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30 consumer electronics highlights : we have an established presence in the home theater market that provides compatibility across devices , such as avrs and dmas , through the inclusion of our dd+ and he-aac technologies . additionally , dolby atmos continues to be adopted in an increasing range of devices including avrs , speakers , soundbars , and dmas . the number of dolby atmos-enabled soundbars available from partners such as lg , sony , and samsung grew from 4 at the start of fiscal 2017 to 13 at the end of fiscal 2017. orange , the largest telecom provider in france , launched its dolby atmos service and is offering a dolby atmos soundbar to its subscribers . in september 2017 , amazon announced the new fire tv with dolby atmos . these hardware offerings can be paired with a growing array of dolby enabled content via ott services and blu-ray discs . we will continue to work with oems to expand the range of dolby atmos-enabled hardware , and with content developers and distributors to expand the range of entertainment offerings that utilize our audio technologies . challenges : we must continue to present compelling reasons for consumers to demand our audio and imaging technologies wherever they enjoy entertainment content . to the extent that oems do not incorporate our technologies in current and future products , our revenue could be impacted . mobile highlights : dd+ is incorporated in apple 's ios , and we continue to focus on adoption of our technologies across other major mobile ecosystems , such as android , windows , and amazon , to facilitate delivery and enhanced consumption of dolby-enabled content from a multitude of streaming services . in addition , he-aac is a de facto audio standard across mobile devices . dolby atmos is currently featured on a number of mobile devices from partners such as amazon , lenovo , and zte . challenges : growth in this market is dependent on several factors . with shorter product lifecycles , it is easier for mobile device oems to add or remove certain of our technologies from mobile devices . our success depends on our ability to address the ever-changing use cases of mobile devices . we must continuously collaborate with manufacturers of mobile devices to incorporate our technologies . finally , we must continue the development and distribution of dolby content via various ecosystems . personal computers highlights : dd+ and he-aac continue to enhance playback in both mac and windows operating systems , including native support in their respective safari and microsoft edge browsers . dolby 's presence in these browsers enables us to reach more users through new types of content , including streaming video entertainment . during fiscal 2017 , lenovo , huawei , and xiaomi launched pcs that feature dolby atmos . we also partnered with huawei on the system design to help create a more immersive audio experience . challenges : in recent years , unit demand for pcs has experienced secular decline as consumer choices have shifted towards other devices such as tablets and mobile phones . this has caused downward pressure on our pc revenues . furthermore , a decline in the portion of pcs that have optical disc functionality will have a negative impact on our asps . other highlights : dd+ is incorporated in both the xbox and playstation gaming consoles and platforms . during fiscal 2017 , microsoft launched hdmi support for dolby atmos on windows and xbox one , which enables playback on downstream atmos devices such as soundbars and avrs . in addition , we launched dolby atmos for headphones , which allows a user to enable dolby atmos on their headphones by purchasing an app on the microsoft app store . oems can also pre-purchase and bundle dolby atmos for headphones into their offerings . for example , plantronics released its rig 800lx gaming headset that included a prepaid voucher to download dolby atmos for headphones on windows and xbox . we also generate revenue from the automotive industry , where we experienced higher than typical revenue due to recoveries in fiscal 2017. challenges : the gaming console market continues to be challenged by competition from mobile devices and gaming pcs , which have faster refresh cycles and appeal to a broader consumer base . in fiscal 2017 , 31 automotive revenues included recoveries that exceeded our expectations , and we anticipate a decline in these recoveries in fiscal 2018. products and services we also generate revenue by providing products and services for a variety of applications in the cinema , broadcast , and communications markets . highlights : we offer servers and audio processors to enable the playback of content in cinemas . our product revenue base expanded due to our portfolio of servers and audio processors , and we continue to see continued adoption of dolby atmos by studios , content creators , post-production facilities , and exhibitors . as of the end of fiscal 2017 , there were approximately 3,200 dolby atmos-enabled screens installed or committed to be installed , and approximately 780 dolby atmos theatrical titles announced or released . during fiscal 2017 , we introduced our most recent cinema products , which include the ims3000 , an integrated imaging and audio server with dolby atmos , the dolby multichannel amplifier , and our 3-axis speaker . these products allow us to offer a more complete dolby atmos offering that can also provide exhibitors with a more cost effective solution than what was previously available to them . challenges : demand for our cinema products is dependent upon industry and economic cycles along with our ability to develop and introduce new technologies , further our relationships with content creators , and promote new cinematic audio and imaging experiences . story_separator_special_tag replace_table_token_10_th 36 2017 vs. 2016 factor revenue gross margin configuration & post-production á higher mastering services no significant fluctuations support & other â decreased support and maintenance services 2016 vs. 2015 factor revenue gross margin configuration & post-production â lower mastering services â lower utilization of available services capacity support & other á increased support and maintenance services no significant fluctuations operating expenses research and development r & d expenses consist primarily of employee compensation and benefits expenses , stock-based compensation , consulting and contract labor costs , depreciation and amortization , facilities costs , costs for outside materials and services , and information technology expenses . replace_table_token_11_th 2017 vs. 2016 category key drivers compensation & benefits á higher headcount on r & d projects along with merit increases across the employee base product development á increased funding of various research projects and initiatives aimed at developing new products and technologies 2016 vs. 2015 category key drivers compensation & benefits á higher headcount on r & d projects along with merit increases across the employee base facilities á higher costs as r & d personnel had not yet fully occupied our worldwide headquarters in fiscal 2015 product development â lower prototype costs depreciation & amortization á higher depreciation primarily from laboratory equipment placed into service sales and marketing s & m expenses consist primarily of employee compensation and benefits expenses , stock-based compensation , marketing and promotional expenses for events such as trade shows and conferences , marketing campaigns , travel-related expenses , consulting fees , facilities costs , depreciation and amortization , information technology expenses , and legal costs associated with the protection of our ip . replace_table_token_12_th 37 2017 vs. 2016 category key drivers compensation & benefits á higher headcount and merit increases across the employee base legal , professional , & consulting á higher costs associated with ip related activities aimed at revenue generation depreciation & amortization â lower amortization from assets that have been fully amortized stock-based compensation â decrease in award grants marketing programs â lower costs associated with select tradeshow activities 2016 vs. 2015 category key drivers compensation & benefits á higher headcount primarily for programs to drive new revenue initiatives , along with merit increases across the employee base facilities á higher costs as s & m personnel had not yet fully occupied our worldwide headquarters in fiscal 2015 stock-based compensation á higher headcount and an increase in award grants marketing programs â lower costs associated with selected marketing efforts legal , professional , and consulting â lower costs associated with ip related activities aimed at revenue generation general and administrative g & a expenses consist primarily of employee compensation and benefits expenses , stock-based compensation , depreciation , facilities and information technology costs , as well as professional fees and other costs associated with external consulting and contract labor . replace_table_token_13_th 2017 vs. 2016 category key drivers compensation & benefits á increase in headcount and merit increases across the employee base stock-based compensation â decrease in award grants 2016 vs. 2015 category key drivers facilities â lower costs as our worldwide headquarters included r & d and s & m departments starting in fiscal 2016 stock-based compensation â decrease in award grants legal , professional , and consulting á higher costs associated with various legal activities depreciation & amortization â lower depreciation as fully depreciated assets were only partially offset by new assets placed in service restructuring restructuring charges recorded as operating expenses in our statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods . the extent of our costs arising as a result of these actions , including fluctuations in related balances between fiscal periods , is based on the nature of activities under the various plans . replace_table_token_14_th 38 restructuring charges recorded in fiscal 2017 were incurred in relation to our fiscal 2017 restructuring plan , which was implemented during fiscal 2017 and represent costs to reduce certain activities in order to reallocate resources towards higher priority investment areas . restructuring charges recorded in fiscal 2016 were incurred in relation to our fiscal 2016 restructuring plan implemented and completed within fiscal 2016 and represent costs to reorganize and consolidate certain strategic activities and positions within our global business infrastructure . these charges primarily related to severance and other related benefits provided to employees . note that a restructuring credit of less than $ 0.1 million was recorded during fiscal 2015 in connection with the completion of activity under the fiscal 2014 restructuring plan . other income/expense other income/ ( expense ) primarily consists of interest income earned on cash and investments and the net gains/ ( losses ) from foreign currency transactions , derivative instruments , and sales of marketable securities from our investment portfolio . replace_table_token_15_th 2017 vs. 2016 category key drivers interest income á higher yields on our investment balances other income/ ( expense ) ßà $ 2 million impairment charge recorded on a cost method investment , offset by lower currency translation losses and other expenses 2016 vs. 2015 category key drivers other income/ ( expense ) â pre-tax gain of $ 26.2 million from the sale of our ownership interest in a jointly-owned real estate entity in fiscal 2015 ( refer to note 16 to our consolidated financial statements for additional information ) â fiscal 2015 included the receipt of a non-recurring governmental grant interest income á higher yields on our investment balances income taxes our effective tax rate is based on our annual fiscal year results , and is affected each period-end by several factors . these include changes in our projected fiscal year results , recurring items such as tax rates and relative income earned in foreign jurisdictions , as well as discrete items such as changes to our uncertain tax positions that may occur in , but are not necessarily consistent between periods . for additional information related to effective tax rates , see note 10
