did not provide for federal income taxes in 2011 or 2010 because we had a tax loss for both 2011 and 2010 . 38 years ended december 31 , 2010 and 2009 revenueprogram fee revenue king paid us a $ 150.0 million upfront fee in connection with the closing of our strategic alliance with king in december 2005. revenues recognized from amortization of this upfront fee were $ 10.5 million in 2010 and $ 14.3 million in 2009. revenuecollaboration revenue collaboration revenues were $ 1.3 million in 2010 and $ 6.2 million in 2009. these revenues related to reimbursement of our development expenses incurred pursuant to the king strategic alliance . collaboration revenues were lower in 2010 as compared to 2009 primarily because the reimbursable expenses we incurred pursuant to the strategic alliance with king were lower in 2010 as compared to 2009. revenuemilestone revenue milestone revenue of $ 5.0 million in 2010 was related to acceptance by the fda of the ind for abuse-resistant oxymorphone under the king agreements . research and development expense research and development expense consists primarily of costs of drug development work associated with our drug candidates , including : preclinical testing , clinical trials , clinical supplies and related formulation and design costs , and salaries and other personnel-related expenses . in october 2010 , we were awarded $ 2.1 million in research grants by the u.s. government under the qualifying therapeutic discovery project program . the research grants were awarded following a competitive review of thousands of applications . according to guidance released by the u.s. department of the treasury , the u.s. department of health and human services evaluated each project for its potential to produce new therapies , reduce long-term health care costs or cure cancer . we recognized these grants as a reduction in research and development expenses for the fourth quarter 2010. research and development expense decreased to $ 15.7 million in 2010 from $ 21.1 million in 2009. the decrease was primarily due to decreases in development activities for remoxy , the timing of development activities for our other product candidates and reduction in research and development costs for grants awarded to us by the u.s. government , offset in part by increased non-cash stock related compensation costs . research and development expenses included non-cash stock related compensation costs of $ 10.3 million in 2010 and $ 4.0 million in 2009. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. general and administrative expense general and administrative expenses consist primarily of compensation and other general corporate expenses . general and administrative expenses increased to $ 14.8 million in 2010 from $ 6.2 million in 2009. the increase was primarily due to increases in non-cash stock-related compensation costs . 39 general and administrative expenses included non-cash stock related compensation costs of $ 9.9 million in 2010 and $ 2.7 million in 2009. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend
| sources of liquidity we are currently in the liquidation period . the liquidation period is the time-frame in which we sell equipment under lease in the normal course of business . during this time period we anticipate that a substantial portion of our cash outflows will be from operating activities and the majority of our cash inflows are expected to be from operating and investing activities . we believe that the cash inflows will be sufficient to finance our liquidity requirements for the foreseeable future , including semi-annual distributions to our limited partners , general and administrative expenses , and fees paid to our investment manager . operating activities cash used in operating activities for the year ended december 31 , 2017 was $ 826,865 and was primarily driven by the following factors ; ( i ) a net loss for the year ended december 31 , 2017 of $ 8,947,762 , ( ii ) a decline in finance income of $ 1,046,724 , ( iii ) an increase in foreign currency transactions of $ 1,840,424 , and ( iv ) a decline in other assets of $ 1,677,048. offsetting these fluctuations was an increase in minimum rents receivable of $ 2,186,878 , an increase in provision for lease , note and loan losses of $ 3,001,573 , an increase in depreciation and amortization of $ 2,203,710 , and an increase of $ 940,440 in accounts payable and accrued expenses .
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sufficient information does not yet exist to accurately assess the time required to resolve the concerns raised in the fda 's complete response letter . in january 2011 , we announced that the fda had accepted our ind for abuse-resistant oxymorphone and that we had received a $ 5.0 million milestone payment under the king agreements for this milestone . all of our collaboration , contract and milestone revenues are recognized pursuant to payments we 've received from the king agreements , including : replace_table_token_4_th we will receive a $ 15.0 million cash milestone payment from king upon regulatory approval of remoxy in the united states . we could also receive from king up to $ 105.0 million in additional milestone payments in the course of clinical development of the other abuse-resistant opioid painkillers under the strategic alliance . in addition , subject to certain limitations , king is obligated to fund development expenses incurred by us pursuant to the collaboration agreement . king is obligated to fund the commercialization expenses of , and has the 33 exclusive right to market and sell , drugs developed in connection with the strategic alliance . the royalty rate for net sales of remoxy and other products covered by the strategic alliance with king in the united states is 20 % , except as to the first $ 1.0 billion in cumulative net sales in the united states , for which the royalty is set at 15 % . the royalty rate for net sales of products covered by the strategic alliance with king outside the united states is 10 % on all of net sales . although we were profitable in 2006 , 2007 and 2008 based on payments received from king and interest income , we have yet to generate any revenues from product sales . we have recorded an accumulated deficit of $ 132.2 million at december 31 , 2011. 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 trials as well as clinical supplies associated with our drug 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 and enrollment rates of clinical trials for our drug candidates and our need for clinical supplies . 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 : continue to conduct preclinical and clinical trials for our drug candidates ; seek regulatory approvals for our drug candidates ; develop , formulate , manufacture and commercialize our drug 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 drug candidates . if our development efforts result in regulatory approval and successful commercialization of our drug 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 , contract research organizations and clinical research sites for a significant portion of our product development efforts . we focus substantially all our research and development efforts on the research and development of drugs for the treatment of pain , metastatic melanoma and hemophilia . the following table summarizes expenses by category for research and development efforts ( in thousands ) : replace_table_token_5_th ( 1 ) contractor fees generally include expenses for preclinical studies and clinical trials . ( 2 ) supplies generally include costs for formulation and manufacturing activities . ( 3 ) other generally includes the allocation of common costs such as facilities . 34 our technology has been applied across certain of our portfolio of drug candidates . data , know-how , personnel , clinical results , research results and other matters related to the research and development of any one of our drug candidates also relate to , and further the development of , our other drug candidates . for example , we expect that results of non-clinical studies , such as pharmacokinetics , toxicology and other studies , regarding certain components of our drug candidate remoxy to be applicable to the other potential drug candidates that may arise out of our collaboration with king since all such potential drug candidates are expected to utilize such components . as a result , costs allocated to a specific drug candidate may not necessarily reflect the actual costs surrounding research and development of that drug candidate due to cross application of the foregoing . our contractor fees and supplies expenses in 2011 related to programs outside of the king agreements were limited to approximately $ 0.4 million . in july 2011 , we terminated our license to certain technology from albert einstein college of medicine , including technology we used in our monoclonal antibody program for the treatment of metastatic melanoma . we did not incur any expenses as a result of this termination . story_separator_special_tag research and development expense decreased to $ 8.3 million in 2011 from $ 15.7 million in 2010. the decrease was primarily due to decreases in non-cash stock related compensation costs as well as the timing of development activities for our product candidates , offset in part by the reduction in research and development costs in 2010 for grants awarded to us by the u.s. government . research and development expenses included non-cash stock related compensation costs of $ 2.7 million in 2011 and $ 10.3 million in 2010. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. we expect our development efforts to result in our drug candidates progressing through various stages of clinical trials , including current and potential clinical trials for our other abuse-resistant drug candidates , as well as further clinical development of our product candidates in metastatic melanoma and hemophilia . pfizer reimburses certain development expenses for our abuse-resistant drug candidates pursuant to our collaboration agreement . 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 trials and preclinical studies . general and administrative expense general and administrative expenses consist primarily of compensation and other general corporate expenses . general and administrative expenses decreased to $ 6.7 million in 2011 from $ 14.8 million in 2010. the decrease was primarily due to decreased non-cash stock-related compensation costs in 2011 as compared to 2010. general and administrative expenses included non-cash stock related compensation costs of $ 2.8 million in 2011 and $ 9.9 million in 2010. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. we expect other general and administrative expenses to increase over the next several years in connection with support of precommercialization and commercialization activities for our drug candidates . the increase may fluctuate from period to period due to the timing and scope of these activities and the results of clinical trials and preclinical studies . interest and other income , net interest and other income , net , decreased to $ 0.9 million in 2011 from $ 1.7 million in 2010. this decrease was primarily due to decreased average balances of marketable securities . we expect our interest income to decrease in the future as we use cash to fund our operations . provision for income taxes we did not provide for federal income taxes in 2011 or 2010 because we had a tax loss for both 2011 and 2010 . 38 years ended december 31 , 2010 and 2009 revenueprogram fee revenue king paid us a $ 150.0 million upfront fee in connection with the closing of our strategic alliance with king in december 2005. revenues recognized from amortization of this upfront fee were $ 10.5 million in 2010 and $ 14.3 million in 2009. revenuecollaboration revenue collaboration revenues were $ 1.3 million in 2010 and $ 6.2 million in 2009. these revenues related to reimbursement of our development expenses incurred pursuant to the king strategic alliance . collaboration revenues were lower in 2010 as compared to 2009 primarily because the reimbursable expenses we incurred pursuant to the strategic alliance with king were lower in 2010 as compared to 2009. revenuemilestone revenue milestone revenue of $ 5.0 million in 2010 was related to acceptance by the fda of the ind for abuse-resistant oxymorphone under the king agreements . research and development expense research and development expense consists primarily of costs of drug development work associated with our drug candidates , including : preclinical testing , clinical trials , clinical supplies and related formulation and design costs , and salaries and other personnel-related expenses . in october 2010 , we were awarded $ 2.1 million in research grants by the u.s. government under the qualifying therapeutic discovery project program . the research grants were awarded following a competitive review of thousands of applications . according to guidance released by the u.s. department of the treasury , the u.s. department of health and human services evaluated each project for its potential to produce new therapies , reduce long-term health care costs or cure cancer . we recognized these grants as a reduction in research and development expenses for the fourth quarter 2010. research and development expense decreased to $ 15.7 million in 2010 from $ 21.1 million in 2009. the decrease was primarily due to decreases in development activities for remoxy , the timing of development activities for our other product candidates and reduction in research and development costs for grants awarded to us by the u.s. government , offset in part by increased non-cash stock related compensation costs . research and development expenses included non-cash stock related compensation costs of $ 10.3 million in 2010 and $ 4.0 million in 2009. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend distribution to stockholders in the fourth quarter of 2010. general and administrative expense general and administrative expenses consist primarily of compensation and other general corporate expenses . general and administrative expenses increased to $ 14.8 million in 2010 from $ 6.2 million in 2009. the increase was primarily due to increases in non-cash stock-related compensation costs . 39 general and administrative expenses included non-cash stock related compensation costs of $ 9.9 million in 2010 and $ 2.7 million in 2009. these costs in 2010 included $ 7.4 million for one-time modifications made to outstanding stock options to prevent diminution of the benefit of these options from the special , one-time nondividend
| liquidity and capital resources since inception , we have financed our operations primarily through public and private stock offerings , payments received under our strategic alliance with king 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 , 2011 , cash , cash equivalents and marketable securities were $ 98.1 million . net cash used in operating activities was $ 0.3 million for 2011 and $ 0.1 million for 2010. net cash provided by investing activities was $ 59.9 million for 2011 compared to $ 52.5 million for 2010. investing activities for both years consisted primarily of the purchase , sale and maturities of marketable securities . we did not use any cash to purchase property , equipment and leasehold improvements in 2011 and 2010. net cash provided by financing activities was $ 8.7 million for 2011 and net cash used by financing activities was $ 83.3 million in 2010. cash from financing activities in 2011 consisted primarily of cash from stock option exercises . cash used by financing activities in 2010 consisted primarily of cash used for the special , one-time nondividend distribution of approximately $ 85.7 million , offset in part by cash from stock option exercises . realization of our other deferred tax assets is dependent on future earnings , if any . we are uncertain about the timing and amount of any future earnings .
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our continued qualification as a reit depends on our ability to meet , on a continuing basis , various complex requirements under the internal revenue code relating to , among other things , the source of our gross income , the composition and values of our assets , our distribution levels and the concentration of ownership of our capital stock . even if we maintain our qualification as a reit , we may become subject to some federal , state and local taxes on our income generated in our wholly owned taxable reit subsidiary ( `` trs `` ) , five oaks acquisition corp. ( `` foac `` ) . recent developments as of december 31 , 2020 , there is an ongoing global outbreak of a novel coronavirus , or covid-19 . on march 11 , 2020 , the who declared covid-19 a global pandemic , and numerous countries , including the united states , declared national emergencies with respect to covid-19 . the united states and other countries reacted to the covid-19 outbreak with unprecedented government intervention , including interest rate cuts and economic stimulus . the global impact of the outbreak rapidly evolved ( and continues to do so ) , and many countries reacted by instituting , or strongly encouraging , quarantines and restrictions on travel , closing financial markets and or restricting trading , limiting operations of non-essential offices , retail centers , hotels , and other businesses , and taking other restrictive measures to help slow the spread of covid-19 . businesses also implemented similar precautionary measures . such measures , as well as the general uncertainty surrounding the dangers and impact of covid-19 , have created disruption in global supply chains , increasing rates of unemployment and adversely impacting many industries , including industries related to the collateral underlying certain of our loans . moreover , with the continued spread of covid-19 , governments and businesses are likely to continue to take aggressive measures to help slow its spread . for this reason , among others , as covid-19 continues to spread , the potential impacts , including a global , regional , or other economic recession , are increasingly uncertain and difficult to assess . although we are still uncertain of the potential full magnitude or duration of the covid-19 outbreak and its impact on the current financial , economic and capital markets environment , and future developments in these and other areas , we face future uncertainty and risk with respect to our financial condition , results of operations , liquidity and ability to pay distributions . possible future declines in rental rates and expectations of future rental concessions , including free rent to renew tenants early , to retain tenants who are up for renewal or to attract new tenants , or rent abatements for tenants severely impacted by the covid-19 pandemic may result in decreases in cash flows to our borrowers and potentially in defaults in paying debt service on outstanding indebtedness , which could adversely impact our results of operations and financial performance . impending declines in economic conditions could negatively impact real estate and real estate capital markets and result in lower occupancy , lower rental rates and declining values in our portfolio , which could adversely impact the value of investments , making it more difficult for us to make distributions or meet our financing obligations . although there are effective vaccines for covid-19 that have been approved for use , distribution of the vaccines did not begin until late 2020 , and a majority of the public will likely not have access to a vaccination until sometime in 2021. accordingly , the full extent of the impact and effects of covid-19 will depend on future developments , including , among other factors , the duration and spread of the outbreak , along with travel advisories , quarantines and restrictions , the recovery time of the disrupted 31 supply chains and industries , the impact of labor market interruptions , the impact of government interventions , and uncertainty with respect to the duration of the economic slowdown . we are unable to predict or control these factors . the effects of the covid-19 pandemic did not significantly impact our operating results for the year ended december 31 , 2020 , other than previously deferred debt issuance costs of $ 624,816 expensed in the second quarter of 2020 as a result of the current market environment related to a collateralized loan obligations transaction that has been determined as unlikely to be executed prior to december 31 , 2020. however , the prolonged duration and impact of the covid-19 pandemic could materially disrupt our business operations and negatively impact our business , financial performance and operating results for the year ending december 31 , 2021 and potentially longer . 2020 highlights we believe we successfully navigated the challenging economic environment resulting from the covid-19 pandemic during 2020. as of december 31 , 2020 , our loan portfolio is 100 % performing with no loan impairments , loan defaults or non-accrual loans and no forbearance requests granted within our loan portfolio . our net income attributable to our common stockholders increased from $ 2.7 million , or $ 0.11 per share of common stock , in 2019 to $ 8.4 million , or $ 0.34 per share of common stock , in 2020. our distributable earnings increased by 22 % from $ 7.6 million , or $ 0.32 per share of common stock , in 2019 to $ 9.8 million , or $ 0.39 per share of common stock , in 2020. distributable earnings is a non-gaap financial measure . for a definition of distributable earnings and a reconciliation of our distributable earnings to our net income attributable to common stockholders , see `` key financial measure and indicators . story_separator_special_tag as further described below , distributable earnings is a measure that is not prepared in accordance with accounting principles generally accepted in the united states of america , or gaap , which helps us to evaluate our performance excluding the effects of certain transactions and gaap adjustments that we believe are not necessarily indicative of our current loan portfolio and operations . in addition , distributable earnings is a performance metric we consider when declaring our dividends . earnings per share and dividends declared the following table sets forth the calculation of basic and diluted net income per share and dividends declared per share : replace_table_token_3_th ( 1 ) represents net income attributable to lument finance trust , inc. ( 2 ) includes $ 0.04 special dividend declared on december 21 , 2020. distributable earnings distributable earnings is a non-gaap financial measure , which we define as gaap net income ( loss ) attributable to holders of common stock , or , without duplication , owners of our subsidiaries , computed in accordance with gaap , including realized losses not otherwise included in gaap net income ( loss ) and excluding ( i ) non-cash equity compensation , ( ii ) incentive compensation payable to the manager , ( iii ) depreciation and amortization , ( iv ) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable repotting period , regardless of whether such items are included in other comprehensive income ( loss ) or net income ( loss ) , and ( v ) one-time events pursuant to changes in gaap and certain material non-cash income or expense items after discussions with the company 's board of directors and approved by a majority of the company 's independent directors . distributable earnings mirrors how we calculate core earnings ( as defined in our management agreement between our manager and us ) for purposes of calculating the incentive fee payable to our manager . while distributable earnings excludes the impact of any unrealized provisions for credit losses , any loan losses are charged off and realized through distributable earnings when deemed non-recoverable . non-recoverability is determined ( i ) upon the resolution of a loan ( i.e . when the loan is repaid , fully or partially , or in the case of foreclosures , when the underlying asset is sold ) , or ( ii ) with respect to any amount due under any loan , when such amount is determined to be non-collectible . we believe that distributable earnings provides meaningful information to consider in addition to our net income ( loss ) and cash flows from operating activities determined in accordance with gaap . we believe distributable earnings is a useful financial metric for existing and potential future holders of our common stock as historically , over time , distributable earnings has been a strong indicator of our dividends per share . as a reit , we generally must distribute annually at least 90 % of our taxable income , subject to certain adjustments , and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock . refer to note 16 to our consolidated financial statements for further discussion of our distribution requirements as a reit . furthermore , distributable earnings help us to evaluate our performance excluding the effects of certain transactions and gaap adjustments that we believe are not necessarily indicative of our current loan portfolio and operations , and is a performance metric we consider when declaring our dividends . distributable earnings does not represent net income ( loss ) or cash generated from operating activities and should not be considered as an alternative to gaap net income ( loss ) , or an indication of gaap cash flows from operations , a measure of our liquidity , or an indication of funds available for our cash needs . in addition , our methodology for calculating distributable earnings may differ from the methodologies employed by other companies to calculate the same or similar performance measures , and accordingly , our reported distributable earnings may not be comparable to the distributable earnings reported by other companies . the following table provides a reconciliation of distributable earnings to gaap net income : 34 replace_table_token_4_th ( 1 ) represents net income attributable to common stockholders of lument finance trust , inc. book value per share the following table calculates our book value per share : replace_table_token_5_th as of december 31 , 2020 , our equity was $ 113.7 million , and our book value per common share was $ 4.56 on a basic and fully diluted basis . our equity increased by $ 5.1 million compared to our stockholders ' equity as of december 31 , 2019 as a result of the orix private placement on january 3 , 2020 , while book value per common share declined by 0.7 % from the previous year-end amount of $ 4.59. the slight decrease in book value per share is primarily reflective of the one-time special cash dividend of $ 0.04 per share of common stock declared in december 2020 in order to satisfy reit distribution requirements . investment portfolio commercial mortgage loans as of december 31 , 2020 , we have determined that we are the primary beneficiary of hunt cre 2017-fl1 , ltd. and hunt cre 2018-fl2 , ltd. based on our obligation to absorb losses derived from ownership of our residual interests . accordingly , the company consolidated the assets , liabilities , income and expenses of the underlying issuing entities , collateralized loan obligations . the following table details our loan activity by unpaid principal balance : year ended december 31 , 2020 balance at december 31 , 2019 $ 635,260,420 purchases and advances 57,601,572 proceeds from principal repayments ( 145,516,658 ) balance at december 31 , 2020 $ 547,345,334 the following table details overall statistics for
| liquidity and capital resources since inception , we have financed our operations primarily through public and private stock offerings , payments received under our strategic alliance with king 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 , 2011 , cash , cash equivalents and marketable securities were $ 98.1 million . net cash used in operating activities was $ 0.3 million for 2011 and $ 0.1 million for 2010. net cash provided by investing activities was $ 59.9 million for 2011 compared to $ 52.5 million for 2010. investing activities for both years consisted primarily of the purchase , sale and maturities of marketable securities . we did not use any cash to purchase property , equipment and leasehold improvements in 2011 and 2010. net cash provided by financing activities was $ 8.7 million for 2011 and net cash used by financing activities was $ 83.3 million in 2010. cash from financing activities in 2011 consisted primarily of cash from stock option exercises . cash used by financing activities in 2010 consisted primarily of cash used for the special , one-time nondividend distribution of approximately $ 85.7 million , offset in part by cash from stock option exercises . realization of our other deferred tax assets is dependent on future earnings , if any . we are uncertain about the timing and amount of any future earnings .
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our continued qualification as a reit depends on our ability to meet , on a continuing basis , various complex requirements under the internal revenue code relating to , among other things , the source of our gross income , the composition and values of our assets , our distribution levels and the concentration of ownership of our capital stock . even if we maintain our qualification as a reit , we may become subject to some federal , state and local taxes on our income generated in our wholly owned taxable reit subsidiary ( `` trs `` ) , five oaks acquisition corp. ( `` foac `` ) . recent developments as of december 31 , 2020 , there is an ongoing global outbreak of a novel coronavirus , or covid-19 . on march 11 , 2020 , the who declared covid-19 a global pandemic , and numerous countries , including the united states , declared national emergencies with respect to covid-19 . the united states and other countries reacted to the covid-19 outbreak with unprecedented government intervention , including interest rate cuts and economic stimulus . the global impact of the outbreak rapidly evolved ( and continues to do so ) , and many countries reacted by instituting , or strongly encouraging , quarantines and restrictions on travel , closing financial markets and or restricting trading , limiting operations of non-essential offices , retail centers , hotels , and other businesses , and taking other restrictive measures to help slow the spread of covid-19 . businesses also implemented similar precautionary measures . such measures , as well as the general uncertainty surrounding the dangers and impact of covid-19 , have created disruption in global supply chains , increasing rates of unemployment and adversely impacting many industries , including industries related to the collateral underlying certain of our loans . moreover , with the continued spread of covid-19 , governments and businesses are likely to continue to take aggressive measures to help slow its spread . for this reason , among others , as covid-19 continues to spread , the potential impacts , including a global , regional , or other economic recession , are increasingly uncertain and difficult to assess . although we are still uncertain of the potential full magnitude or duration of the covid-19 outbreak and its impact on the current financial , economic and capital markets environment , and future developments in these and other areas , we face future uncertainty and risk with respect to our financial condition , results of operations , liquidity and ability to pay distributions . possible future declines in rental rates and expectations of future rental concessions , including free rent to renew tenants early , to retain tenants who are up for renewal or to attract new tenants , or rent abatements for tenants severely impacted by the covid-19 pandemic may result in decreases in cash flows to our borrowers and potentially in defaults in paying debt service on outstanding indebtedness , which could adversely impact our results of operations and financial performance . impending declines in economic conditions could negatively impact real estate and real estate capital markets and result in lower occupancy , lower rental rates and declining values in our portfolio , which could adversely impact the value of investments , making it more difficult for us to make distributions or meet our financing obligations . although there are effective vaccines for covid-19 that have been approved for use , distribution of the vaccines did not begin until late 2020 , and a majority of the public will likely not have access to a vaccination until sometime in 2021. accordingly , the full extent of the impact and effects of covid-19 will depend on future developments , including , among other factors , the duration and spread of the outbreak , along with travel advisories , quarantines and restrictions , the recovery time of the disrupted 31 supply chains and industries , the impact of labor market interruptions , the impact of government interventions , and uncertainty with respect to the duration of the economic slowdown . we are unable to predict or control these factors . the effects of the covid-19 pandemic did not significantly impact our operating results for the year ended december 31 , 2020 , other than previously deferred debt issuance costs of $ 624,816 expensed in the second quarter of 2020 as a result of the current market environment related to a collateralized loan obligations transaction that has been determined as unlikely to be executed prior to december 31 , 2020. however , the prolonged duration and impact of the covid-19 pandemic could materially disrupt our business operations and negatively impact our business , financial performance and operating results for the year ending december 31 , 2021 and potentially longer . 