| net cash provided by operating activities increased $ 14.2 million in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows net income á higher net income , partially offset by non-cash reconciling adjustments working capital á higher inflows primarily due to increase in accrued liabilities investing activities fiscal year ended september 29 , 2017 september 30 , 2016 net cash used in investing activities $ ( 161,732 ) $ ( 282,497 ) capital expenditures ( 99,617 ) ( 100,762 ) net cash used in investing activities was $ 120.8 million lower in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows purchase of investments á lower outflows for the purchase of marketable investment securities proceeds from investments â lower inflows from the sale & maturities of marketable investment securities purchase of intangible assets á lower outflows for the purchase of patent portfolios financing activities fiscal year ended september 29 , 2017 september 30 , 2016 net cash used in financing activities $ ( 100,089 ) $ ( 88,761 ) repurchase of common stock ( 100,000 ) ( 100,854 ) 41 net cash used in financing activities was $ 11.3 million higher in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows dividend payments â higher outflows for payments of our quarterly cash dividend to common stockholders primarily as a result of a $ 0.02 per share increase compared to the prior fiscal year share repurchases â higher outflows resulting from increased volumes of common stock
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its largest expenses are interest on these deposits and salaries and related employee benefits . the investment management segment originated through the acquisition of substantially all of the assets of chartwell investment partners , lp which was consummated on march 5 , 2014 , and the recent formation of chartwell tsc securities corp. , which is applying to be registered as a broker/dealer with the sec and finra . the investment management segment generates most of its revenue from investment management fees earned on assets under management and its largest expenses are salaries and related employee benefits . the following discussion and analysis presents our financial condition and results of operations on a consolidated basis , except where significant segment disclosures are necessary to better explain the operations of each segment and related variances . in particular , the discussion and analysis of non-interest income and non-interest expense is reported by segment . we measure our performance primarily through our earnings per common share ; total revenue ; and pre-tax , pre-provision net revenue . other salient metrics include the ratio of allowance for loan losses to loans ; net interest margin ; the efficiency ratio of the bank segment ; assets under management ; return on average assets ; and return on average equity , while maintaining appropriate regulatory leverage and risk-based capital ratios . executive overview tristate capital holdings , inc. ( “ we ” , “ us ” , “ our ” or the “ company ” ) is a bank holding company headquartered in pittsburgh , pennsylvania . the company has three wholly owned subsidiaries : tristate capital bank ( “ the bank ” ) , a pennsylvania chartered bank ; chartwell investment partners , llc ( “ chartwell ” ) , a registered investment advisor ; and chartwell tsc securities corp. ( “ ctsc securities ” ) , which is applying to be registered as a broker/dealer with the sec and finra . through our bank subsidiary , we serve middle-market businesses in our primary markets throughout the states of pennsylvania , ohio , new jersey and new york . we also serve high-net-worth individuals on a national basis through our private banking channel . we market and distribute our products and services through a scalable branchless banking model , which creates significant operating leverage throughout our business as we continue to grow . through our investment management subsidiary , we provide investment management services to institutional , sub-advisory , managed account and private clients on a national basis . our broker/dealer subsidiary , once registered , will support any distribution and marketing efforts for chartwell 's proprietary investment products that may require sec or finra licensing . on december 16 , 2015 , the company entered into a definitive asset purchase agreement to acquire the killen group , inc. ( “ tkg ” ) in a transaction that is expected to close in the second quarter of 2016 , subject to certain client consents and other customary closing conditions . the privately held investment manager has assets under management of approximately $ 2.3 billion as of december 31 , 2015 . 2015 compared to 2014 operating performance for the year ended december 31 , 2015 , our net income was $ 22.5 million compared to $ 15.9 million for the same period in 2014 , an increase of $ 6.6 million , or 41.2 % , primarily due to the net impact of ( 1 ) a $ 1.9 million , or 2.9 % , increase in our net interest income due largely to our continued loan growth ; ( 2 ) a decrease in provision for loan losses of $ 10.1 million ; ( 3 ) an increase of $ 4.2 million in non-interest income largely related to higher investment management fees with two additional months of chartwell 's operating results and higher swap fees offset by lower net gain on the sale of investment securities available-for-sale ; ( 4 ) an increase of $ 5.7 million in our non-interest expense largely related to two additional months of chartwell expense ; and ( 5 ) a $ 3.9 million increase in income taxes . our diluted eps was $ 0.80 for the year ended december 31 , 2015 , compared to $ 0.55 for the same period in 2014 . the increase is a result of an increase of $ 6.6 million , or 41.2 % , in our net income and lower dilutive average shares largely related to the purchase of treasury stock . for the year ended december 31 , 2015 , total revenue increased $ 7.4 million , or 7.8 % , to $ 103.4 million from $ 96.0 million for the same period in 2014 , driven by two additional months of chartwell 's revenue and growth in our loan income and swap fees . p re-tax , pre-provision net revenue increased $ 1.7 million , or 5.5 % , to $ 33.4 million for the year ended december 31 , 2015 , from $ 31.6 million for the same period in 2014 , primarily resulting from two additional months of chartwell 's operating results . our net interest margin was 2.35 % for the year ended december 31 , 2015 , as compared to 2.62 % for the same period in 2014 . the most significant factor driving net interest margin compression has been our shift toward lower-risk assets , most notably the marketable-securities-backed private banking margin loan portfolio that the bank has made its fastest growing channel . in addition , net interest margin for the year ended december 31 , 2015 , was impacted by the additional interest expense from our june 2014 subordinated debt placement . story_separator_special_tag the increase in interest income was primarily the result of an increase in average total loans of $ 411.2 million , or 23.7 % , which is our primary earning asset and the bank 's core business , as well as an increase of $ 20.0 million in average investment securities held-to-maturity , partially offset by a decrease of $ 34.5 million in average investment securities available-for-sale and a decrease of 50 basis points in yield on our loans . the most significant factor of the declining yield on our loan portfolio has been our shift toward lower-risk assets , most notably the marketable-securities-backed private banking loan portfolio that the bank has made its fastest growing channel . the overall yield on interest-earning assets declined 34 basis points to 3.10 % for the year ended december 31 , 2014 , as compared to 3.44 % for the same period in 2013 , primarily as a result of the lower yield on loans , driven largely by the increase in our private banking portfolio . interest expense on interest-bearing liabilities of $ 12.3 million , for the year ended december 31 , 2014 , increased $ 1.2 million , or 10.7 % , from the same period in 2013 as a result of an increase of $ 369.5 million , or 20.6 % , in average interest-bearing liabilities for the year ended december 31 , 2014 , partially offset by a decrease of five basis points in the average rate paid on our average interest-bearing liabilities compared to the same period in 2013. the decrease in average rate paid was reflective of decreases in rates paid in the three largest interest-bearing deposit categories , partially offset by the issuance of subordinated debt , as well as a shift in our deposit mix . the increase in average interest-bearing liabilities was driven primarily by an increase of $ 164.6 million , or 17.7 % , in average money market deposit accounts , an increase of $ 78.4 million in average fhlb borrowings , an increase of $ 62.5 million in interest-bearing checking accounts and an increase in average cdars ® time deposits of $ 44.7 million , or 12.2 % . the following tables analyze the dollar amount of the change in interest income and interest expense with respect to the primary components of interest-earning assets and interest-bearing liabilities . the tables show the amount of the change in interest income or interest expense caused by either changes in outstanding balances or changes in interest rates for the periods indicated . the effect of changes in balance is measured by applying the average rate during the first period to the balance ( “ volume ” ) change between the two periods . the effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period . 55 replace_table_token_16_th ( 1 ) the change in interest income and expense due to change in composition and applicable yields and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . replace_table_token_17_th ( 1 ) the change in interest income and expense due to change in composition and applicable yields and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . 56 provision for loan losses the provision for loan losses represents our determination of the amount necessary to be charged against the current period 's earnings to maintain the allowance for loan losses at a level that is considered adequate in relation to the estimated losses inherent in the loan portfolio . for additional information regarding our allowance for loan losses , see “ allowance for loan losses . ” provision for loan losses for the years ended december 31 , 2015 and 2014 . we recorded a $ 13,000 and a $ 10.2 million provision for loan losses for the years ended december 31 , 2015 and 2014 , respectively . the provision for the year ended december 31 , 2015 , was comprised of a net decrease of $ 1.3 million in general reserves on commercial and industrial loans largely due to a reserve reversal from payoffs on two substandard-rated credits and recoveries of $ 1.0 million offset by a net increase in specific reserves of $ 2.3 million on commercial and industrial non-performing loans . the provision for loan losses for the year ended december 31 , 2014 , was largely driven by the impact of charge-offs totaling $ 9.5 million for the year ended december 31 , 2014 , on six commercial and industrial loans . provision for loan losses for the years ended december 31 , 2014 and 2013. we recorded a $ 10.2 million and an $ 8.2 million provision for loan losses for the years ended december 31 , 2014 and 2013 , respectively . the provision for the year ended december 31 , 2014 , was comprised of ( a ) the impact of $ 9.5 million in charge-offs related to six non-performing commercial and industrial loans ; ( b ) a net increase of $ 245,000 in additional specific reserves on non-performing commercial and industrial loans ; and ( c ) a $ 1.4 million increase in commercial and industrial general reserves largely driven by the impact of charge-offs and loans that were downgraded during the year ; partially offset by ( d ) recoveries of $ 545,000 on three commercial and industrial loans ; and ( e ) a decrease of $ 349,000 in the general reserve of the commercial real estate portfolio due to improved credit quality . there were no charge-offs for the commercial real estate and private banking portfolios for the year ended december 31 , 2014. the provision for loan losses for the year ended december 31 ,
| net cash provided by operating activities increased $ 14.2 million in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows net income á higher net income , partially offset by non-cash reconciling adjustments working capital á higher inflows primarily due to increase in accrued liabilities investing activities fiscal year ended september 29 , 2017 september 30 , 2016 net cash used in investing activities $ ( 161,732 ) $ ( 282,497 ) capital expenditures ( 99,617 ) ( 100,762 ) net cash used in investing activities was $ 120.8 million lower in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows purchase of investments á lower outflows for the purchase of marketable investment securities proceeds from investments â lower inflows from the sale & maturities of marketable investment securities purchase of intangible assets á lower outflows for the purchase of patent portfolios financing activities fiscal year ended september 29 , 2017 september 30 , 2016 net cash used in financing activities $ ( 100,089 ) $ ( 88,761 ) repurchase of common stock ( 100,000 ) ( 100,854 ) 41 net cash used in financing activities was $ 11.3 million higher in fiscal 2017 compared to fiscal 2016 , primarily due to the following : factor impact on cash flows dividend payments â higher outflows for payments of our quarterly cash dividend to common stockholders primarily as a result of a $ 0.02 per share increase compared to the prior fiscal year share repurchases â higher outflows resulting from increased volumes of common stock
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its largest expenses are interest on these deposits and salaries and related employee benefits . the investment management segment originated through the acquisition of substantially all of the assets of chartwell investment partners , lp which was consummated on march 5 , 2014 , and the recent formation of chartwell tsc securities corp. , which is applying to be registered as a broker/dealer with the sec and finra . the investment management segment generates most of its revenue from investment management fees earned on assets under management and its largest expenses are salaries and related employee benefits . the following discussion and analysis presents our financial condition and results of operations on a consolidated basis , except where significant segment disclosures are necessary to better explain the operations of each segment and related variances . in particular , the discussion and analysis of non-interest income and non-interest expense is reported by segment . we measure our performance primarily through our earnings per common share ; total revenue ; and pre-tax , pre-provision net revenue . other salient metrics include the ratio of allowance for loan losses to loans ; net interest margin ; the efficiency ratio of the bank segment ; assets under management ; return on average assets ; and return on average equity , while maintaining appropriate regulatory leverage and risk-based capital ratios . executive overview tristate capital holdings , inc. ( “ we ” , “ us ” , “ our ” or the “ company ” ) is a bank holding company headquartered in pittsburgh , pennsylvania . the company has three wholly owned subsidiaries : tristate capital bank ( “ the bank ” ) , a pennsylvania chartered bank ; chartwell investment partners , llc ( “ chartwell ” ) , a registered investment advisor ; and chartwell tsc securities corp. ( “ ctsc securities ” ) , which is applying to be registered as a broker/dealer with the sec and finra . through our bank subsidiary , we serve middle-market businesses in our primary markets throughout the states of pennsylvania , ohio , new jersey and new york . we also serve high-net-worth individuals on a national basis through our private banking channel . we market and distribute our products and services through a scalable branchless banking model , which creates significant operating leverage throughout our business as we continue to grow . through our investment management subsidiary , we provide investment management services to institutional , sub-advisory , managed account and private clients on a national basis . our broker/dealer subsidiary , once registered , will support any distribution and marketing efforts for chartwell 's proprietary investment products that may require sec or finra licensing . on december 16 , 2015 , the company entered into a definitive asset purchase agreement to acquire the killen group , inc. ( “ tkg ” ) in a transaction that is expected to close in the second quarter of 2016 , subject to certain client consents and other customary closing conditions . the privately held investment manager has assets under management of approximately $ 2.3 billion as of december 31 , 2015 . 2015 compared to 2014 operating performance for the year ended december 31 , 2015 , our net income was $ 22.5 million compared to $ 15.9 million for the same period in 2014 , an increase of $ 6.6 million , or 41.2 % , primarily due to the net impact of ( 1 ) a $ 1.9 million , or 2.9 % , increase in our net interest income due largely to our continued loan growth ; ( 2 ) a decrease in provision for loan losses of $ 10.1 million ; ( 3 ) an increase of $ 4.2 million in non-interest income largely related to higher investment management fees with two additional months of chartwell 's operating results and higher swap fees offset by lower net gain on the sale of investment securities available-for-sale ; ( 4 ) an increase of $ 5.7 million in our non-interest expense largely related to two additional months of chartwell expense ; and ( 5 ) a $ 3.9 million increase in income taxes . our diluted eps was $ 0.80 for the year ended december 31 , 2015 , compared to $ 0.55 for the same period in 2014 . the increase is a result of an increase of $ 6.6 million , or 41.2 % , in our net income and lower dilutive average shares largely related to the purchase of treasury stock . for the year ended december 31 , 2015 , total revenue increased $ 7.4 million , or 7.8 % , to $ 103.4 million from $ 96.0 million for the same period in 2014 , driven by two additional months of chartwell 's revenue and growth in our loan income and swap fees . p re-tax , pre-provision net revenue increased $ 1.7 million , or 5.5 % , to $ 33.4 million for the year ended december 31 , 2015 , from $ 31.6 million for the same period in 2014 , primarily resulting from two additional months of chartwell 's operating results . our net interest margin was 2.35 % for the year ended december 31 , 2015 , as compared to 2.62 % for the same period in 2014 . the most significant factor driving net interest margin compression has been our shift toward lower-risk assets , most notably the marketable-securities-backed private banking margin loan portfolio that the bank has made its fastest growing channel . in addition , net interest margin for the year ended december 31 , 2015 , was impacted by the additional interest expense from our june 2014 subordinated debt placement . story_separator_special_tag the increase in interest income was primarily the result of an increase in average total loans of $ 411.2 million , or 23.7 % , which is our primary earning asset and the bank 's core business , as well as an increase of $ 20.0 million in average investment securities held-to-maturity , partially offset by a decrease of $ 34.5 million in average investment securities available-for-sale and a decrease of 50 basis points in yield on our loans . the most significant factor of the declining yield on our loan portfolio has been our shift toward lower-risk assets , most notably the marketable-securities-backed private banking loan portfolio that the bank has made its fastest growing channel . the overall yield on interest-earning assets declined 34 basis points to 3.10 % for the year ended december 31 , 2014 , as compared to 3.44 % for the same period in 2013 , primarily as a result of the lower yield on loans , driven largely by the increase in our private banking portfolio . interest expense on interest-bearing liabilities of $ 12.3 million , for the year ended december 31 , 2014 , increased $ 1.2 million , or 10.7 % , from the same period in 2013 as a result of an increase of $ 369.5 million , or 20.6 % , in average interest-bearing liabilities for the year ended december 31 , 2014 , partially offset by a decrease of five basis points in the average rate paid on our average interest-bearing liabilities compared to the same period in 2013. the decrease in average rate paid was reflective of decreases in rates paid in the three largest interest-bearing deposit categories , partially offset by the issuance of subordinated debt , as well as a shift in our deposit mix . the increase in average interest-bearing liabilities was driven primarily by an increase of $ 164.6 million , or 17.7 % , in average money market deposit accounts , an increase of $ 78.4 million in average fhlb borrowings , an increase of $ 62.5 million in interest-bearing checking accounts and an increase in average cdars ® time deposits of $ 44.7 million , or 12.2 % . the following tables analyze the dollar amount of the change in interest income and interest expense with respect to the primary components of interest-earning assets and interest-bearing liabilities . the tables show the amount of the change in interest income or interest expense caused by either changes in outstanding balances or changes in interest rates for the periods indicated . the effect of changes in balance is measured by applying the average rate during the first period to the balance ( “ volume ” ) change between the two periods . the effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period . 55 replace_table_token_16_th ( 1 ) the change in interest income and expense due to change in composition and applicable yields and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . replace_table_token_17_th ( 1 ) the change in interest income and expense due to change in composition and applicable yields and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each . 56 provision for loan losses the provision for loan losses represents our determination of the amount necessary to be charged against the current period 's earnings to maintain the allowance for loan losses at a level that is considered adequate in relation to the estimated losses inherent in the loan portfolio . for additional information regarding our allowance for loan losses , see “ allowance for loan losses . ” provision for loan losses for the years ended december 31 , 2015 and 2014 . we recorded a $ 13,000 and a $ 10.2 million provision for loan losses for the years ended december 31 , 2015 and 2014 , respectively . the provision for the year ended december 31 , 2015 , was comprised of a net decrease of $ 1.3 million in general reserves on commercial and industrial loans largely due to a reserve reversal from payoffs on two substandard-rated credits and recoveries of $ 1.0 million offset by a net increase in specific reserves of $ 2.3 million on commercial and industrial non-performing loans . the provision for loan losses for the year ended december 31 , 2014 , was largely driven by the impact of charge-offs totaling $ 9.5 million for the year ended december 31 , 2014 , on six commercial and industrial loans . provision for loan losses for the years ended december 31 , 2014 and 2013. we recorded a $ 10.2 million and an $ 8.2 million provision for loan losses for the years ended december 31 , 2014 and 2013 , respectively . the provision for the year ended december 31 , 2014 , was comprised of ( a ) the impact of $ 9.5 million in charge-offs related to six non-performing commercial and industrial loans ; ( b ) a net increase of $ 245,000 in additional specific reserves on non-performing commercial and industrial loans ; and ( c ) a $ 1.4 million increase in commercial and industrial general reserves largely driven by the impact of charge-offs and loans that were downgraded during the year ; partially offset by ( d ) recoveries of $ 545,000 on three commercial and industrial loans ; and ( e ) a decrease of $ 349,000 in the general reserve of the commercial real estate portfolio due to improved credit quality . there were no charge-offs for the commercial real estate and private banking portfolios for the year ended december 31 , 2014. the provision for loan losses for the year ended december 31 ,
| investing activities resulted in a net cash outflow of $ 465.1 million , for the year ended december 31 , 2015 , as compared to a net cash outflow of $ 581.9 million for the same period in 2014 . the outflow s for the year ended december 31 , 2015 , were primarily due to the net loan growth of $ 448.2 million and $ 51.1 million for the purchase of investment securities , partially offset by proceeds from the sale of investment securities available-for-sale totaling $ 11.8 million and principal repayments and maturities of investments securities of $ 27.8 million . the outflow s for the year ended december 31 , 2014 , included $ 42.9 million for the chartwell acquisition net of cash , $ 348.1 million in net loan growth , the purchase of $ 219.5 million in loans and the purchase of investment securities of $ 77.3 million partially offset by proceeds from the sale of investment securities available-for-sale totaling $ 69.6 million and principal repayments and maturities of investments securities of $ 31.2 million . financing activities resulted in a net inflow of $ 424.4 million for the year ended december 31 , 2015 , compared to a net inflow of $ 512.7 million for the same period in 2014 , primarily as a result of an increase in fhlb advances of $ 90.0 million and the net growth in deposits of $ 352.9 million for the year ended december 31 , 2015 , compared to net growth of $ 375.2 million in deposits , increased fhlb borrowings of $ 110.0 million and net proceeds from the issuance of $ 34.0 million in subordinated notes payable for the year ended december 31 , 2014 . we continue to evaluate the potential impact on liquidity management by regulatory proposals , including those being established under the dodd-frank act , as government regulators continue the final rule-making process .