2020 highlights we believe we successfully navigated the challenging economic environment resulting from the covid-19 pandemic during 2020. as of december 31 , 2020 , our loan portfolio is 100 % performing with no loan impairments , loan defaults or non-accrual loans and no forbearance requests granted within our loan portfolio . our net income attributable to our common stockholders increased from $ 2.7 million , or $ 0.11 per share of common stock , in 2019 to $ 8.4 million , or $ 0.34 per share of common stock , in 2020. our distributable earnings increased by 22 % from $ 7.6 million , or $ 0.32 per share of common stock , in 2019 to $ 9.8 million , or $ 0.39 per share of common stock , in 2020. distributable earnings is a non-gaap financial measure . for a definition of distributable earnings and a reconciliation of our distributable earnings to our net income attributable to common stockholders , see `` key financial measure and indicators . story_separator_special_tag as further described below , distributable earnings is a measure that is not prepared in accordance with accounting principles generally accepted in the united states of america , or gaap , which helps us to evaluate our performance excluding the effects of certain transactions and gaap adjustments that we believe are not necessarily indicative of our current loan portfolio and operations . in addition , distributable earnings is a performance metric we consider when declaring our dividends . earnings per share and dividends declared the following table sets forth the calculation of basic and diluted net income per share and dividends declared per share : replace_table_token_3_th ( 1 ) represents net income attributable to lument finance trust , inc. ( 2 ) includes $ 0.04 special dividend declared on december 21 , 2020. distributable earnings distributable earnings is a non-gaap financial measure , which we define as gaap net income ( loss ) attributable to holders of common stock , or , without duplication , owners of our subsidiaries , computed in accordance with gaap , including realized losses not otherwise included in gaap net income ( loss ) and excluding ( i ) non-cash equity compensation , ( ii ) incentive compensation payable to the manager , ( iii ) depreciation and amortization , ( iv ) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable repotting period , regardless of whether such items are included in other comprehensive income ( loss ) or net income ( loss ) , and ( v ) one-time events pursuant to changes in gaap and certain material non-cash income or expense items after discussions with the company 's board of directors and approved by a majority of the company 's independent directors . distributable earnings mirrors how we calculate core earnings ( as defined in our management agreement between our manager and us ) for purposes of calculating the incentive fee payable to our manager . while distributable earnings excludes the impact of any unrealized provisions for credit losses , any loan losses are charged off and realized through distributable earnings when deemed non-recoverable . non-recoverability is determined ( i ) upon the resolution of a loan ( i.e . when the loan is repaid , fully or partially , or in the case of foreclosures , when the underlying asset is sold ) , or ( ii ) with respect to any amount due under any loan , when such amount is determined to be non-collectible . we believe that distributable earnings provides meaningful information to consider in addition to our net income ( loss ) and cash flows from operating activities determined in accordance with gaap . we believe distributable earnings is a useful financial metric for existing and potential future holders of our common stock as historically , over time , distributable earnings has been a strong indicator of our dividends per share . as a reit , we generally must distribute annually at least 90 % of our taxable income , subject to certain adjustments , and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock . refer to note 16 to our consolidated financial statements for further discussion of our distribution requirements as a reit . furthermore , distributable earnings help us to evaluate our performance excluding the effects of certain transactions and gaap adjustments that we believe are not necessarily indicative of our current loan portfolio and operations , and is a performance metric we consider when declaring our dividends . distributable earnings does not represent net income ( loss ) or cash generated from operating activities and should not be considered as an alternative to gaap net income ( loss ) , or an indication of gaap cash flows from operations , a measure of our liquidity , or an indication of funds available for our cash needs . in addition , our methodology for calculating distributable earnings may differ from the methodologies employed by other companies to calculate the same or similar performance measures , and accordingly , our reported distributable earnings may not be comparable to the distributable earnings reported by other companies . the following table provides a reconciliation of distributable earnings to gaap net income : 34 replace_table_token_4_th ( 1 ) represents net income attributable to common stockholders of lument finance trust , inc. book value per share the following table calculates our book value per share : replace_table_token_5_th as of december 31 , 2020 , our equity was $ 113.7 million , and our book value per common share was $ 4.56 on a basic and fully diluted basis . our equity increased by $ 5.1 million compared to our stockholders ' equity as of december 31 , 2019 as a result of the orix private placement on january 3 , 2020 , while book value per common share declined by 0.7 % from the previous year-end amount of $ 4.59. the slight decrease in book value per share is primarily reflective of the one-time special cash dividend of $ 0.04 per share of common stock declared in december 2020 in order to satisfy reit distribution requirements . investment portfolio commercial mortgage loans as of december 31 , 2020 , we have determined that we are the primary beneficiary of hunt cre 2017-fl1 , ltd. and hunt cre 2018-fl2 , ltd. based on our obligation to absorb losses derived from ownership of our residual interests . accordingly , the company consolidated the assets , liabilities , income and expenses of the underlying issuing entities , collateralized loan obligations . the following table details our loan activity by unpaid principal balance : year ended december 31 , 2020 balance at december 31 , 2019 $ 635,260,420 purchases and advances 57,601,572 proceeds from principal repayments ( 145,516,658 ) balance at december 31 , 2020 $ 547,345,334 the following table details overall statistics for
| cash flows the following table sets forth changes in cash , cash equivalents and restricted cash for the years ended december 31 , 2020 and december 31 , 2019 : replace_table_token_14_th during the year ended december 31 , 2020 , cash , cash equivalents and restricted cash increased by $ 53.4 million and for the year ended december 31 , 2019 , cash , cash equivalents and restricted cash decreased by $ 43.2 million . operating activities for the years ended december 31 , 2020 and december 31 , 2019 , net cash provided by operating activities totaled $ 12.2 million and $ 7.3 million , respectively . for the year ended december 31 , 2020 , our cash flows from operating activities were primarily driven by $ 22.1 million of interest received from the junior retained notes and preferred shares of hunt cre 2017-fl1 , ltd. and hunt cre 2018-fl2 , ltd. , the cre clos that we consolidate , $ 0.7 million of interest received from our senior secured loans held outside the cre clos we consolidate and $ 0.7 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our secured term loan of $ 3.0 million , management fees of $ 2.3 million , expense reimbursements of $ 1.7 million and other operating expenditures of $ 4.5 million .
| 1 |
pursuant to the purdue collaboration , purdue is conducting a phase 1b clinical trial in psoriasis patients in germany to evaluate the effect of higher concentrations of ast-005 gel on tnf mrna and downstream mrna expression . patient dosing is complete and no serious adverse events have been reported . we expect to have the topline results of the clinical trial in early 2018. our second therapeutic candidate , xcur17 , is an sna targeted to il-17ra for the treatment of mild to moderate psoriasis . we filed a cta for a phase 1 clinical trial of xcur17 in patients with psoriasis in germany in 88 the third quarter of 2017. our cta was approved in february 2018 and we expect the first patient in our phase 1 clinical trial to be dosed in early 2018. we expect this clinical trial to be completed in mid-2018 . our third therapeutic candidate , ast-008 , is an sna consisting of toll-like receptor 9 , or tlr9 , agonists designed for immuno-oncology applications . ast-008 has exhibited anti-tumor activity as both a monotherapy and in combination with certain checkpoint inhibitors across a range of preclinical models of solid and hematological cancers . in the third quarter of 2017 , we received an authorization from the mhra to conduct a phase 1 clinical trial with ast-008 . we began subject dosing in our phase 1 clinical trial for ast-008 in the fourth quarter of 2017. we expect this trial to be completed in mid-2018 . we ultimately plan to clinically advance ast-008 in combination with checkpoint inhibitors . since our inception in 2011 , we have devoted substantial resources to the research and development of snas and the protection and enhancement of our intellectual property . we have no products approved for sale and all of our $ 15.4 million in revenue through december 31 , 2017 has been earned through our research collaboration , license , and option agreement with purdue or as a primary contractor or as a subcontractor on government grants . in addition to our revenue , through december 31 , 2017 , we have funded our operations through private placements of preferred stock with gross proceeds totaling $ 42.8 million , sales of common stock in the private placement with gross proceeds totaling $ 31.5 million and debt financing totaling $ 6.0 million . as of december 31 , 2017 , our cash and cash equivalents were $ 25.8 million . since our inception , we have incurred significant operating losses . our net loss was $ 12.0 million and $ 16.9 million for the years ended december 31 , 2017 and 2016 , respectively . as of december 31 , 2017 , our accumulated deficit was $ 53.5 million . substantially all of our operating losses resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations . we expect to continue to incur significant and increasing losses in the foreseeable future . our net losses may fluctuate significantly from quarter to quarter and year to year . we anticipate that our expenses will increase substantially as we : conduct further preclinical studies and clinical trials of ast-008 and xcur17 ; increase research and development for the discovery and development of additional therapeutic candidates ; advance other therapeutic candidates into preclinical and clinical development ; increase our research and development to enhance our technology ; procure clinical trial materials ; seek regulatory approval for our therapeutic candidates that successfully complete clinical trials ; maintain , expand and protect our intellectual property portfolio ; add operational , financial and management information systems and personnel , including personnel to support our product development and planned future commercialization efforts ; and operate as a public company . we have not generated any commercial product revenue nor do we expect to generate substantial revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates . successful therapeutic development and regulatory approval are subject to significant uncertainty and we expect will take at least five years . if we obtain regulatory approval for any of our therapeutic candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . other sources of revenue could include a combination of research and development 89 payments , license fees and other upfront payments , milestone payments , and royalties in connection with our current and any future collaborations and licenses . until such time , if ever , that we generate revenue from whatever source , we expect to finance our cash needs through a combination of public or private equity offerings , debt financings and research collaboration and license agreements . we may be unable to raise capital or enter into such other arrangements when needed or on favorable terms . our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our therapeutic candidates . basis of presentation the audited financial statements of exicure , inc. for the fiscal years ended december 31 , 2017 and 2016 , contained herein , include a summary of our significant accounting policies and should be read in conjunction with the discussion below . recent developments reverse merger on september 26 , 2017 , pursuant to the merger agreement , max-1 acquisition sub , inc. , a wholly-owned subsidiary of max-1 acquisition corporation , or max-1 , merged with and into exicure operating company ( f/k/a exicure , inc. ) , a privately-held delaware corporation referred to herein as exicure opco , with exicure opco remaining as the surviving entity and a wholly-owned operating subsidiary of max-1 , or the merger . story_separator_special_tag the expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development . the estimated forfeiture rates were based on historical experience for similar classes of employees . the dividend yield was based on expected dividends at the time of grant . common stock warrant liability freestanding warrants related to shares that are redeemable , contingently redeemable , or for purchases of common stock that are not indexed to the company 's own stock are classified as a liability on the company 's balance sheet . the common stock warrants are recorded at fair value , estimated using the black-scholes option-pricing model , and marked to market at each balance sheet date with changes in the fair value of the liability recorded in other income ( expense ) , net in the statements of operations . a 10 % change in the estimate of expected volatility at december 31 , 2017 would increase or decrease the aggregate fair value of the common stock warrant liability in the amount of $ 45,000 . a 10 % change in the estimate of fair value of the common stock at december 31 , 2017 would increase or decrease the aggregate fair value of the common stock warrant liability in the amount of $ 87,000 . recently adopted accounting pronouncements in march 2016 , the financial accounting standards board , or fasb , issued accounting standards update , or asu , 2016-09 , improvements to employee share-based payment accounting . asu 2016-09 changes several aspects of the accounting for share-based payment transactions , including the income tax consequences , classification of awards as either equity or liabilities , and classification on the statement of cash flows . asu 2016-09 requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period . further , excess tax benefits are required to be classified along with other income tax cash flows as an operating activity . the guidance was effective for the company in the first quarter of 2017. adoption of this guidance did not have a significant impact to the company 's financial statements . recent accounting pronouncements not yet adopted in may 2014 , the fasb , issued asu , 2014-09 ( asc 606 ) , revenue from contracts with customers . this asu , as amended by asu 2015-14 , affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets . asu 2014-09 will replace most existing revenue recognition guidance in gaap when it becomes effective . the standard 's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services . in doing so , companies will need to use more judgment and make more estimates than under the currently effective guidance . these may include identifying performance obligations in the contract , estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation . asu 2014-09 is effective for exicure in the first quarter of 2018 and early adoption is permitted beginning in the first quarter of 2017. the company intends to adopt this standard on january 1 , 2018 on a modified retrospective basis and continues to analyze and assess the impact , if any , of this standard on its financial statements . in february 2016 , fasb issued asu 2016-02 , leases ( topic 842 ) , which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet . asu 2016-02 is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements . asu 2016-02 will be effective for the company beginning in the first quarter of 2019. early adoption is permitted . the company is currently evaluating the impact of adopting this standard on its financial statements . in august 2016 , the fasb issued asu 2016-15 , statement of cash flows ( topic 230 ) : classification of certain cash receipts and cash payments . asu 2016-15 addresses the classification of certain specific cash flow issues 94 including debt prepayment or extinguishment costs , settlement of certain debt instruments , contingent consideration payments made after a business combination , proceeds from the settlement of certain insurance claims and distributions received from equity method investees . asu 2016-15 is effective for the company in the first quarter of 2018 and early adoption is permitted . an entity that elects early adoption must adopt all of the amendments in the same period . the company is currently evaluating the impact of this guidance on its statement of cash flows . in may 2017 , the fasb issued asu 2017-09 , compensation - stock compensation ( topic 718 ) : scope of modification accounting . asu 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications . under the new guidance , modification accounting is required only if the fair value , the vesting conditions , or the classification of the award changes as a result of the change in terms or conditions . asu 2017-09 will be applied prospectively to awards modified on or after the adoption date . asu 2017-09 is effective for the company for fiscal years beginning after december 15 , 2017 , and interim periods within those fiscal years . early adoption is permitted . the company is currently evaluating the impact of this guidance on its financial statements . components of statements of operations revenue we have earned all of our revenue through december 31 ,
| cash flows the following table sets forth changes in cash , cash equivalents and restricted cash for the years ended december 31 , 2020 and december 31 , 2019 : replace_table_token_14_th during the year ended december 31 , 2020 , cash , cash equivalents and restricted cash increased by $ 53.4 million and for the year ended december 31 , 2019 , cash , cash equivalents and restricted cash decreased by $ 43.2 million . operating activities for the years ended december 31 , 2020 and december 31 , 2019 , net cash provided by operating activities totaled $ 12.2 million and $ 7.3 million , respectively . for the year ended december 31 , 2020 , our cash flows from operating activities were primarily driven by $ 22.1 million of interest received from the junior retained notes and preferred shares of hunt cre 2017-fl1 , ltd. and hunt cre 2018-fl2 , ltd. , the cre clos that we consolidate , $ 0.7 million of interest received from our senior secured loans held outside the cre clos we consolidate and $ 0.7 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our secured term loan of $ 3.0 million , management fees of $ 2.3 million , expense reimbursements of $ 1.7 million and other operating expenditures of $ 4.5 million .