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we classify our businesses into three reportable segments : mortgage services consists of mortgage portfolio management services that span the mortgage lifecycle from origination through reo asset management and sale ; financial services principally consists of unsecured asset recovery and customer relationship management ; and technology services consists of modular , comprehensive integrated technological solutions for loan servicing , vendor management and invoice presentment and payment as well as providing infrastructure support . in addition , our corporate items and eliminations segment includes eliminations of transactions between the reporting segments and also includes costs recognized by us related to corporate support functions such as executive , finance , legal , human resources , vendor management and six sigma . in evaluating our performance , we utilize service revenue which consists of amounts attributable to our fee based services . reimbursable expenses and cooperative non-controlling interests are pass-through items for which we earn no margin . reimbursable expenses consists of amounts that we incur on behalf of our customers in performing our fee based services , but we pass such costs directly on to our customers without any additional markup . further discussion regarding our business may be found under part i , item 1 , business . strategic update for 2011 , we focused our efforts on strategically supporting ocwen as its portfolio of loans serviced continued to grow at an accelerated pace . to support such growth , we invested significantly in hiring and training new personnel ( increasing our global staffing by 66 % ) , developed and expanded some of the newer services ( primarily insurance related services ) and continued to add to the geographic footprint for existing services where it made economic sense . through ocwen 's growth and our focused efforts to capture more revenue per loan serviced by ocwen , we recognized $ 334.8 million of service revenue , a 36 % increase over the year-ended december 31 , 2010. in addition , although we made significant investments in personnel and related costs months in advance of loans boarding , we achieved gross margins based on service revenue of 44 % , comparable to 2010 levels , and improved income from operations as a percent of service revenue to 26 % , up from 22 % in 2010. from a cash perspective , we generated $ 111.6 million in operating cash flow which represents $ 0.33 for every dollar of service revenue . we sought to strategically deploy cash principally in three ways . first , we returned $ 61.1 million to shareholders through the repurchase of 1.6 million shares under the stock repurchase program . second , we invested $ 16.4 million in technology and facilities to support our rapid growth . third , we continued to invest in mortgage origination services with our $ 15.0 million investment in correspondent one and our acquisition of springhouse . looking ahead to 2012 , we expect to remain focused on a few key initiatives that we believe will allow us to continue to deliver superior results for our customers and shareholders : support ocwen 's growth . our primary focus for next year will be the continued support of ocwen . ocwen 's growth in loans serviced , including loans boarded in the second half of 2011 and the additional 0.2 million loans we expect ocwen to board in early 2012 , will be the principal driver of our expected growth in 2012. furthermore , we believe ocwen will remain a leader in the on-going consolidation of high touch residential loan servicers . improve operating effectiveness . we must deliver high quality , regulatory compliant services that meet or exceed customers ' performance expectations . this requires us to intelligently and persistently invest in an array of broad based competencies including technology , quality assurance , compliance , econometrics and behavioral science among others . 22 service offerings . we intend to capture additional revenue per loan from the loans boarded on our systems as well as develop a more balanced portfolio of service offerings that we believe will enable us to generate long-term consistent revenue and earnings growth , with faster growth in 2012. in 2012 , we will expand our offering of mortgage origination services , principally to the members of lenders one , as well as begin implementation of our next generation of realsuite technologies . bring financial services to profitability . our financial services segment improved in 2011 posting $ 4.4 million in pre-tax income , which compares to $ 0.3 million in 2010 , although revenue declined 8 % to $ 71.2 million . we remain committed to this segment as we believe that significant market opportunities exist in assisting clients in the areas of customer relationship and asset recovery management services . we continue to believe that investments in areas such as optimal resolution models deployed through dynamic scripts will enable us to take advantage of these opportunities over an extended time period . basis of presentation we have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the united states of america ( gaap ) . for periods prior to the separation , our results include revenues and expenses directly attributable to our operations and allocations of expense from ocwen which may not necessarily reflect what our consolidated results of operations , financial position and cash flows would have been had we operated as an independent company during that entire period . stock repurchase plan in may 2010 , our shareholders authorized us to purchase 15 % of our outstanding share capital , or 3.8 million shares of common stock , in the open market . from authorization through december 31 , 2011 , we have purchased 2.3 million shares of common stock on the open market at an average price of $ 34.55 per share leaving 1.5 million shares available for purchase under the program . story_separator_special_tag in addition , professional services fees such as those associated with the external audit increased in 2010 as a result of being a public company for a full year . 34 financial services the following table presents our results of operations for our financial services segment for the years ended december 31 : replace_table_token_22_th n/m not meaningful . in 2011 , we reorganized our reporting structure within this segment in that certain services originally part of component services and other in the mortgage services segment are now classified as part of customer relationship management in our financial services segment . our leadership team is focused on disciplined floor management , delivering more services over our global delivery platform , expanding our quality and analytical initiatives and investing in new technology . in july 2011 , we purchased the assembled workforce of a sub-contractor in india that performs asset recovery services . for periods prior to the acquisition , the costs paid to the sub-contractor were included as a component of outside fees and services . since acquisition , the costs have been recorded as employee costs , technology or occupancy as appropriate which has resulted in movement between cost of revenue and selling , general and administrative expense categories . 35 revenue replace_table_token_23_th n/m not meaningful . in our financial services segment , we generate revenue from asset recovery management fees we earn for collecting amounts due to our customers and from fees we earn for performing customer relationship management for our customers . financial services revenue declined over the three year period due to a decline in revenue attributable to asset recovery management , primarily associated with one of the segment 's largest customers . the decline was due to the general economic environment which has kept collection rates depressed and also the result of the client shifting work to the company 's global delivery platform . our global delivery platform consists of highly trained specialists in various geographic regions . the use of specialists in certain countries may result in lower commission rates paid by clients but results in higher margins principally due to the lower employee cost structure . these declines were partially offset by growth in new asset recovery management accounts , which drove an increase in associated revenues , and growth in our customer relationship management operations . cost of revenue replace_table_token_24_th n/m not meaningful . 36 cost of revenues as percent of service revenue has remained flat over the periods presented as we have actively worked to manage our cost structure in a declining revenue environment . we principally managed our cost structure through a reduction in compensation and benefit costs both through reduction in overall headcount as well as expanding our use of our global workforce . the decline in compensation and benefits in 2011 is mostly offset by the acquisition of a sub-contractor , as previously described , for which costs incurred prior to the acquisition were recorded in outside fees and services . since acquisition , costs have been recorded as employee costs , technology or occupancy as appropriate which has also resulted in movement between cost of revenue and selling , general and administrative expense categories . cost of revenues in 2010 decreased as compared to 2009 principally due to a reduction in compensation and benefits as a result of a lower number of collectors and reduced commissions , partially offset by higher costs associated with the utilization of outside collectors . selling , general and administrative expenses replace_table_token_25_th n/m not meaningful . ( 1 ) includes $ 1.9 million in one-time facility closure costs primarily consisting of lease exit costs and severance and $ 1.4 million of legal settlement losses in 2009. selling , general and administrative expenses decreased in 2011 primarily due to a $ 2.8 million goodwill impairment recorded in the fourth quarter of 2010 ( no impairment recorded in 2011 ) as well as a result of reduced occupancy costs and costs from our technology services segment following implementation of certain cost containment measures . 37 technology services the following table presents our results of operations for our technology services segment for the years ended december 31 : replace_table_token_26_th the primary focus of the technology services segment today is to support the growth of mortgage services and ocwen . in addition , technology services assists in cost reduction and quality initiatives within the financial services segment . effective january 1 , 2011 , we modified our pricing for it infrastructure services within our technology services segment from a model based principally on a set charge per headcount per service to a fully loaded cost plus mark-up methodology . mark-ups for infrastructure services are based upon economic studies performed that are generally consistent with our transfer pricing methodology . this new model applies to the infrastructure amounts charged to ocwen as well as internal allocations of infrastructure costs . in addition , in 2011 we now report our consumer analytics group within technology services ( previously reported in our corporate segment ) . our consumer analytics group seeks to expand our use of behavioral sciences by building proprietary algorithms and psychologically-optimized communications through a customized technology platform . 38 revenues replace_table_token_27_th the increase in realsuite revenue is directly attributable to the growth in ocwen 's residential loan servicing portfolio . in addition , the increase in 2010 as compared to 2009 was driven by increases in realservicing attributable to an expanded five-year renewal agreement with a non-related customer in the second quarter of 2009. as mentioned above , it infrastructure services revenue is principally based on fully loaded costs . this increase in 2011 is due to the growth in both our and ocwen 's operations , partially offset by the change in pricing effective january 1 , 2011 as discussed above . the decrease in 2010 as compared to 2009 was due a reduction in our internal expenditures ( which we eliminate
| investing activities resulted in a net cash outflow of $ 465.1 million , for the year ended december 31 , 2015 , as compared to a net cash outflow of $ 581.9 million for the same period in 2014 . the outflow s for the year ended december 31 , 2015 , were primarily due to the net loan growth of $ 448.2 million and $ 51.1 million for the purchase of investment securities , partially offset by proceeds from the sale of investment securities available-for-sale totaling $ 11.8 million and principal repayments and maturities of investments securities of $ 27.8 million . the outflow s for the year ended december 31 , 2014 , included $ 42.9 million for the chartwell acquisition net of cash , $ 348.1 million in net loan growth , the purchase of $ 219.5 million in loans and the purchase of investment securities of $ 77.3 million partially offset by proceeds from the sale of investment securities available-for-sale totaling $ 69.6 million and principal repayments and maturities of investments securities of $ 31.2 million . financing activities resulted in a net inflow of $ 424.4 million for the year ended december 31 , 2015 , compared to a net inflow of $ 512.7 million for the same period in 2014 , primarily as a result of an increase in fhlb advances of $ 90.0 million and the net growth in deposits of $ 352.9 million for the year ended december 31 , 2015 , compared to net growth of $ 375.2 million in deposits , increased fhlb borrowings of $ 110.0 million and net proceeds from the issuance of $ 34.0 million in subordinated notes payable for the year ended december 31 , 2014 . we continue to evaluate the potential impact on liquidity management by regulatory proposals , including those being established under the dodd-frank act , as government regulators continue the final rule-making process .