| 0 |
pursuant to the purdue collaboration , purdue is conducting a phase 1b clinical trial in psoriasis patients in germany to evaluate the effect of higher concentrations of ast-005 gel on tnf mrna and downstream mrna expression . patient dosing is complete and no serious adverse events have been reported . we expect to have the topline results of the clinical trial in early 2018. our second therapeutic candidate , xcur17 , is an sna targeted to il-17ra for the treatment of mild to moderate psoriasis . we filed a cta for a phase 1 clinical trial of xcur17 in patients with psoriasis in germany in 88 the third quarter of 2017. our cta was approved in february 2018 and we expect the first patient in our phase 1 clinical trial to be dosed in early 2018. we expect this clinical trial to be completed in mid-2018 . our third therapeutic candidate , ast-008 , is an sna consisting of toll-like receptor 9 , or tlr9 , agonists designed for immuno-oncology applications . ast-008 has exhibited anti-tumor activity as both a monotherapy and in combination with certain checkpoint inhibitors across a range of preclinical models of solid and hematological cancers . in the third quarter of 2017 , we received an authorization from the mhra to conduct a phase 1 clinical trial with ast-008 . we began subject dosing in our phase 1 clinical trial for ast-008 in the fourth quarter of 2017. we expect this trial to be completed in mid-2018 . we ultimately plan to clinically advance ast-008 in combination with checkpoint inhibitors . since our inception in 2011 , we have devoted substantial resources to the research and development of snas and the protection and enhancement of our intellectual property . we have no products approved for sale and all of our $ 15.4 million in revenue through december 31 , 2017 has been earned through our research collaboration , license , and option agreement with purdue or as a primary contractor or as a subcontractor on government grants . in addition to our revenue , through december 31 , 2017 , we have funded our operations through private placements of preferred stock with gross proceeds totaling $ 42.8 million , sales of common stock in the private placement with gross proceeds totaling $ 31.5 million and debt financing totaling $ 6.0 million . as of december 31 , 2017 , our cash and cash equivalents were $ 25.8 million . since our inception , we have incurred significant operating losses . our net loss was $ 12.0 million and $ 16.9 million for the years ended december 31 , 2017 and 2016 , respectively . as of december 31 , 2017 , our accumulated deficit was $ 53.5 million . substantially all of our operating losses resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations . we expect to continue to incur significant and increasing losses in the foreseeable future . our net losses may fluctuate significantly from quarter to quarter and year to year . we anticipate that our expenses will increase substantially as we : conduct further preclinical studies and clinical trials of ast-008 and xcur17 ; increase research and development for the discovery and development of additional therapeutic candidates ; advance other therapeutic candidates into preclinical and clinical development ; increase our research and development to enhance our technology ; procure clinical trial materials ; seek regulatory approval for our therapeutic candidates that successfully complete clinical trials ; maintain , expand and protect our intellectual property portfolio ; add operational , financial and management information systems and personnel , including personnel to support our product development and planned future commercialization efforts ; and operate as a public company . we have not generated any commercial product revenue nor do we expect to generate substantial revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates . successful therapeutic development and regulatory approval are subject to significant uncertainty and we expect will take at least five years . if we obtain regulatory approval for any of our therapeutic candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . other sources of revenue could include a combination of research and development 89 payments , license fees and other upfront payments , milestone payments , and royalties in connection with our current and any future collaborations and licenses . until such time , if ever , that we generate revenue from whatever source , we expect to finance our cash needs through a combination of public or private equity offerings , debt financings and research collaboration and license agreements . we may be unable to raise capital or enter into such other arrangements when needed or on favorable terms . our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our therapeutic candidates . basis of presentation the audited financial statements of exicure , inc. for the fiscal years ended december 31 , 2017 and 2016 , contained herein , include a summary of our significant accounting policies and should be read in conjunction with the discussion below . recent developments reverse merger on september 26 , 2017 , pursuant to the merger agreement , max-1 acquisition sub , inc. , a wholly-owned subsidiary of max-1 acquisition corporation , or max-1 , merged with and into exicure operating company ( f/k/a exicure , inc. ) , a privately-held delaware corporation referred to herein as exicure opco , with exicure opco remaining as the surviving entity and a wholly-owned operating subsidiary of max-1 , or the merger . story_separator_special_tag the expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development . the estimated forfeiture rates were based on historical experience for similar classes of employees . the dividend yield was based on expected dividends at the time of grant . common stock warrant liability freestanding warrants related to shares that are redeemable , contingently redeemable , or for purchases of common stock that are not indexed to the company 's own stock are classified as a liability on the company 's balance sheet . the common stock warrants are recorded at fair value , estimated using the black-scholes option-pricing model , and marked to market at each balance sheet date with changes in the fair value of the liability recorded in other income ( expense ) , net in the statements of operations . a 10 % change in the estimate of expected volatility at december 31 , 2017 would increase or decrease the aggregate fair value of the common stock warrant liability in the amount of $ 45,000 . a 10 % change in the estimate of fair value of the common stock at december 31 , 2017 would increase or decrease the aggregate fair value of the common stock warrant liability in the amount of $ 87,000 . recently adopted accounting pronouncements in march 2016 , the financial accounting standards board , or fasb , issued accounting standards update , or asu , 2016-09 , improvements to employee share-based payment accounting . asu 2016-09 changes several aspects of the accounting for share-based payment transactions , including the income tax consequences , classification of awards as either equity or liabilities , and classification on the statement of cash flows . asu 2016-09 requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period . further , excess tax benefits are required to be classified along with other income tax cash flows as an operating activity . the guidance was effective for the company in the first quarter of 2017. adoption of this guidance did not have a significant impact to the company 's financial statements . recent accounting pronouncements not yet adopted in may 2014 , the fasb , issued asu , 2014-09 ( asc 606 ) , revenue from contracts with customers . this asu , as amended by asu 2015-14 , affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets . asu 2014-09 will replace most existing revenue recognition guidance in gaap when it becomes effective . the standard 's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services . in doing so , companies will need to use more judgment and make more estimates than under the currently effective guidance . these may include identifying performance obligations in the contract , estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation . asu 2014-09 is effective for exicure in the first quarter of 2018 and early adoption is permitted beginning in the first quarter of 2017. the company intends to adopt this standard on january 1 , 2018 on a modified retrospective basis and continues to analyze and assess the impact , if any , of this standard on its financial statements . in february 2016 , fasb issued asu 2016-02 , leases ( topic 842 ) , which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet . asu 2016-02 is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements . asu 2016-02 will be effective for the company beginning in the first quarter of 2019. early adoption is permitted . the company is currently evaluating the impact of adopting this standard on its financial statements . in august 2016 , the fasb issued asu 2016-15 , statement of cash flows ( topic 230 ) : classification of certain cash receipts and cash payments . asu 2016-15 addresses the classification of certain specific cash flow issues 94 including debt prepayment or extinguishment costs , settlement of certain debt instruments , contingent consideration payments made after a business combination , proceeds from the settlement of certain insurance claims and distributions received from equity method investees . asu 2016-15 is effective for the company in the first quarter of 2018 and early adoption is permitted . an entity that elects early adoption must adopt all of the amendments in the same period . the company is currently evaluating the impact of this guidance on its statement of cash flows . in may 2017 , the fasb issued asu 2017-09 , compensation - stock compensation ( topic 718 ) : scope of modification accounting . asu 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications . under the new guidance , modification accounting is required only if the fair value , the vesting conditions , or the classification of the award changes as a result of the change in terms or conditions . asu 2017-09 will be applied prospectively to awards modified on or after the adoption date . asu 2017-09 is effective for the company for fiscal years beginning after december 15 , 2017 , and interim periods within those fiscal years . early adoption is permitted . the company is currently evaluating the impact of this guidance on its financial statements . components of statements of operations revenue we have earned all of our revenue through december 31 ,
| net cash used in operating activities was $ 19.8 million and $ 5.1 million for the years ended december 31 , 2017 and 2016 , respectively . the increase in cash used in operating activities of $ 14.7 million was primarily due to the cash impact of higher research and development expenses in the year ended december 31 , 2017 , the payment for legal and accounting services of approximately $ 1.5 million , which were incurred in support of a potential public offering that was abandoned during the second quarter of 2017 and also in support of registering the resale of 39,714,143 shares of our common stock issued in connection with the merger and the private placement , the payment of $ 1.5 million in connection with the northwestern university license agreements , as well as the prepayment of directors and officers liability insurance , partially offset by the receipt of the $ 10.0 million upfront payment in connection with the purdue collaboration in december 2016. investing activities net cash used in investing activities was $ 0.9 million and $ 0.4 million for the years ended december 31 , 2017 and 2016 , respectively . cash used in investing activities for each of the above-mentioned periods was primarily due to the purchase of scientific equipment . financing activities net cash provided by financing activities of $ 26.9 million during the year ended december 31 , 2017 is primarily due to the sale of common stock in the private placement . gross proceeds from the private placement of $ 31.5 million , less financing costs paid in 2017 of $ 3.7 million , were partially offset by the repayment of debt of $ 1.0 million . net cash provided by financing activities of $ 6.3 million during the year ended december 31 , 2016 is mostly due to net proceeds of $ 5.9 million from our february 2016 secured debt financing with hercules and $ 0.4 million from our january 2016 series c preferred stock offering . hercules loan and security agreement on february 17 , 2016 , we entered into a loan and security agreement with hercules .
| 1 |
2. portfolio & other reflects sales related to the ownership restructure of dow corning and sales from january 1 , 2016 through april 30 , 2016 for the step acquisition of univation , acquired on may 5 , 2015 ( packaging & specialty plastics ) . portfolio & other also reflects the following divestitures : the chlorine value chain , divested on october 5 , 2015 ( industrial intermediates & infrastructure and packaging & specialty plastics ) , angus chemical company , divested on february 2 , 2015 and the global sodium borohydride business , divested on january 30 , 2015 ( both included in industrial intermediates & infrastructure ) . 35 replace_table_token_6_th 1. portfolio & other reflects sales related to the step acquisition of univation ( packaging & specialty plastics ) and cooperativa central de pesquisa agrícola 's , acquired on february 1 , 2015 ( agriculture ) . portfolio & other also reflects the following divestitures : the chlorine value chain ( industrial intermediates & infrastructure and packaging & specialty plastics ) , angus chemical company and the global sodium borohydride business ( both included in industrial intermediates & infrastructure ) . 2017 versus 2016 the company reported net sales for 2017 of $ 62.5 billion , up 30 percent from $ 48.2 billion for 2016 , primarily reflecting the merger , the addition of dow corning 's silicones business , increased selling prices and demand growth . sales growth was broad-based with increases in all segments and geographic regions . portfolio & other changes contributed 19 percent of the sales increase and impacted all segments , except industrial intermediates & infrastructure , which was flat . local price was up 6 percent compared with the same period last year , with increases in all geographic regions , including a double-digit increase in emea ( up 10 percent ) , driven by broad-based pricing actions as well as higher feedstock and raw material prices . local price increased in industrial intermediates & infrastructure ( up 10 percent ) and packaging & specialty plastics and performance materials & coatings ( both up 8 percent ) and declined in agriculture and electronics & imaging ( both down 1 percent ) . local price was flat in nutrition & biosciences , transportation & advanced polymers and safety & construction . volume increased 5 percent compared with the same period last year , with increases in all segments , except agriculture ( down 2 percent ) , including a double-digit increase in nutrition & biosciences ( up 10 percent ) . volume increased in all geographic regions , except latin america ( down 1 percent ) . currency was flat compared with the same period last year . 2016 versus 2015 the company reported net sales for 2016 of $ 48.2 billion , down 1 percent from $ 48.8 billion for 2015. local price decreased 6 percent compared with the same period last year , with decreases in all segments , except agriculture ( up 1 percent ) , and all geographic regions , due to lower feedstock and raw material prices and competitive pricing pressures . volume increased 3 percent compared with the same period last year , as increases in packaging & specialty plastics ( up 9 percent ) , transportation & advanced polymers ( up 7 percent ) , electronics & imaging ( up 3 percent ) and industrial intermediates & infrastructure ( up 1 percent ) more than offset decreases in agriculture , performance materials & coatings , nutrition & biosciences and safety & construction ( all down 2 percent ) . volume increased in all geographic regions , except latin america , which remained flat . portfolio & other changes contributed 2 percent of the sales increase , primarily reflecting the addition of dow corning 's silicones business . see sales variances by segment and geographic region table on the previous page for additional information on portfolio changes . currency was flat compared with the same period last year . 36 replace_table_token_7_th 1. pro forma net sales for agriculture excludes sales related to the november 30 , 2017 , das divested ag business for the period january 1 , 2016 through august 31 , 2017 ; sales from september 1 , 2017 through november 30 , 2017 , are included in portfolio & other . pro forma net sales also excludes sales related to the september 1 , 2017 , divestiture of the eaa business for the period january 1 , 2016 through august 31 , 2017. portfolio & other includes sales for the acquisition of the h & n business acquired on november 1 , 2017 , impacting nutrition & biosciences . portfolio & other also reflects sales from january 1 , 2017 through may 31 , 2017 , related to the ownership restructure of dow corning on june 1 , 2016 ( impacts performance materials & coatings , electronics & imaging and transportation & advanced polymers ) ; the divestitures of skc haas display films group of companies ( divested june 30 , 2017 ) and the authentication business ( divested on january 6 , 2017 ) , both impacting electronics & imaging ; and , the divestiture of the global food safety diagnostic business ( divested february 28 , 2017 ) , impacting nutrition & biosciences . 2017 versus 2016 the company reported pro forma net sales for 2017 of $ 79.5 billion , up 12 percent from $ 70.9 billion for 2016 , primarily reflecting demand growth , increased selling prices and the addition of dow corning 's silicones business . pro forma net sales increased across all segments and geographic regions . volume increased 5 percent compared with the same period last year , with increases in all segments , including a double-digit increase in electronics & imaging ( up 11 percent ) . volume increased in all geographic regions , except latin america , which was flat . story_separator_special_tag equity earnings in 2015 were impacted by a $ 29 million charge related to afsi 's fair value step-up of its inventories and start-up costs ( related to corporate ) ; a loss recognized by sadara related to the write-off of design engineering work for an epoxy plant , of which the company 's share was $ 27 million ( related to corporate ) ; and a pretax gain of $ 20 million related to a reduction in dow corning 's implant liability ( related to performance materials & coatings ) . see note 12 to the consolidated financial statements for additional information on nonconsolidated affiliates . sundry income ( expense ) - net sundry income ( expense ) – net includes a variety of income and expense items such as the gain or loss on foreign currency exchange , interest income , dividends from investments , gains and losses on sales of investments and assets and litigation . sundry income ( expense ) - net for 2017 was income of $ 966 million , compared with income of $ 1,452 million in 2016 and income of $ 4,716 million in 2015. in 2017 , sundry income ( expense ) - net included a $ 635 million gain on the divestiture of the das divested ag business ( related to agriculture ) , a $ 227 million gain on the divestiture of dow 's eaa business ( related to packaging & specialty plastics ) , a $ 137 million gain related to dow 's patent infringement matter with nova chemical corporation ( related to packaging & specialty plastics ) , a $ 7 million gain for post-closing adjustments on the split-off of dow 's chlorine value chain ( related to corporate ) , gains on sales of other assets and investments and interest income . these gains more than offset a loss of $ 469 million related to dow agrosciences ' arbitration matter with bayer cropscience ( related to agriculture ) and foreign currency exchange losses . see notes 4 , 6 , 7 and 16 to the consolidated financial statements for additional information . in 2016 , sundry income ( expense ) - net included a $ 2,445 million gain on the dow corning ownership restructure ( related to performance materials & coatings ( $ 1,617 million ) , electronics & imaging ( $ 512 million ) and transportation & advanced polymers ( $ 316 million ) ) , a $ 6 million gain for post-closing adjustments on the split-off of dow 's chlorine value chain ( related to industrial intermediates & infrastructure ) , gains on sales of assets and investments , and interest income . these gains more than offset a $ 1,235 million loss related to dow 's settlement of the urethane matters class action lawsuit and the opt-out cases litigation ( related to industrial intermediates & infrastructure ) , $ 41 million of transaction costs and productivity actions ( related to corporate ) , 40 losses on divestitures and foreign currency exchange losses . see notes 3 , 4 , 6 , 7 , 12 and 16 to the consolidated financial statements for additional information . in 2015 , sundry income ( expense ) - net included a $ 2,233 million gain on the split-off of dow 's chlorine value chain ( related to industrial intermediates & infrastructure ( gain of $ 1,984 million ) , packaging & specialty plastics ( gain of $ 317 million ) and corporate ( loss of $ 68 million ) ) , a $ 723 million gain on the sale of dow 's ownership interest in meglobal ( related to industrial intermediates & infrastructure ) , a $ 682 million gain on the divestiture of angus chemical company ( related to industrial intermediates & infrastructure ) , a $ 20 million gain on the divestiture of dow 's global sodium borohydride business ( related to industrial intermediates & infrastructure ) , a $ 618 million gain on the divestiture of dow 's agrofresh business ( net of an $ 8 million loss for mark-to-market adjustments on the fair value of warrants receivable and related to corporate ) , a $ 361 million gain on the univation step acquisition ( related to packaging & specialty plastics ) , gains on sales of assets and investments and interest income . these gains more than offset foreign currency exchange losses , including a $ 98 million loss related to the impact of the argentine peso devaluation ( related to corporate ) , and $ 119 million of transaction costs and productivity actions ( related to corporate ) . see notes 3 , 4 , 6 , 7 , 12 , 15 and 22 to the consolidated financial statements for additional information . interest expense and amortization of debt discount interest expense and amortization of debt discount was $ 1,082 million in 2017 , $ 858 million in 2016 and $ 946 million in 2015. the increase in 2017 was primarily related to the merger and the effect of the long-term debt assumed in the dow corning ownership restructure . the decrease in 2016 was primarily due to the impact of approximately $ 2.5 billion of debt retired in 2015. see liquidity and capital resources in management 's discussion and analysis of financial condition and results of operations and note 15 to the consolidated financial statements for additional information related to debt financing activity . provision ( credit ) for income taxes on continuing operations the company 's effective tax rate fluctuates based on , among other factors , where income is earned , reinvestment assertions regarding foreign income and the level of income relative to tax credits available . the company 's tax rate is also influenced by the level of equity earnings , since most of the earnings from the company 's equity method investments are taxed at the joint venture level . the underlying factors affecting the company 's overall
| net cash used in operating activities was $ 19.8 million and $ 5.1 million for the years ended december 31 , 2017 and 2016 , respectively . the increase in cash used in operating activities of $ 14.7 million was primarily due to the cash impact of higher research and development expenses in the year ended december 31 , 2017 , the payment for legal and accounting services of approximately $ 1.5 million , which were incurred in support of a potential public offering that was abandoned during the second quarter of 2017 and also in support of registering the resale of 39,714,143 shares of our common stock issued in connection with the merger and the private placement , the payment of $ 1.5 million in connection with the northwestern university license agreements , as well as the prepayment of directors and officers liability insurance , partially offset by the receipt of the $ 10.0 million upfront payment in connection with the purdue collaboration in december 2016. investing activities net cash used in investing activities was $ 0.9 million and $ 0.4 million for the years ended december 31 , 2017 and 2016 , respectively . cash used in investing activities for each of the above-mentioned periods was primarily due to the purchase of scientific equipment . financing activities net cash provided by financing activities of $ 26.9 million during the year ended december 31 , 2017 is primarily due to the sale of common stock in the private placement . gross proceeds from the private placement of $ 31.5 million , less financing costs paid in 2017 of $ 3.7 million , were partially offset by the repayment of debt of $ 1.0 million . net cash provided by financing activities of $ 6.3 million during the year ended december 31 , 2016 is mostly due to net proceeds of $ 5.9 million from our february 2016 secured debt financing with hercules and $ 0.4 million from our january 2016 series c preferred stock offering . hercules loan and security agreement on february 17 , 2016 , we entered into a loan and security agreement with hercules .