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we classify our businesses into three reportable segments : mortgage services consists of mortgage portfolio management services that span the mortgage lifecycle from origination through reo asset management and sale ; financial services principally consists of unsecured asset recovery and customer relationship management ; and technology services consists of modular , comprehensive integrated technological solutions for loan servicing , vendor management and invoice presentment and payment as well as providing infrastructure support . in addition , our corporate items and eliminations segment includes eliminations of transactions between the reporting segments and also includes costs recognized by us related to corporate support functions such as executive , finance , legal , human resources , vendor management and six sigma . in evaluating our performance , we utilize service revenue which consists of amounts attributable to our fee based services . reimbursable expenses and cooperative non-controlling interests are pass-through items for which we earn no margin . reimbursable expenses consists of amounts that we incur on behalf of our customers in performing our fee based services , but we pass such costs directly on to our customers without any additional markup . further discussion regarding our business may be found under part i , item 1 , business . strategic update for 2011 , we focused our efforts on strategically supporting ocwen as its portfolio of loans serviced continued to grow at an accelerated pace . to support such growth , we invested significantly in hiring and training new personnel ( increasing our global staffing by 66 % ) , developed and expanded some of the newer services ( primarily insurance related services ) and continued to add to the geographic footprint for existing services where it made economic sense . through ocwen 's growth and our focused efforts to capture more revenue per loan serviced by ocwen , we recognized $ 334.8 million of service revenue , a 36 % increase over the year-ended december 31 , 2010. in addition , although we made significant investments in personnel and related costs months in advance of loans boarding , we achieved gross margins based on service revenue of 44 % , comparable to 2010 levels , and improved income from operations as a percent of service revenue to 26 % , up from 22 % in 2010. from a cash perspective , we generated $ 111.6 million in operating cash flow which represents $ 0.33 for every dollar of service revenue . we sought to strategically deploy cash principally in three ways . first , we returned $ 61.1 million to shareholders through the repurchase of 1.6 million shares under the stock repurchase program . second , we invested $ 16.4 million in technology and facilities to support our rapid growth . third , we continued to invest in mortgage origination services with our $ 15.0 million investment in correspondent one and our acquisition of springhouse . looking ahead to 2012 , we expect to remain focused on a few key initiatives that we believe will allow us to continue to deliver superior results for our customers and shareholders : support ocwen 's growth . our primary focus for next year will be the continued support of ocwen . ocwen 's growth in loans serviced , including loans boarded in the second half of 2011 and the additional 0.2 million loans we expect ocwen to board in early 2012 , will be the principal driver of our expected growth in 2012. furthermore , we believe ocwen will remain a leader in the on-going consolidation of high touch residential loan servicers . improve operating effectiveness . we must deliver high quality , regulatory compliant services that meet or exceed customers ' performance expectations . this requires us to intelligently and persistently invest in an array of broad based competencies including technology , quality assurance , compliance , econometrics and behavioral science among others . 22 service offerings . we intend to capture additional revenue per loan from the loans boarded on our systems as well as develop a more balanced portfolio of service offerings that we believe will enable us to generate long-term consistent revenue and earnings growth , with faster growth in 2012. in 2012 , we will expand our offering of mortgage origination services , principally to the members of lenders one , as well as begin implementation of our next generation of realsuite technologies . bring financial services to profitability . our financial services segment improved in 2011 posting $ 4.4 million in pre-tax income , which compares to $ 0.3 million in 2010 , although revenue declined 8 % to $ 71.2 million . we remain committed to this segment as we believe that significant market opportunities exist in assisting clients in the areas of customer relationship and asset recovery management services . we continue to believe that investments in areas such as optimal resolution models deployed through dynamic scripts will enable us to take advantage of these opportunities over an extended time period . basis of presentation we have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the united states of america ( gaap ) . for periods prior to the separation , our results include revenues and expenses directly attributable to our operations and allocations of expense from ocwen which may not necessarily reflect what our consolidated results of operations , financial position and cash flows would have been had we operated as an independent company during that entire period . stock repurchase plan in may 2010 , our shareholders authorized us to purchase 15 % of our outstanding share capital , or 3.8 million shares of common stock , in the open market . from authorization through december 31 , 2011 , we have purchased 2.3 million shares of common stock on the open market at an average price of $ 34.55 per share leaving 1.5 million shares available for purchase under the program . story_separator_special_tag in addition , professional services fees such as those associated with the external audit increased in 2010 as a result of being a public company for a full year . 34 financial services the following table presents our results of operations for our financial services segment for the years ended december 31 : replace_table_token_22_th n/m not meaningful . in 2011 , we reorganized our reporting structure within this segment in that certain services originally part of component services and other in the mortgage services segment are now classified as part of customer relationship management in our financial services segment . our leadership team is focused on disciplined floor management , delivering more services over our global delivery platform , expanding our quality and analytical initiatives and investing in new technology . in july 2011 , we purchased the assembled workforce of a sub-contractor in india that performs asset recovery services . for periods prior to the acquisition , the costs paid to the sub-contractor were included as a component of outside fees and services . since acquisition , the costs have been recorded as employee costs , technology or occupancy as appropriate which has resulted in movement between cost of revenue and selling , general and administrative expense categories . 35 revenue replace_table_token_23_th n/m not meaningful . in our financial services segment , we generate revenue from asset recovery management fees we earn for collecting amounts due to our customers and from fees we earn for performing customer relationship management for our customers . financial services revenue declined over the three year period due to a decline in revenue attributable to asset recovery management , primarily associated with one of the segment 's largest customers . the decline was due to the general economic environment which has kept collection rates depressed and also the result of the client shifting work to the company 's global delivery platform . our global delivery platform consists of highly trained specialists in various geographic regions . the use of specialists in certain countries may result in lower commission rates paid by clients but results in higher margins principally due to the lower employee cost structure . these declines were partially offset by growth in new asset recovery management accounts , which drove an increase in associated revenues , and growth in our customer relationship management operations . cost of revenue replace_table_token_24_th n/m not meaningful . 36 cost of revenues as percent of service revenue has remained flat over the periods presented as we have actively worked to manage our cost structure in a declining revenue environment . we principally managed our cost structure through a reduction in compensation and benefit costs both through reduction in overall headcount as well as expanding our use of our global workforce . the decline in compensation and benefits in 2011 is mostly offset by the acquisition of a sub-contractor , as previously described , for which costs incurred prior to the acquisition were recorded in outside fees and services . since acquisition , costs have been recorded as employee costs , technology or occupancy as appropriate which has also resulted in movement between cost of revenue and selling , general and administrative expense categories . cost of revenues in 2010 decreased as compared to 2009 principally due to a reduction in compensation and benefits as a result of a lower number of collectors and reduced commissions , partially offset by higher costs associated with the utilization of outside collectors . selling , general and administrative expenses replace_table_token_25_th n/m not meaningful . ( 1 ) includes $ 1.9 million in one-time facility closure costs primarily consisting of lease exit costs and severance and $ 1.4 million of legal settlement losses in 2009. selling , general and administrative expenses decreased in 2011 primarily due to a $ 2.8 million goodwill impairment recorded in the fourth quarter of 2010 ( no impairment recorded in 2011 ) as well as a result of reduced occupancy costs and costs from our technology services segment following implementation of certain cost containment measures . 37 technology services the following table presents our results of operations for our technology services segment for the years ended december 31 : replace_table_token_26_th the primary focus of the technology services segment today is to support the growth of mortgage services and ocwen . in addition , technology services assists in cost reduction and quality initiatives within the financial services segment . effective january 1 , 2011 , we modified our pricing for it infrastructure services within our technology services segment from a model based principally on a set charge per headcount per service to a fully loaded cost plus mark-up methodology . mark-ups for infrastructure services are based upon economic studies performed that are generally consistent with our transfer pricing methodology . this new model applies to the infrastructure amounts charged to ocwen as well as internal allocations of infrastructure costs . in addition , in 2011 we now report our consumer analytics group within technology services ( previously reported in our corporate segment ) . our consumer analytics group seeks to expand our use of behavioral sciences by building proprietary algorithms and psychologically-optimized communications through a customized technology platform . 38 revenues replace_table_token_27_th the increase in realsuite revenue is directly attributable to the growth in ocwen 's residential loan servicing portfolio . in addition , the increase in 2010 as compared to 2009 was driven by increases in realservicing attributable to an expanded five-year renewal agreement with a non-related customer in the second quarter of 2009. as mentioned above , it infrastructure services revenue is principally based on fully loaded costs . this increase in 2011 is due to the growth in both our and ocwen 's operations , partially offset by the change in pricing effective january 1 , 2011 as discussed above . the decrease in 2010 as compared to 2009 was due a reduction in our internal expenditures ( which we eliminate
| liquidity and capital resources liquidity we seek to deploy excess cash generated in a disciplined manner . principally , we will continue to reinvest excess cash in developing compelling services that we believe will generate high margins . in addition , we may seek to acquire a limited number of complementary companies that fit our strategic objectives . finally , given the tax inefficiency of dividends , the low returns earned on cash held and our current belief to pursue a limited number of acquisitions , we believe one of the best ways to return value to shareholders is through a share repurchase program . on may 19 , 2010 , our shareholders authorized us to purchase up to 3.8 million shares of our common stock in the open market . through december 31 , 2011 , we purchased 2.3 million shares of our common stock on the open market at an average price of $ 34.55 leaving 1.5 million shares still available for purchase under the program . cash flows the following table presents our cash flows for the years ended december 31 : replace_table_token_31_th n/m not meaningful . cash flow from operating activities cash flow from operating activities consists of two components : ( i ) net income adjusted for depreciation , amortization and certain other non-cash items and ( ii ) working capital . for the year ended december 31 , 2011 , we generated $ 111.6 million in positive cash flow from operations or approximately $ 0.33 for every dollar of service revenue . this primarily reflects our profitability , adjusted for non-cash items , as a result of our year-over-year growth in mortgage-related services as well as a focused effort to improve our working capital position . the significant increase in operating cash flow in 2010 compared to 2009 was primarily driven by our increased profitability as our mortgage services segment has expanded . cash flow from investing activities during 2011 , we invested $ 15.0 million in correspondent one to facilitate the establishment of this business .