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2. portfolio & other reflects sales related to the ownership restructure of dow corning and sales from january 1 , 2016 through april 30 , 2016 for the step acquisition of univation , acquired on may 5 , 2015 ( packaging & specialty plastics ) . portfolio & other also reflects the following divestitures : the chlorine value chain , divested on october 5 , 2015 ( industrial intermediates & infrastructure and packaging & specialty plastics ) , angus chemical company , divested on february 2 , 2015 and the global sodium borohydride business , divested on january 30 , 2015 ( both included in industrial intermediates & infrastructure ) . 35 replace_table_token_6_th 1. portfolio & other reflects sales related to the step acquisition of univation ( packaging & specialty plastics ) and cooperativa central de pesquisa agrícola 's , acquired on february 1 , 2015 ( agriculture ) . portfolio & other also reflects the following divestitures : the chlorine value chain ( industrial intermediates & infrastructure and packaging & specialty plastics ) , angus chemical company and the global sodium borohydride business ( both included in industrial intermediates & infrastructure ) . 2017 versus 2016 the company reported net sales for 2017 of $ 62.5 billion , up 30 percent from $ 48.2 billion for 2016 , primarily reflecting the merger , the addition of dow corning 's silicones business , increased selling prices and demand growth . sales growth was broad-based with increases in all segments and geographic regions . portfolio & other changes contributed 19 percent of the sales increase and impacted all segments , except industrial intermediates & infrastructure , which was flat . local price was up 6 percent compared with the same period last year , with increases in all geographic regions , including a double-digit increase in emea ( up 10 percent ) , driven by broad-based pricing actions as well as higher feedstock and raw material prices . local price increased in industrial intermediates & infrastructure ( up 10 percent ) and packaging & specialty plastics and performance materials & coatings ( both up 8 percent ) and declined in agriculture and electronics & imaging ( both down 1 percent ) . local price was flat in nutrition & biosciences , transportation & advanced polymers and safety & construction . volume increased 5 percent compared with the same period last year , with increases in all segments , except agriculture ( down 2 percent ) , including a double-digit increase in nutrition & biosciences ( up 10 percent ) . volume increased in all geographic regions , except latin america ( down 1 percent ) . currency was flat compared with the same period last year . 2016 versus 2015 the company reported net sales for 2016 of $ 48.2 billion , down 1 percent from $ 48.8 billion for 2015. local price decreased 6 percent compared with the same period last year , with decreases in all segments , except agriculture ( up 1 percent ) , and all geographic regions , due to lower feedstock and raw material prices and competitive pricing pressures . volume increased 3 percent compared with the same period last year , as increases in packaging & specialty plastics ( up 9 percent ) , transportation & advanced polymers ( up 7 percent ) , electronics & imaging ( up 3 percent ) and industrial intermediates & infrastructure ( up 1 percent ) more than offset decreases in agriculture , performance materials & coatings , nutrition & biosciences and safety & construction ( all down 2 percent ) . volume increased in all geographic regions , except latin america , which remained flat . portfolio & other changes contributed 2 percent of the sales increase , primarily reflecting the addition of dow corning 's silicones business . see sales variances by segment and geographic region table on the previous page for additional information on portfolio changes . currency was flat compared with the same period last year . 36 replace_table_token_7_th 1. pro forma net sales for agriculture excludes sales related to the november 30 , 2017 , das divested ag business for the period january 1 , 2016 through august 31 , 2017 ; sales from september 1 , 2017 through november 30 , 2017 , are included in portfolio & other . pro forma net sales also excludes sales related to the september 1 , 2017 , divestiture of the eaa business for the period january 1 , 2016 through august 31 , 2017. portfolio & other includes sales for the acquisition of the h & n business acquired on november 1 , 2017 , impacting nutrition & biosciences . portfolio & other also reflects sales from january 1 , 2017 through may 31 , 2017 , related to the ownership restructure of dow corning on june 1 , 2016 ( impacts performance materials & coatings , electronics & imaging and transportation & advanced polymers ) ; the divestitures of skc haas display films group of companies ( divested june 30 , 2017 ) and the authentication business ( divested on january 6 , 2017 ) , both impacting electronics & imaging ; and , the divestiture of the global food safety diagnostic business ( divested february 28 , 2017 ) , impacting nutrition & biosciences . 2017 versus 2016 the company reported pro forma net sales for 2017 of $ 79.5 billion , up 12 percent from $ 70.9 billion for 2016 , primarily reflecting demand growth , increased selling prices and the addition of dow corning 's silicones business . pro forma net sales increased across all segments and geographic regions . volume increased 5 percent compared with the same period last year , with increases in all segments , including a double-digit increase in electronics & imaging ( up 11 percent ) . volume increased in all geographic regions , except latin america , which was flat . story_separator_special_tag equity earnings in 2015 were impacted by a $ 29 million charge related to afsi 's fair value step-up of its inventories and start-up costs ( related to corporate ) ; a loss recognized by sadara related to the write-off of design engineering work for an epoxy plant , of which the company 's share was $ 27 million ( related to corporate ) ; and a pretax gain of $ 20 million related to a reduction in dow corning 's implant liability ( related to performance materials & coatings ) . see note 12 to the consolidated financial statements for additional information on nonconsolidated affiliates . sundry income ( expense ) - net sundry income ( expense ) – net includes a variety of income and expense items such as the gain or loss on foreign currency exchange , interest income , dividends from investments , gains and losses on sales of investments and assets and litigation . sundry income ( expense ) - net for 2017 was income of $ 966 million , compared with income of $ 1,452 million in 2016 and income of $ 4,716 million in 2015. in 2017 , sundry income ( expense ) - net included a $ 635 million gain on the divestiture of the das divested ag business ( related to agriculture ) , a $ 227 million gain on the divestiture of dow 's eaa business ( related to packaging & specialty plastics ) , a $ 137 million gain related to dow 's patent infringement matter with nova chemical corporation ( related to packaging & specialty plastics ) , a $ 7 million gain for post-closing adjustments on the split-off of dow 's chlorine value chain ( related to corporate ) , gains on sales of other assets and investments and interest income . these gains more than offset a loss of $ 469 million related to dow agrosciences ' arbitration matter with bayer cropscience ( related to agriculture ) and foreign currency exchange losses . see notes 4 , 6 , 7 and 16 to the consolidated financial statements for additional information . in 2016 , sundry income ( expense ) - net included a $ 2,445 million gain on the dow corning ownership restructure ( related to performance materials & coatings ( $ 1,617 million ) , electronics & imaging ( $ 512 million ) and transportation & advanced polymers ( $ 316 million ) ) , a $ 6 million gain for post-closing adjustments on the split-off of dow 's chlorine value chain ( related to industrial intermediates & infrastructure ) , gains on sales of assets and investments , and interest income . these gains more than offset a $ 1,235 million loss related to dow 's settlement of the urethane matters class action lawsuit and the opt-out cases litigation ( related to industrial intermediates & infrastructure ) , $ 41 million of transaction costs and productivity actions ( related to corporate ) , 40 losses on divestitures and foreign currency exchange losses . see notes 3 , 4 , 6 , 7 , 12 and 16 to the consolidated financial statements for additional information . in 2015 , sundry income ( expense ) - net included a $ 2,233 million gain on the split-off of dow 's chlorine value chain ( related to industrial intermediates & infrastructure ( gain of $ 1,984 million ) , packaging & specialty plastics ( gain of $ 317 million ) and corporate ( loss of $ 68 million ) ) , a $ 723 million gain on the sale of dow 's ownership interest in meglobal ( related to industrial intermediates & infrastructure ) , a $ 682 million gain on the divestiture of angus chemical company ( related to industrial intermediates & infrastructure ) , a $ 20 million gain on the divestiture of dow 's global sodium borohydride business ( related to industrial intermediates & infrastructure ) , a $ 618 million gain on the divestiture of dow 's agrofresh business ( net of an $ 8 million loss for mark-to-market adjustments on the fair value of warrants receivable and related to corporate ) , a $ 361 million gain on the univation step acquisition ( related to packaging & specialty plastics ) , gains on sales of assets and investments and interest income . these gains more than offset foreign currency exchange losses , including a $ 98 million loss related to the impact of the argentine peso devaluation ( related to corporate ) , and $ 119 million of transaction costs and productivity actions ( related to corporate ) . see notes 3 , 4 , 6 , 7 , 12 , 15 and 22 to the consolidated financial statements for additional information . interest expense and amortization of debt discount interest expense and amortization of debt discount was $ 1,082 million in 2017 , $ 858 million in 2016 and $ 946 million in 2015. the increase in 2017 was primarily related to the merger and the effect of the long-term debt assumed in the dow corning ownership restructure . the decrease in 2016 was primarily due to the impact of approximately $ 2.5 billion of debt retired in 2015. see liquidity and capital resources in management 's discussion and analysis of financial condition and results of operations and note 15 to the consolidated financial statements for additional information related to debt financing activity . provision ( credit ) for income taxes on continuing operations the company 's effective tax rate fluctuates based on , among other factors , where income is earned , reinvestment assertions regarding foreign income and the level of income relative to tax credits available . the company 's tax rate is also influenced by the level of equity earnings , since most of the earnings from the company 's equity method investments are taxed at the joint venture level . the underlying factors affecting the company 's overall
| liquidity and capital resources 59 outlook 65 other matters 66 critical accounting estimates 66 environmental matters 70 asbestos-related matters of union carbide corporation 74 33 about dowdupont inc. dowdupont is a holding company comprised of dow and dupont with the intent to form strong , independent , publicly traded companies in the agriculture , materials science and specialty products sectors ( the `` intended business separations '' ) that will lead their respective industries through productive , science-based innovation to meet the needs of customers and help solve global challenges . in 2017 , 37 percent of the company 's net sales were to customers in the u.s. & canada ; 29 percent were in europe , middle east and africa ( `` emea '' ) ; 22 percent were in asia pacific ; and 12 percent were in latin america . on a pro forma basis , 39 percent of the company 's net sales were to customers in the u.s. & canada ; 28 percent were in emea ; 22 percent were in asia pacific ; and 11 percent were in latin america . in 2017 , the company and its consolidated subsidiaries did not operate in countries subject to u.s. economic sanctions and export controls as imposed by the u.s. state department or in countries designated by the u.s. state department as state sponsors of terrorism , including iran , sudan and syria . the company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable u.s. laws and regulations .
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we attribute this growth to our broad provider networks , competitive premium rates for our fully-insured business and aso fees for our self-insured business , and our commitment to providing outstanding customer service to all of our constituencies ( employer groups , members , brokers , and providers ) . historically , healthcare services expense has generally increased for both the fully-insured dental segment and the self-insured dental segment . we continue to review and adjust our provider fee schedules where appropriate . other important factors that have an impact on our profitability are both the competitive pricing environment and market conditions . with respect to pricing , there is a tradeoff between sustaining or increasing underwriting margins versus increasing enrollment . with respect to market conditions , economies of scale have an impact on our administrative overhead . as a result of a decline in preference for more closely managed dental hmo products , dental costs have become increasingly comparable among our larger competitors . product design and consumer involvement have become more important drivers of dental services consumption , and administrative expense efficiency is becoming a more significant driver of margin sustainability . consequently , we continually evaluate our administrative expense structure and attempt to realize administrative expense savings principally through technology improvements . highlights ● we had net income of approximately $ 1,989,000 for the year ended december 31 , 2016 compared to net income of approximately $ 958,000 for the year ended december 31 , 2015. the increase in net income is primarily the result of higher gross margin of approximately $ 3,517,000 offset by an increase in insurance expense of approximately $ 2,067,000. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.0 % in 2016 from 20.4 % in 2015 . ● our ratio of healthcare services expense to premium revenue ( “ loss ratio ” ) decreased by approximately 1.8 % from 78.0 % in 2015 to 76.2 % in 2016. the improved loss ratio impacted 2016 by approximately $ 132,000 in gross margin . the fully-insured dental hmo/ind and fully-insured dental ppo segments together represent approximately 71.7 % of our total dental business . ● our dental and vision products grew by approximately 19,900 members , or 5.5 % , from 362,200 members at december 31 , 2015 to 382,100 members at december 31 , 2016. this membership increase from december 31 , 2015 is due to an increase in fully-insured dental hmo/ind membership of approximately 8,800 members , an increase in fully-insured dental ppo membership of approximately 9,700 members and an increase in corporate , all other membership of approximately 3,900 members . this was offset by a slight decrease in self-insured dental membership of approximately 2,500 members . ● in march 2016 , we paid a dividend of $ 40.47 per share to shareholders of record for all redeemable common shares . we paid a dividend in march 2015 of $ 39.86 per share to shareholders of record for all redeemable common shares . ● during 2016 , we sold an aggregate of 433 class b and 1,766 class c redeemable common shares for approximately $ 2,280,000. the net proceeds , with available cash , was used to repurchase all outstanding shares of the company 's redeemable institutional preferred shares . 18 comparison of results of operations for 201 6 and 201 5 the following table shows membership totals and revenues and expenses for our four business segments for the years ended december 31 , 2016 and 2015 ( dollars in thousands ) : replace_table_token_8_th summary net income was approximately $ 1,989,000 and $ 958,000 for 2016 and 2015 , respectively . this increase in net income is primarily the result of an increase in premium revenue of approximately $ 7,333,000 offset by an increase in healthcare services expense of approximately $ 3,816,000 in 2016. the increase in gross margin of approximately $ 3,517,000 was offset by an increase in insurance expenses of $ 2,067,000 in 2016. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.0 % in 2016 from 20.4 % in 2015. membership our fully-insured dental hmo/ind membership increased by approximately 8,800 in 2016. this membership increase is primarily attributable to an increase in fully-insured dental hmo membership resulting from new sales of approximately 11,500 members in the cincinnati and northern kentucky markets during 2016. an increase of approximately 2,400 is due to an increase of new sales of our individual dental hmo product . these increases were offset by the loss of approximately 5,100 members due to employer groups that did not renew with the company or reduced employee counts of retained employer groups . some of our fully-insured dental hmo membership losses were the result of employer groups moving to medical carriers to take advantage of medical/dental package savings . 