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with respect to certain loans , the underwritten irr calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments , and assumes no defaults . irr is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment . it is the discount rate that makes the net present value of all cash outflows ( the costs of investment ) equal to the net present value of cash inflows ( returns on investment ) . it is derived from the negative and positive cash flows resulting from or 34 produced by each transaction ( or for a transaction involving more than one investment , cash flows resulting from or produced by each of the investments ) , whether positive , such as investment returns , or negative , such as transaction expenses or other costs of investment , taking into account the dates on which such cash flows occurred or are expected to occur , and compounding interest accordingly . there can be no assurance that the actual irrs will equal the underwritten irrs shown in the table . see “ risk factors — the company may not achieve its underwritten internal rate of return on its investments which may lead to future returns that may be significantly lower than anticipated ” for a discussion of some of the factors that could adversely impact the returns received by the company from the investments shown in the table over time . ( 4 ) subordinate loans are net of a participation sold during february 2015. the company presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to gaap . at december 31 , 2015 , the company had one such participation sold with a face amount of £19,850 ( or $ 29,250 ) and a carrying amount of £19,850 ( or $ 29,250 ) . ( 5 ) cmbs , held-to-maturity are net of a participation sold during june 2014. at december 31 , 2015 , the company presented the participation sold as an asset of $ 88,984 and non-recourse liabilities of $ 88,951 because the participation does not qualify as a sale according to gaap . investment activity – 2015 during january 2015 , the company closed a £34,519 ( or $ 51,996 ) mezzanine loan secured by a portfolio of 44 senior housing facilities located throughout the united kingdom . the five-year , floating-rate mezzanine loan is part of a £223,800 whole loan , which includes a £164,100 first mortgage loan and a £59,700 mezzanine loan . the company closed an additional £20,000 ( or $ 30,672 ) during february 2015 , which was participated to an investment fund affiliated with apollo . the mezzanine loan has an appraised loan-to-value ( `` ltv `` ) of 70 % and was underwritten to generate an irr of approximately 10 % . see “ — investments ” above for a discussion of how irr is calculated . during january 2015 , the company funded an additional investment of 3,331 ( or $ 3,929 ) related to its investment in champ lp . in february 2015 , the company sold approximately 48 % of its ownership interest in champ lp at cost to an account managed by apollo for approximately 16,314 ( or $ 20,794 ) ( of which $ 2,614 related to foreign exchange losses , which were previously included in accumulated other comprehensive loss ) , reducing its unfunded commitment to champ lp to 3,229 ( or $ 3,508 ) . through its interest in champ lp , the company now holds an indirect ownership interest of approximately 11 % in bremer kreditbank ag , which operates under the name bkb bank ( `` bkb bank `` ) . the company together with other affiliated investors , in aggregate , own 100 % of champ lp . champ lp together with certain unaffiliated third party investors , in aggregate , own 100 % of bkb bank . during february 2015 , the company closed a $ 20,000 mezzanine loan secured by a 488-key full service hotel located in burbank , california . the five-year , fixed rate mezzanine loan is part of a $ 90,000 financing which consists of a $ 70,000 first mortgage loan and the company 's $ 20,000 mezzanine loan . the mezzanine loan has an appraised ltv of 74 % and has been underwritten to generate an irr of approximately 11 % . see “ — investments ” above for a discussion of how irr is calculated . during february 2015 , the company closed a $ 92,500 ( $ 72,500 of which was funded at closing ) first mortgage loan for the predevelopment of a mixed-use multifamily and retail development aggregating approximately 330,000 square feet in downtown brooklyn , new york . the two-year , floating-rate first mortgage loan has an appraised ltv of 57 % and has been underwritten to generate an irr of approximately 21 % on a levered basis . see “ — investments ” above for a discussion of how irr is calculated . during april 2015 , the company closed a $ 37,500 financing , consisting of a $ 22,000 mezzanine loan and a $ 15,500 preferred equity investment for two multifamily properties , totaling 621 units of collateral located in southern florida . the floating-rate financing has a two-year initial term and three one-year extension options . the repeat borrower , an international commercial real estate owner and operator , provided a $ 25,000 payment guarantee on the financing . the subordinate financing has an appraised ltv of 89 % and was underwritten to generate an irr of approximately 14 % . story_separator_special_tag see “ — investments ” above for a discussion of how irr is calculated . during may 2014 , the company closed a $ 34,000 floating-rate first mortgage loan for the acquisition of a newly renovated 301-key hotel located in downtown philadelphia . the first mortgage has a three-year term with two one-year extension options and an underwritten loan-to-cost of approximately 58 % . the first mortgage loan was underwritten to generate an irr of approximately 13 % on a levered basis . see “ — investments ” above for a discussion of how irr is calculated . during june 2014 , the company closed a $ 65,100 floating-rate first mortgage loan ( $ 20,000 of which was funded at closing ) for the development of a 40-unit luxury residential condominium in downtown bethesda , maryland . the company 's loan has a 30-month term with a six-month extension option . on a fully funded basis , the first mortgage loan has a projected appraised loan-to-net sellout of approximately 67 % and has been underwritten to generate an irr of approximately 14 % . see “ — investments ” above for a discussion of how irr is calculated . during july 2014 , the company closed a $ 34,500 ( $ 30,000 of which was funded at closing ) floating-rate , first mortgage loan secured by a newly constructed , class-a , 63-unit multifamily property located in brooklyn , new york , which also includes approximately 7,300 square feet of retail space and 31 parking spaces . the first mortgage loan has a two-year initial 38 term with three one-year extension options and an appraised ltv of approximately 70 % on a fully funded basis . the company anticipates financing the loan , and on a levered basis , the loan was underwritten to generate an irr of approximately 12 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 165,000 ( $ 18,350 of which was funded at closing ) floating-rate first mortgage loan for the development of the majority of the retail portion of a mixed-use lifestyle center in cincinnati , ohio . when completed , the 65-acre property will consist of 626,791 square feet of retail space , a 200,000 flagship retail building , 233 residential units , a 130-key hotel and 4,216 structured and surfaced parking spaces . the balance of the loan will be funded throughout the next eighteen months . the first mortgage loan has a 42-month term with two one-year extension options and a loan-to-cost of approximately 56 % . the first mortgage loan was underwritten to generate an irr of approximately 14 % once financed under the jpmorgan facility . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 67,300 floating-rate first mortgage loan for the acquisition and predevelopment of an existing 12-story industrial building planned to be converted into a luxury residential condominium with approximately 86,000 square feet of net sellable residential space located in the west village neighborhood of new york city . the first mortgage loan is part of an $ 87,300 first mortgage which consists of the company 's $ 67,300 a-note and a subordinate $ 20,000 b-note . the company will have the option , but not the obligation , to participate in the development financing for the property . the a-note has an 18-month term and one six-month extension option and a loan-to-cost of approximately 58 % . the a-note loan was underwritten to generate a levered irr of approximately 25 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 58,000 floating rate first mortgage loan secured by a 330-unit , eight building apartment community and 36 single-family rental homes located in williston , north dakota . williston is located at the epicenter of oil drilling activity for the bakken formation and the property is part of a master-developed residential community . the first mortgage loan has a three-year term with two one-year extension options and an appraised ltv of 73 % . the first mortgage has been underwritten to generate a levered irr of approximately 13 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 50,000 participating first mortgage loan secured by a portfolio of 24 condominiums located in new york city and maui , hawaii owned by a luxury destination club . earlier in the year , the company provided a $ 210,000 first mortgage loan to the same borrower , secured by an additional portfolio of single-family and condominium destination homes located throughout north america , central america , england and the caribbean . the fixed-rate , participating first mortgage loan has a five-year term with two one-year extension options and an appraised ltv of 75 % . the first mortgage loan was underwritten to generate an irr of approximately 8 % on an unlevered basis . the company anticipates financing the loan , and on a levered basis , the loan was underwritten to generate an irr of approximately 15 % . see “ — investments ” above for a discussion of how irr is calculated . subordinate loans . during april 2014 , the company closed a $ 53,954 ( £32,100 ) fixed-rate , nine-month mezzanine loan in connection with the purchase of an existing commercial building that is expected to be re-developed into a 173,000 salable square foot residential condominium in central london . the mezzanine loan is part of a $ 126,060 ( £75,000 ) pre-development loan comprised of a $ 72,106 ( £42,900 ) first mortgage and the company 's $ 53,954 ( £32,100 ) mezzanine loan . the company will have the
| liquidity and capital resources liquidity we seek to deploy excess cash generated in a disciplined manner . principally , we will continue to reinvest excess cash in developing compelling services that we believe will generate high margins . in addition , we may seek to acquire a limited number of complementary companies that fit our strategic objectives . finally , given the tax inefficiency of dividends , the low returns earned on cash held and our current belief to pursue a limited number of acquisitions , we believe one of the best ways to return value to shareholders is through a share repurchase program . on may 19 , 2010 , our shareholders authorized us to purchase up to 3.8 million shares of our common stock in the open market . through december 31 , 2011 , we purchased 2.3 million shares of our common stock on the open market at an average price of $ 34.55 leaving 1.5 million shares still available for purchase under the program . cash flows the following table presents our cash flows for the years ended december 31 : replace_table_token_31_th n/m not meaningful . cash flow from operating activities cash flow from operating activities consists of two components : ( i ) net income adjusted for depreciation , amortization and certain other non-cash items and ( ii ) working capital . for the year ended december 31 , 2011 , we generated $ 111.6 million in positive cash flow from operations or approximately $ 0.33 for every dollar of service revenue . this primarily reflects our profitability , adjusted for non-cash items , as a result of our year-over-year growth in mortgage-related services as well as a focused effort to improve our working capital position . the significant increase in operating cash flow in 2010 compared to 2009 was primarily driven by our increased profitability as our mortgage services segment has expanded . cash flow from investing activities during 2011 , we invested $ 15.0 million in correspondent one to facilitate the establishment of this business .
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with respect to certain loans , the underwritten irr calculation assumes certain estimates with respect to the timing and magnitude of future fundings for the remaining commitments and associated loan repayments , and assumes no defaults . irr is the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment . it is the discount rate that makes the net present value of all cash outflows ( the costs of investment ) equal to the net present value of cash inflows ( returns on investment ) . it is derived from the negative and positive cash flows resulting from or 34 produced by each transaction ( or for a transaction involving more than one investment , cash flows resulting from or produced by each of the investments ) , whether positive , such as investment returns , or negative , such as transaction expenses or other costs of investment , taking into account the dates on which such cash flows occurred or are expected to occur , and compounding interest accordingly . there can be no assurance that the actual irrs will equal the underwritten irrs shown in the table . see “ risk factors — the company may not achieve its underwritten internal rate of return on its investments which may lead to future returns that may be significantly lower than anticipated ” for a discussion of some of the factors that could adversely impact the returns received by the company from the investments shown in the table over time . ( 4 ) subordinate loans are net of a participation sold during february 2015. the company presents the participation sold as both assets and non-recourse liabilities because the participation does not qualify as a sale according to gaap . at december 31 , 2015 , the company had one such participation sold with a face amount of £19,850 ( or $ 29,250 ) and a carrying amount of £19,850 ( or $ 29,250 ) . ( 5 ) cmbs , held-to-maturity are net of a participation sold during june 2014. at december 31 , 2015 , the company presented the participation sold as an asset of $ 88,984 and non-recourse liabilities of $ 88,951 because the participation does not qualify as a sale according to gaap . investment activity – 2015 during january 2015 , the company closed a £34,519 ( or $ 51,996 ) mezzanine loan secured by a portfolio of 44 senior housing facilities located throughout the united kingdom . the five-year , floating-rate mezzanine loan is part of a £223,800 whole loan , which includes a £164,100 first mortgage loan and a £59,700 mezzanine loan . the company closed an additional £20,000 ( or $ 30,672 ) during february 2015 , which was participated to an investment fund affiliated with apollo . the mezzanine loan has an appraised loan-to-value ( `` ltv `` ) of 70 % and was underwritten to generate an irr of approximately 10 % . see “ — investments ” above for a discussion of how irr is calculated . during january 2015 , the company funded an additional investment of 3,331 ( or $ 3,929 ) related to its investment in champ lp . in february 2015 , the company sold approximately 48 % of its ownership interest in champ lp at cost to an account managed by apollo for approximately 16,314 ( or $ 20,794 ) ( of which $ 2,614 related to foreign exchange losses , which were previously included in accumulated other comprehensive loss ) , reducing its unfunded commitment to champ lp to 3,229 ( or $ 3,508 ) . through its interest in champ lp , the company now holds an indirect ownership interest of approximately 11 % in bremer kreditbank ag , which operates under the name bkb bank ( `` bkb bank `` ) . the company together with other affiliated investors , in aggregate , own 100 % of champ lp . champ lp together with certain unaffiliated third party investors , in aggregate , own 100 % of bkb bank . during february 2015 , the company closed a $ 20,000 mezzanine loan secured by a 488-key full service hotel located in burbank , california . the five-year , fixed rate mezzanine loan is part of a $ 90,000 financing which consists of a $ 70,000 first mortgage loan and the company 's $ 20,000 mezzanine loan . the mezzanine loan has an appraised ltv of 74 % and has been underwritten to generate an irr of approximately 11 % . see “ — investments ” above for a discussion of how irr is calculated . during february 2015 , the company closed a $ 92,500 ( $ 72,500 of which was funded at closing ) first mortgage loan for the predevelopment of a mixed-use multifamily and retail development aggregating approximately 330,000 square feet in downtown brooklyn , new york . the two-year , floating-rate first mortgage loan has an appraised ltv of 57 % and has been underwritten to generate an irr of approximately 21 % on a levered basis . see “ — investments ” above for a discussion of how irr is calculated . during april 2015 , the company closed a $ 37,500 financing , consisting of a $ 22,000 mezzanine loan and a $ 15,500 preferred equity investment for two multifamily properties , totaling 621 units of collateral located in southern florida . the floating-rate financing has a two-year initial term and three one-year extension options . the repeat borrower , an international commercial real estate owner and operator , provided a $ 25,000 payment guarantee on the financing . the subordinate financing has an appraised ltv of 89 % and was underwritten to generate an irr of approximately 14 % . story_separator_special_tag see “ — investments ” above for a discussion of how irr is calculated . during may 2014 , the company closed a $ 34,000 floating-rate first mortgage loan for the acquisition of a newly renovated 301-key hotel located in downtown philadelphia . the first mortgage has a three-year term with two one-year extension options and an underwritten loan-to-cost of approximately 58 % . the first mortgage loan was underwritten to generate an irr of approximately 13 % on a levered basis . see “ — investments ” above for a discussion of how irr is calculated . during june 2014 , the company closed a $ 65,100 floating-rate first mortgage loan ( $ 20,000 of which was funded at closing ) for the development of a 40-unit luxury residential condominium in downtown bethesda , maryland . the company 's loan has a 30-month term with a six-month extension option . on a fully funded basis , the first mortgage loan has a projected appraised loan-to-net sellout of approximately 67 % and has been underwritten to generate an irr of approximately 14 % . see “ — investments ” above for a discussion of how irr is calculated . during july 2014 , the company closed a $ 34,500 ( $ 30,000 of which was funded at closing ) floating-rate , first mortgage loan secured by a newly constructed , class-a , 63-unit multifamily property located in brooklyn , new york , which also includes approximately 7,300 square feet of retail space and 31 parking spaces . the first mortgage loan has a two-year initial 38 term with three one-year extension options and an appraised ltv of approximately 70 % on a fully funded basis . the company anticipates financing the loan , and on a levered basis , the loan was underwritten to generate an irr of approximately 12 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 165,000 ( $ 18,350 of which was funded at closing ) floating-rate first mortgage loan for the development of the majority of the retail portion of a mixed-use lifestyle center in cincinnati , ohio . when completed , the 65-acre property will consist of 626,791 square feet of retail space , a 200,000 flagship retail building , 233 residential units , a 130-key hotel and 4,216 structured and surfaced parking spaces . the balance of the loan will be funded throughout the next eighteen months . the first mortgage loan has a 42-month term with two one-year extension options and a loan-to-cost of approximately 56 % . the first mortgage loan was underwritten to generate an irr of approximately 14 % once financed under the jpmorgan facility . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 67,300 floating-rate first mortgage loan for the acquisition and predevelopment of an existing 12-story industrial building planned to be converted into a luxury residential condominium with approximately 86,000 square feet of net sellable residential space located in the west village neighborhood of new york city . the first mortgage loan is part of an $ 87,300 first mortgage which consists of the company 's $ 67,300 a-note and a subordinate $ 20,000 b-note . the company will have the option , but not the obligation , to participate in the development financing for the property . the a-note has an 18-month term and one six-month extension option and a loan-to-cost of approximately 58 % . the a-note loan was underwritten to generate a levered irr of approximately 25 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 58,000 floating rate first mortgage loan secured by a 330-unit , eight building apartment community and 36 single-family rental homes located in williston , north dakota . williston is located at the epicenter of oil drilling activity for the bakken formation and the property is part of a master-developed residential community . the first mortgage loan has a three-year term with two one-year extension options and an appraised ltv of 73 % . the first mortgage has been underwritten to generate a levered irr of approximately 13 % . see “ — investments ” above for a discussion of how irr is calculated . during november 2014 , the company closed a $ 50,000 participating first mortgage loan secured by a portfolio of 24 condominiums located in new york city and maui , hawaii owned by a luxury destination club . earlier in the year , the company provided a $ 210,000 first mortgage loan to the same borrower , secured by an additional portfolio of single-family and condominium destination homes located throughout north america , central america , england and the caribbean . the fixed-rate , participating first mortgage loan has a five-year term with two one-year extension options and an appraised ltv of 75 % . the first mortgage loan was underwritten to generate an irr of approximately 8 % on an unlevered basis . the company anticipates financing the loan , and on a levered basis , the loan was underwritten to generate an irr of approximately 15 % . see “ — investments ” above for a discussion of how irr is calculated . subordinate loans . during april 2014 , the company closed a $ 53,954 ( £32,100 ) fixed-rate , nine-month mezzanine loan in connection with the purchase of an existing commercial building that is expected to be re-developed into a 173,000 salable square foot residential condominium in central london . the mezzanine loan is part of a $ 126,060 ( £75,000 ) pre-development loan comprised of a $ 72,106 ( £42,900 ) first mortgage and the company 's $ 53,954 ( £32,100 ) mezzanine loan . the company will have the
| cash generated from operations cash from operations is generally comprised of interest income from the company 's investments , net of any associated financing expense , principal repayments from the company 's investments , net of associated financing repayments , proceeds from the sale of investments , and changes in working capital balances . see “ - results of operations – investments '' for a summary of interest rates and weighted average lives related to the company 's investment portfolio as of december 31 , 2015 . 50 while there are no contractual paydowns related to the company 's cmbs , periodic paydowns do occur . repayments on the debt secured by the company 's cmbs occur in conjunction with the paydowns on the collateral pledged . borrowings under various financing arrangements jpmorgan facility in january 2010 , the company , through two indirect wholly owned subsidiaries , entered into the jpmorgan facility , which as amended in 2015 , currently provides for a maximum aggregate purchase price of $ 600,000 and a three-year term expiring in january 2018 plus a one-year extension option , exercisable at the option of the company subject to certain conditions and the payment of a fee , for the purchase , sale and repurchase of eligible senior commercial or multifamily mortgage loans , junior commercial or multifamily mortgage loans , mezzanine loans and participation interests therein that are secured by properties located in the united states , england or wales . amounts borrowed under the jpmorgan facility bear interest at spreads ranging from 2.25 % to 4.75 % over one-month libor . maximum advance rates under the jpmorgan facility range from 25 % to 80 % on the estimated fair value of the pledged collateral depending on its ltv .