19 our fully-insured dental ppo membership increased by approximately 9,700 members in 2016. this membership increase is due to new sales in the dayton and central ohio markets and the southern kentucky market of approximately 10,600 members during 2016 , offset by the loss of approximately 8,200 members with employer groups that did not renew with the company or reduced employee counts of retained employer groups in these markets . the remaining increase of approximately 7,300 members is due to new sales of individual and on exchange dental ppo products in 2016. our self-insured dental membership decreased by approximately 2,500 members in 2016 as a result of a decrease in membership of existing employer groups in the last twelve months offset by the addition of new self-insured dental hmo and dental ppo employer groups in the southwest ohio and northern kentucky markets . our corporate , all other membership increased by approximately 3,900 members in 2016 as a result of increased membership in our vision plan . story_separator_special_tag insurance expenses consolidated insurance expenses increased approximately $ 1,751,000 in 2015. total insurance expenses as a percentage of total premium revenue , or the insurance expense ratio , was 20.4 % for 2015 , increasing 0.5 % from the 2014 ratio of 19.9 % . salaries and wages increased by approximately $ 517,000 in 2015. commissions expense increased approximately $ 297,000 , due to the increase in total premium revenue in 2015 compared to 2014. other insurance expense increased by approximately $ 937,000 due to an increase in expenses related to the launch of the individual dental ppo and dental hmo products in ohio as well as the development of the on exchange dental ppo products for georgia , tennessee and pennsylvania for 2016. income taxes our effective tax rate for 2015 was 45.5 % compared to the 39.8 % effective tax rate in 2014. the increase in the effective tax rate for 2015 compared to 2014 is the result of the increase in the 2015 federal premium tax assessment that is not deductible for federal tax purposes . also , ou r 2015 and 2014 effective tax rates were higher than the federal statutory rate primarily due to the impact of permanent tax differences related to meal and entertainment expenses and legal fees . see note 10 to the consolidated financial statements included in item 8-financial statements and supplementary data for a complete reconciliation of the federal statutory rate to the effective tax rate . liquidity and capital resources and changes in financial condition our primary sources of cash are premiums , aso fees , investment and other income , as well as the proceeds from the maturity or sale of our investment securities , from the sale of redeemable common and preferred shares , and from borrowings . our primary uses of cash include disbursements for claims payments , insurance expense , interest expense , taxes , purchases of investment securities , capital expenditures , redeemable common and preferred share redemptions , dividends , and payments on borrowings . because premiums are collected in advance of claims payments , our business should normally produce positive operating cash flows during a period of increasing enrollment . conversely , cash flows would be negatively impacted during a period of shrinking enrollment . cash decreased $ 436,000 , or 3.7 % , for the year ended december 31 , 2016 to approximately $ 11,221,000 at december 31 , 2016 from approximately $ 11,657,000 at december 31 , 2015. this cash decrease is primarily the result of cash flow used in investing activities and financing activities of approximately $ 2,209,000 and $ 1,909,000 , respectively . these were offset by an increase in cash flow provided from operations of approximately $ 3,682,000. cash increased $ 2,467,000 , or 26.8 % , for the year ended december 31 , 2015 to approximately $ 11,657,000 million at december 31 , 2015 from approximately $ 9,190,000 million at december 31 , 2014. this cash increase is primarily the result of cash flow from operations of approximately $ 2,994,000 and cash provided by financing activities of approximately $ 817,000 that was offset by cash used in investing activities of approximately $ 1,344,000. the change in cash for the years ended december 31 , 2016 , 2015 and 2014 is summarized as follows ( in thousands ) : replace_table_token_12_th cash f lows from operating activities in 2016 , approximately $ 3,682,000 was provided by operating activities . we had net income of approximately $ 1,989,000. our non-cash deferred compensation activity was approximately $ 995,000 primarily due to current year vesting activity and an increase in current book value in 2016. deferred policy acquisition costs increased by approximately $ 1,096,000 primarily as a result of the increase in the fully-insured business renewed in january 2016. other payables and accrued expenses increased and resulted in a net increase in cash flow from operating activities of approximately $ 1,848,000. an increase in accounts receivable offset by an increase in unearned premium revenue resulted in a decrease of cash of approximately $ 641,000 in the 2016 period . we paid $ 1,069,000 of federal income taxes in the 2016 period that related to our 2015 extension payment and 2016 estimated tax payments . the remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2015 . 26 in 2015 , approximately $ 2,994,000 was provided by operating activities . we had net income of approximately $ 958,000. an increase in premiums received in advance as well as an improvement in remittance of uncollected accounts receivable resulted in a favorable increase of cash of approximately $ 829,000 in 2015. due to claims activity and the timing of our payments , our claims payable liability increased approximately $ 256,000. our deferred compensation liability increased by approximately $ 748,000 primarily due to current year vesting activity for restricted share unit awards and an increase in current book value in 2015. other payables and accrued expenses increased and resulted in a net increase in cash flow from operations of approximately $ 98,000. the remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2014. in 2014 , we generated approximately $ 2,556,000 of cash from operating activities . this level of cash flow from operating activities is $ 139,000 lower than the cash flow generated from operating activities in 2013. we had net income of approximately $ 1,341,000 in 2014 compared to net income of $ 1,282,000 in 2013. during 2014 , we paid approximately $ 1,270,000 in federal tax payments . as a result , our federal income tax payable decreased by approximately $ 216,000 in 2014. in addition to our 2014 net income , we had non-cash depreciation and amortization expense of approximately $ 335,000 and an increase in deferred compensation liabilities of $ 959,000. the increase in deferred compensation liabilities is primarily due to
| liquidity and capital resources 59 outlook 65 other matters 66 critical accounting estimates 66 environmental matters 70 asbestos-related matters of union carbide corporation 74 33 about dowdupont inc. dowdupont is a holding company comprised of dow and dupont with the intent to form strong , independent , publicly traded companies in the agriculture , materials science and specialty products sectors ( the `` intended business separations '' ) that will lead their respective industries through productive , science-based innovation to meet the needs of customers and help solve global challenges . in 2017 , 37 percent of the company 's net sales were to customers in the u.s. & canada ; 29 percent were in europe , middle east and africa ( `` emea '' ) ; 22 percent were in asia pacific ; and 12 percent were in latin america . on a pro forma basis , 39 percent of the company 's net sales were to customers in the u.s. & canada ; 28 percent were in emea ; 22 percent were in asia pacific ; and 11 percent were in latin america . in 2017 , the company and its consolidated subsidiaries did not operate in countries subject to u.s. economic sanctions and export controls as imposed by the u.s. state department or in countries designated by the u.s. state department as state sponsors of terrorism , including iran , sudan and syria . the company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable u.s. laws and regulations .
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we attribute this growth to our broad provider networks , competitive premium rates for our fully-insured business and aso fees for our self-insured business , and our commitment to providing outstanding customer service to all of our constituencies ( employer groups , members , brokers , and providers ) . historically , healthcare services expense has generally increased for both the fully-insured dental segment and the self-insured dental segment . we continue to review and adjust our provider fee schedules where appropriate . other important factors that have an impact on our profitability are both the competitive pricing environment and market conditions . with respect to pricing , there is a tradeoff between sustaining or increasing underwriting margins versus increasing enrollment . with respect to market conditions , economies of scale have an impact on our administrative overhead . as a result of a decline in preference for more closely managed dental hmo products , dental costs have become increasingly comparable among our larger competitors . product design and consumer involvement have become more important drivers of dental services consumption , and administrative expense efficiency is becoming a more significant driver of margin sustainability . consequently , we continually evaluate our administrative expense structure and attempt to realize administrative expense savings principally through technology improvements . highlights ● we had net income of approximately $ 1,989,000 for the year ended december 31 , 2016 compared to net income of approximately $ 958,000 for the year ended december 31 , 2015. the increase in net income is primarily the result of higher gross margin of approximately $ 3,517,000 offset by an increase in insurance expense of approximately $ 2,067,000. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.0 % in 2016 from 20.4 % in 2015 . ● our ratio of healthcare services expense to premium revenue ( “ loss ratio ” ) decreased by approximately 1.8 % from 78.0 % in 2015 to 76.2 % in 2016. the improved loss ratio impacted 2016 by approximately $ 132,000 in gross margin . the fully-insured dental hmo/ind and fully-insured dental ppo segments together represent approximately 71.7 % of our total dental business . ● our dental and vision products grew by approximately 19,900 members , or 5.5 % , from 362,200 members at december 31 , 2015 to 382,100 members at december 31 , 2016. this membership increase from december 31 , 2015 is due to an increase in fully-insured dental hmo/ind membership of approximately 8,800 members , an increase in fully-insured dental ppo membership of approximately 9,700 members and an increase in corporate , all other membership of approximately 3,900 members . this was offset by a slight decrease in self-insured dental membership of approximately 2,500 members . ● in march 2016 , we paid a dividend of $ 40.47 per share to shareholders of record for all redeemable common shares . we paid a dividend in march 2015 of $ 39.86 per share to shareholders of record for all redeemable common shares . ● during 2016 , we sold an aggregate of 433 class b and 1,766 class c redeemable common shares for approximately $ 2,280,000. the net proceeds , with available cash , was used to repurchase all outstanding shares of the company 's redeemable institutional preferred shares . 18 comparison of results of operations for 201 6 and 201 5 the following table shows membership totals and revenues and expenses for our four business segments for the years ended december 31 , 2016 and 2015 ( dollars in thousands ) : replace_table_token_8_th summary net income was approximately $ 1,989,000 and $ 958,000 for 2016 and 2015 , respectively . this increase in net income is primarily the result of an increase in premium revenue of approximately $ 7,333,000 offset by an increase in healthcare services expense of approximately $ 3,816,000 in 2016. the increase in gross margin of approximately $ 3,517,000 was offset by an increase in insurance expenses of $ 2,067,000 in 2016. our ratio of insurance expense to total premium revenue ( “ insurance expense ratio ” ) increased to 21.0 % in 2016 from 20.4 % in 2015. membership our fully-insured dental hmo/ind membership increased by approximately 8,800 in 2016. this membership increase is primarily attributable to an increase in fully-insured dental hmo membership resulting from new sales of approximately 11,500 members in the cincinnati and northern kentucky markets during 2016. an increase of approximately 2,400 is due to an increase of new sales of our individual dental hmo product . these increases were offset by the loss of approximately 5,100 members due to employer groups that did not renew with the company or reduced employee counts of retained employer groups . some of our fully-insured dental hmo membership losses were the result of employer groups moving to medical carriers to take advantage of medical/dental package savings . 19 our fully-insured dental ppo membership increased by approximately 9,700 members in 2016. this membership increase is due to new sales in the dayton and central ohio markets and the southern kentucky market of approximately 10,600 members during 2016 , offset by the loss of approximately 8,200 members with employer groups that did not renew with the company or reduced employee counts of retained employer groups in these markets . the remaining increase of approximately 7,300 members is due to new sales of individual and on exchange dental ppo products in 2016. our self-insured dental membership decreased by approximately 2,500 members in 2016 as a result of a decrease in membership of existing employer groups in the last twelve months offset by the addition of new self-insured dental hmo and dental ppo employer groups in the southwest ohio and northern kentucky markets . our corporate , all other membership increased by approximately 3,900 members in 2016 as a result of increased membership in our vision plan . story_separator_special_tag insurance expenses consolidated insurance expenses increased approximately $ 1,751,000 in 2015. total insurance expenses as a percentage of total premium revenue , or the insurance expense ratio , was 20.4 % for 2015 , increasing 0.5 % from the 2014 ratio of 19.9 % . salaries and wages increased by approximately $ 517,000 in 2015. commissions expense increased approximately $ 297,000 , due to the increase in total premium revenue in 2015 compared to 2014. other insurance expense increased by approximately $ 937,000 due to an increase in expenses related to the launch of the individual dental ppo and dental hmo products in ohio as well as the development of the on exchange dental ppo products for georgia , tennessee and pennsylvania for 2016. income taxes our effective tax rate for 2015 was 45.5 % compared to the 39.8 % effective tax rate in 2014. the increase in the effective tax rate for 2015 compared to 2014 is the result of the increase in the 2015 federal premium tax assessment that is not deductible for federal tax purposes . also , ou r 2015 and 2014 effective tax rates were higher than the federal statutory rate primarily due to the impact of permanent tax differences related to meal and entertainment expenses and legal fees . see note 10 to the consolidated financial statements included in item 8-financial statements and supplementary data for a complete reconciliation of the federal statutory rate to the effective tax rate . liquidity and capital resources and changes in financial condition our primary sources of cash are premiums , aso fees , investment and other income , as well as the proceeds from the maturity or sale of our investment securities , from the sale of redeemable common and preferred shares , and from borrowings . our primary uses of cash include disbursements for claims payments , insurance expense , interest expense , taxes , purchases of investment securities , capital expenditures , redeemable common and preferred share redemptions , dividends , and payments on borrowings . because premiums are collected in advance of claims payments , our business should normally produce positive operating cash flows during a period of increasing enrollment . conversely , cash flows would be negatively impacted during a period of shrinking enrollment . cash decreased $ 436,000 , or 3.7 % , for the year ended december 31 , 2016 to approximately $ 11,221,000 at december 31 , 2016 from approximately $ 11,657,000 at december 31 , 2015. this cash decrease is primarily the result of cash flow used in investing activities and financing activities of approximately $ 2,209,000 and $ 1,909,000 , respectively . these were offset by an increase in cash flow provided from operations of approximately $ 3,682,000. cash increased $ 2,467,000 , or 26.8 % , for the year ended december 31 , 2015 to approximately $ 11,657,000 million at december 31 , 2015 from approximately $ 9,190,000 million at december 31 , 2014. this cash increase is primarily the result of cash flow from operations of approximately $ 2,994,000 and cash provided by financing activities of approximately $ 817,000 that was offset by cash used in investing activities of approximately $ 1,344,000. the change in cash for the years ended december 31 , 2016 , 2015 and 2014 is summarized as follows ( in thousands ) : replace_table_token_12_th cash f lows from operating activities in 2016 , approximately $ 3,682,000 was provided by operating activities . we had net income of approximately $ 1,989,000. our non-cash deferred compensation activity was approximately $ 995,000 primarily due to current year vesting activity and an increase in current book value in 2016. deferred policy acquisition costs increased by approximately $ 1,096,000 primarily as a result of the increase in the fully-insured business renewed in january 2016. other payables and accrued expenses increased and resulted in a net increase in cash flow from operating activities of approximately $ 1,848,000. an increase in accounts receivable offset by an increase in unearned premium revenue resulted in a decrease of cash of approximately $ 641,000 in the 2016 period . we paid $ 1,069,000 of federal income taxes in the 2016 period that related to our 2015 extension payment and 2016 estimated tax payments . the remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2015 . 26 in 2015 , approximately $ 2,994,000 was provided by operating activities . we had net income of approximately $ 958,000. an increase in premiums received in advance as well as an improvement in remittance of uncollected accounts receivable resulted in a favorable increase of cash of approximately $ 829,000 in 2015. due to claims activity and the timing of our payments , our claims payable liability increased approximately $ 256,000. our deferred compensation liability increased by approximately $ 748,000 primarily due to current year vesting activity for restricted share unit awards and an increase in current book value in 2015. other payables and accrued expenses increased and resulted in a net increase in cash flow from operations of approximately $ 98,000. the remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2014. in 2014 , we generated approximately $ 2,556,000 of cash from operating activities . this level of cash flow from operating activities is $ 139,000 lower than the cash flow generated from operating activities in 2013. we had net income of approximately $ 1,341,000 in 2014 compared to net income of $ 1,282,000 in 2013. during 2014 , we paid approximately $ 1,270,000 in federal tax payments . as a result , our federal income tax payable decreased by approximately $ 216,000 in 2014. in addition to our 2014 net income , we had non-cash depreciation and amortization expense of approximately $ 335,000 and an increase in deferred compensation liabilities of $ 959,000. the increase in deferred compensation liabilities is primarily due to
| cash f lows from financing activities in 2016 , we made scheduled principal payments of approximately $ 50,000 related to our office building mortgage and scheduled payments of approximately $ 311,000 related to our capital leases . during 2016 , we repurchased redeemable common shares with a value of approximately $ 276,000. also , we repurchased all of our institutional preferred shares with a value of approximately $ 2,805,000 , and including the 5 % premium of approximately $ 119,000 paid to the holders of the 2012 ( a ) and the 2013 ( a ) series , the total price paid was approximately $ 2,924,000. we also paid dividends of approximately $ 442,000 to holders of our redeemable common shares and approximately $ 68,000 to holders of our redeemable institutional preferred shares in 2016. during 2016 , we issued approximately $ 2,280,000 of new redeemable common shares . in 2015 , we made scheduled principal payments of approximately $ 49,000 related to our office building mortgage and scheduled payments of approximately $ 249,000 related to our capital leases . during 2015 , we repurchased redeemable common shares with a value of approximately $ 223,000. we also paid dividends of approximately $ 346,000 to holders of our redeemable common shares and approximately $ 135,000 to holders of our redeemable institutional preferred shares in 2015. in addition , we issued approximately $ 1,932,000 of new redeemable common shares during 2015 .
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the company has set a goal to commercialize its first durastim® hydraulic 33 fracturing equipment to our customer wellsites in the second half of 2021. we also have an option to purchase up to an additional 108,000 hhp of durastim® hydraulic fracturing equipment in the future through july 31 , 2022. the durastim® equipment is powered by electricity . we currently have gas turbines to provide electrical power to our durastim® fleet . the electrical power sources for future durastim® fleets are still being evaluated and could be supplied by the company , customers or a third-party supplier . pioneer pressure pumping acquisition on december 31 , 2018 , we consummated the purchase of pressure pumping and related assets of pioneer and pioneer pumping services , llc in the pioneer pressure pumping acquisition . the pressure pumping assets acquired included hydraulic fracturing pumps of 510,000 hhp , four coiled tubing units and the associated equipment maintenance facility . in connection with the acquisition , we became a long-term service provider to pioneer under the pioneer services agreement , providing pressure pumping and related services for a term of up to 10 years ; provided , that pioneer has the right to terminate the pioneer services agreement , in whole or part , effective as of december 31 of each of the calendar years of 2022 , 2024 and 2026. pioneer can increase the number of committed fleets prior to december 31 , 2022. pursuant to the pioneer services agreement , the company is entitled to receive compensation if pioneer were to idle committed fleets ( “ idle fees ” ) ; however , we are first required to use all economically reasonable effort to deploy the idled fleets to another customer . at the present , we have eight fleets committed to pioneer . during times when there is a significant reduction in overall demand for our services , the idle fees could represent a material portion of our revenues . while management believes our relationship with pioneer will continue beyond december 31 , 2022 , if pioneer elects to terminate the pioneer services agreement effective december 31 , 2022 , or seeks to renegotiate the terms on which we provide services to pioneer , it could have a material adverse effect on our financial condition , results of operations and cash flows . commodity price and other economic conditions the global public health crisis associated with the covid-19 pandemic has and is anticipated to continue to have an adverse effect on global economic activity for the immediate future and has resulted in travel restrictions , business closures and the institution of quarantining and other activity restrictions in many communities . the slowdown in global economic activity attributable to covid-19 has resulted in a dramatic decline in the demand for energy which directly impacts our industry and the company . in addition , global crude oil prices experienced a collapse starting in early march 2020 as a direct result of failed negotiations between opec and russia . as the breadth of the covid-19 health crisis expanded throughout the month of march 2020 and governmental authorities implemented more restrictive measures to limit person-to-person contact , global economic activity continued to decline commensurately . the associated impact on the energy industry has been adverse and continued to be exacerbated by the depressed demand in the energy sector and uncertainty in global production levels . in response to the global economic slowdown and depressed demand in the oil and gas industry , opec+ has made adjustments to production levels with the objective of rebalancing the energy market . after the march 2020 failed negotiations , opec+ subsequently agreed to cut production by 7.7 million bopd . in january 2021 , opec+ reconvened to discuss the matter of production cuts in light of unprecedented disruption and supply and demand imbalances . agreements were reached to gradually increase production by 0.5 million bopd , starting in january 2021 , and adjusting the production reduction from 7.7 million bopd to 7.2 million bopd . opec+ members have shown compliance with previously agreed upon production levels , and we have seen recovery in crude oil prices from its low point in 2020. the combined effect of covid-19 and the energy industry disruptions led to a decline in wti crude oil prices of approximately 67 percent from the beginning of january 2020 , when prices were approximately $ 62 per barrel , through the end of march 2020 , when they were just above $ 20 per barrel . overall , with opec+ managing production levels and with the development and distribution of covid-19 vaccines , there has been a gradual recovery in crude oil prices from the low point in march 2020. however , with the uncertainty in the global market resulting from the covid-19 pandemic , the risk that currently developed vaccines may not be successful in preventing the covid-19 virus or the outbreak of a new virus , the global demand for crude oil could continue to 34 be depressed and crude oil prices could decline . as of march 3 , 2021 , the wti price for a barrel of crude oil was approximately $ 62. in light of the covid-19 pandemic and the energy industry disruptions , the permian basin rig count decreased significantly from approximately 403 at the beginning of january 2020 to approximately 175 at the end of december 2020 , according to baker hughes . however , the rig count slowly increased exiting 2020 from its august low of 117 rigs . if the rig count and market conditions do not continue to improve or worsen , the company expects a material adverse impact on its business , results of operations and cash flows , resulting from a decrease in customer activity and pricing pressure from its customers . story_separator_special_tag ( 3 ) for definitions of the non‑gaap financial measures of adjusted ebitda and adjusted ebitda margin and reconciliation of adjusted ebitda and adjusted ebitda margin to our most directly comparable financial measures calculated in accordance with gaap , please read “ how we evaluate our operations . ” included in our adjusted ebitda is idle fees of $ 47.2 million and $ 13.3 million for the years ended december 31 , 2020 and 2019 , respectively . ( 4 ) the non‑gaap financial measure of adjusted ebitda margin for the pressure pumping segment is calculated by taking adjusted ebitda for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment . 41 revenue . revenue decreased 61.5 % , or $ 1,263.1 million , to $ 789.2 million for the year ended december 31 , 2020 , as compared to $ 2,052.3 million for the year ended december 31 , 2019. our pressure pumping segment revenues decreased 61.4 % , or $ 1,228.2 million for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019. the decreases were primarily attributable to the significant decrease in demand for pressure pumping services , as well as pricing discounts we provided to our customers following the depressed oil prices and slowdown in economic activity resulting from the covid-19 pandemic . the decrease in demand for our pressure pumping services resulted in a significant decrease in our average effectively utilized fleet count to approximately 10.2 active fleets in 2020 from 23.9 active fleets in 2019. furthermore , the decrease in our revenue was also driven by the increase in our customers directly sourcing from vendors certain consumables like sand , chemicals and fuel . included in our revenue for the years ended december 31 , 2020 and 2019 was revenue generated from idle fees charged to our customer of approximately $ 47.2 million and $ 13.3 million , respectively . revenues from services other than pressure pumping decreased 68.9 % , or approximately $ 34.9 million , for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019. the decrease in revenues from services other than pressure pumping during the year ended december 31 , 2020 , was primarily attributable to the shutdown of our flowback operations and also a significant reduction in utilization experienced in our coiled tubing operations , which was driven by lower e & p completions activity following the depressed oil prices and impact of the covid-19 pandemic . cost of services . cost of services decreased 60.3 % , or $ 886.1 million , to $ 584.3 million for the year ended december 31 , 2020 , from $ 1,470.4 million during the year ended december 31 , 2019. cost of services in our pressure pumping segment decreased $ 858.2 million during the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019. the decreases were primarily attributable to our lower utilization and activity levels , following the depressed oil prices and economic slowdown caused by the covid-19 pandemic that negatively impacted e & p completions activity . as a percentage of pressure pumping segment revenues ( including idle fees ) , pressure pumping cost of services increased to 73.8 % for the year ended december 31 , 2020 , as compared to 71.4 % for the year ended december 31 , 2019. excluding idle fees revenue of $ 47.2 million and $ 13.3 million for the years ended december 31 , 2020 and 2019 , respectively , our pressure pumping cost of services as a percentage of pressure pumping revenues for the years ended december 31 , 2020 and 2019 was approximately 78.5 % and 71.9 % , respectively . the increase in our cost of services percentage was primarily attributable to pricing pressure on our services resulting from customer discounts . our pricing in 2020 was significantly depressed following the economic slowdown caused by covid-19 pandemic and depressed oil prices . general and administrative expenses . general and administrative expenses decreased 17.4 % , or $ 18.3 million , to $ 86.8 million for the year ended december 31 , 2020 , as compared to $ 105.1 million for the year ended december 31 , 2019. the net decrease was primarily attributable to a decrease during 2020 in ( i ) nonrecurring professional fees of $ 12.2 million , which was primarily attributable to the company 's expanded audit committee internal review , pending sec investigation and shareholder litigation , ( ii ) retention and other bonuses , and severance expense of $ 8.1 million ; ( iii ) property taxes of $ 1.6 million , and ( iv ) $ 5.0 million in other remaining general and administrative expenses , which was partially offset by a net increase of approximately $ 7.2 million paid in legal , accounting and consulting professional fees , and stock based compensation expense of $ 1.3 million . depreciation and amortization . depreciation and amortization increased 5.5 % , or $ 8.0 million , to $ 153.3 million for the year ended december 31 , 2020 , as compared to $ 145.3 million for the year ended december 31 , 2019. the increase was primarily attributable to the overall increase in our fixed asset base as of december 31 , 2020. impairment expense . during the year ended december 31 , 2020 , the depressed market conditions , crude oil prices and negative near-term outlook for the utilization of certain of our equipment , resulted in the company recording an impairment expense of approximately $ 38.0 million , of which $ 9.4 million relates to goodwill impairment and $ 28.6 million relates to property and equipment impairment . the substantial portion of our impairment expense relates to our pressure pumping segment . during the year ended december 31 , 2019 , we
| cash f lows from financing activities in 2016 , we made scheduled principal payments of approximately $ 50,000 related to our office building mortgage and scheduled payments of approximately $ 311,000 related to our capital leases . during 2016 , we repurchased redeemable common shares with a value of approximately $ 276,000. also , we repurchased all of our institutional preferred shares with a value of approximately $ 2,805,000 , and including the 5 % premium of approximately $ 119,000 paid to the holders of the 2012 ( a ) and the 2013 ( a ) series , the total price paid was approximately $ 2,924,000. we also paid dividends of approximately $ 442,000 to holders of our redeemable common shares and approximately $ 68,000 to holders of our redeemable institutional preferred shares in 2016. during 2016 , we issued approximately $ 2,280,000 of new redeemable common shares . in 2015 , we made scheduled principal payments of approximately $ 49,000 related to our office building mortgage and scheduled payments of approximately $ 249,000 related to our capital leases . during 2015 , we repurchased redeemable common shares with a value of approximately $ 223,000. we also paid dividends of approximately $ 346,000 to holders of our redeemable common shares and approximately $ 135,000 to holders of our redeemable institutional preferred shares in 2015. in addition , we issued approximately $ 1,932,000 of new redeemable common shares during 2015 .
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