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accordingly , our success depends not only on the development , but also on our ability to finance the development , of these products . we will require substantial additional funding to complete development and seek regulatory approval for these products . additionally , we 59 index to financial statements currently have no sales , marketing or distribution capabilities and thus our ability to market our products in the future will depend in part on our ability to develop such capabilities either alone or with collaboration partners . in november 2014 , we entered into a collaboration and license agreement with eli lilly and company , or lilly , to develop one or more zp-pth microneedle patch products , with the initial product candidate being daily zp-pth , a daily administration of zp-pth . under the terms of the agreement , we granted to lilly an exclusive , worldwide license to commercialize zp-pth in all dosing frequencies , including daily zp-pth . on september 28 , 2015 , we terminated the collaboration agreement in accordance with its terms following our determination that it is commercially unreasonable to pursue one of the critical success factors under the collaboration agreement , relating to worldwide regulatory approval of daily zp-pth by 2019. as a result of the termination of the collaboration agreement , the exclusive , worldwide license that we granted to lilly terminated and reverted to us , and we will no longer be eligible to receive any milestone or other payments from lilly . in january 2014 , we entered into an agreement with novo nordisk a/s , or novo nordisk , to develop a new transdermal formulation of semaglutide , an investigational proprietary human glp-1 ( glucagon-like peptide-1 ) analogue , to be administered once a week using our microneedle patch system for the treatment of type 2 diabetes . in july 2015 , we announced that novo nordisk a/s , or novo nordisk , has notified us of its intention to discontinue the collaboration . we were notified that novo nordisk 's decision was related to a strategic prioritization of novo nordisk 's research portfolio despite continued progress during the collaboration period . upon the termination of the collaboration agreement , which became effective on october 27 , 2015 , all technology rights licensed to novo nordisk related to the field of glp-1 products reverted to us . we received a non-refundable upfront payment of $ 1 million upon entering into the collaboration agreement in january 2014. we will no longer be eligible to receive any milestone or other payments from novo nordisk . for the immediate future , our efforts and resources will be focused primarily on advancing our product candidate zp-triptan through clinical development , and raising capital to continue our clinical and commercial success . in addition to developing our own product candidate zp-triptan , we are actively seeking opportunities to evaluate collaboration with strategic partners to further the clinical and commercial development of our other product candidates . we also intend to selectively collaborate with other biopharmaceutical companies to explore other therapeutic uses for our microneedle patch system . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements , which have been prepared in accordance with united states generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported revenue generated and expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results could differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k , we believe that the accounting policies discussed below are those that are most critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . we are an emerging growth company as defined in the jumpstart our business startups act of 2012 , or the jobs act . emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies . we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards , and , therefore , will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies . 60 index to financial statements revenue recognition to date , we have not generated any revenue from product sales and do not expect to do so until one of our product candidates receives approval from the fda . the only revenue we have generated to date has been revenue generated from collaboration and license agreements for the development of our technology for proposed indications utilizing our microneedle patch system . collaboration and license agreements may include non-refundable upfront payments , partial or complete reimbursement of research and development costs , contingent payments based on the occurrence of specified events under our collaboration arrangements and royalties on sales of product candidates if they are successfully approved and commercialized . our performance obligations under the collaborations may include the transfer or license of intellectual property rights , provision of research and development services and related materials , and participation on development and or commercialization committees with the collaboration partners . story_separator_special_tag there was no cost of license fees revenue for the year ended december 31 , 2015. cost of license fee revenue for the year ended december 31 , 2014 was $ 0.1 million due to the royalty payment to alza attributable to our receipt of a $ 1.0 million license fee from novo nordisk upon execution of the collaboration and license agreement in january 2014. research and development expenses year ended december 31 , change 2015 2014 amount % ( in thousands ) research and development $ 20,366 $ 10,953 $ 9,413 86 % research and development expenses increased $ 9.4 million , or 86 % for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014. of this increase , $ 5.8 million was due to daily zp-pth phase 3 gmp manufacturing preparation and patient preference study conducted in connection with our then collaboration with lilly , $ 3.1 million was due to zp-triptan phase 1 clinical trial and related preclinical toxicology studies , $ 2.3 million was due to zp-glucagon phase 2 clinical trial , partially offset by a $ 0.6 million reduction in spending on our weekly zp-pth program and a $ 1.2 million reduction in spending on our other research and development projects . for the immediate future , our research and development efforts and resources will be focused primarily on advancing our product candidate zp-triptan through clinical development . while we are planning to pursue clinical development of our zp-triptan product candidate to a meaningful milestone , we remain open to opportunities with potential strategic partners to ensure our product candidate will receive the best chance of commercial success . we are actively seeking opportunities to evaluate collaborations with strategic partners to further the clinical and commercial development of our other product candidates . 67 index to financial statements general and administrative expenses year ended december 31 , change 2015 2014 amount % ( in thousands ) general and administrative $ 6,315 $ 4,420 $ 1,895 43 % general and administrative expenses increased $ 1.9 million , or 43 % , for the year ended december 31 , 2015 as compared to the same period in 2014. the increase was primarily due to approximately $ 1.2 million related to compliance , infrastructure and insurance expenses to support our operations as a public company and $ 0.7 million related to additional general and administrative personnel costs in support of our expanded research and development operations . other expenses replace_table_token_8_th interest expense , net , decreased $ 0.3 million for the year ended december 31 , 2015 as compared to the same period in 2014. the decrease in interest expense was primarily due to savings from the restructuring of our term loan with hercules in june 2015 at a lower interest rate . for the year ended december 31 , 2015 , we recorded other expense of approximately $ 97,000 as compared to other expense of approximately $ 93,000 for the same period in 2014. other expense for the year ended december 31 , 2015 consisted of an impairment charge on our long-term investment in zosano , inc. , a public shell corporation , partially offset by income related to the recovery of prior year property damage claim received from an insurance company . other expense for the year ended december 31 , 2014 was primarily related to the fair value of the 31,250 shares of common stock that we issued to bmv direct sotrs lp in june 2014 as an inducement for its subordination of the bmr note to the hercules term loan . warrant revaluation income or expense resulted from the re-measurement of our common stock warrant liability issued in connection with the hercules term loan . we record changes to the fair value of the common stock warrants as income or loss at each balance sheet date until they are exercised , reclassified , expired or converted into shares of our common stock . warrant revaluation income/expense changed by $ 0.2 million as a result of changes in fair value of our common stock . the gain on debt forgiveness of $ 0.5 million in 2014 was due to a one-time transaction in march 2014 resulting from the cancellation of zp group llc 's revolving line of credit with asahi kasei pharma usa , pursuant to the provisions of our joint venture termination agreement with asahi . loss on debt extinguishment was related to the restructuring and consolidation of our outstanding debt in june 2015. the amended hercules term loan has substantially different terms than the original loan and the original debt was considered extinguished . we accounted for the extinguishment based on the relative fair value of the loan and recorded a loss on debt extinguishment of $ 0.4 million in 2015 . 68 index to financial statements income taxes as of december 31 , 2015 , we had net deferred tax assets of $ 75.8 million . the deferred tax assets primarily consisted of federal and state tax net operating losses and research and development tax credit carryforwards . due to uncertainties surrounding our ability to generate future taxable income to realize these tax assets , a full valuation allowance has been established to offset our deferred tax assets . as of december 31 , 2015 , we had federal net operating loss carryforwards of approximately $ 172.7 million and state net operating loss carryforwards of approximately $ 169.6 million . if not utilized , the federal net operating loss carryforwards will begin to expire in 2026 and state net operating loss carryforwards will begin to expire in 2016. utilization of net operating loss carryforward may also be subject to an annual limitation due to the ownership change limitations . these annual limitations may result in the expiration of the net operating loss carryforwards before utilization . we have not performed an analysis under internal revenue code section 382 to determine whether our net operating
| cash generated from operations cash from operations is generally comprised of interest income from the company 's investments , net of any associated financing expense , principal repayments from the company 's investments , net of associated financing repayments , proceeds from the sale of investments , and changes in working capital balances . see “ - results of operations – investments '' for a summary of interest rates and weighted average lives related to the company 's investment portfolio as of december 31 , 2015 . 50 while there are no contractual paydowns related to the company 's cmbs , periodic paydowns do occur . repayments on the debt secured by the company 's cmbs occur in conjunction with the paydowns on the collateral pledged . borrowings under various financing arrangements jpmorgan facility in january 2010 , the company , through two indirect wholly owned subsidiaries , entered into the jpmorgan facility , which as amended in 2015 , currently provides for a maximum aggregate purchase price of $ 600,000 and a three-year term expiring in january 2018 plus a one-year extension option , exercisable at the option of the company subject to certain conditions and the payment of a fee , for the purchase , sale and repurchase of eligible senior commercial or multifamily mortgage loans , junior commercial or multifamily mortgage loans , mezzanine loans and participation interests therein that are secured by properties located in the united states , england or wales . amounts borrowed under the jpmorgan facility bear interest at spreads ranging from 2.25 % to 4.75 % over one-month libor . maximum advance rates under the jpmorgan facility range from 25 % to 80 % on the estimated fair value of the pledged collateral depending on its ltv .
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accordingly , our success depends not only on the development , but also on our ability to finance the development , of these products . we will require substantial additional funding to complete development and seek regulatory approval for these products . additionally , we 59 index to financial statements currently have no sales , marketing or distribution capabilities and thus our ability to market our products in the future will depend in part on our ability to develop such capabilities either alone or with collaboration partners . in november 2014 , we entered into a collaboration and license agreement with eli lilly and company , or lilly , to develop one or more zp-pth microneedle patch products , with the initial product candidate being daily zp-pth , a daily administration of zp-pth . under the terms of the agreement , we granted to lilly an exclusive , worldwide license to commercialize zp-pth in all dosing frequencies , including daily zp-pth . on september 28 , 2015 , we terminated the collaboration agreement in accordance with its terms following our determination that it is commercially unreasonable to pursue one of the critical success factors under the collaboration agreement , relating to worldwide regulatory approval of daily zp-pth by 2019. as a result of the termination of the collaboration agreement , the exclusive , worldwide license that we granted to lilly terminated and reverted to us , and we will no longer be eligible to receive any milestone or other payments from lilly . in january 2014 , we entered into an agreement with novo nordisk a/s , or novo nordisk , to develop a new transdermal formulation of semaglutide , an investigational proprietary human glp-1 ( glucagon-like peptide-1 ) analogue , to be administered once a week using our microneedle patch system for the treatment of type 2 diabetes . in july 2015 , we announced that novo nordisk a/s , or novo nordisk , has notified us of its intention to discontinue the collaboration . we were notified that novo nordisk 's decision was related to a strategic prioritization of novo nordisk 's research portfolio despite continued progress during the collaboration period . upon the termination of the collaboration agreement , which became effective on october 27 , 2015 , all technology rights licensed to novo nordisk related to the field of glp-1 products reverted to us . we received a non-refundable upfront payment of $ 1 million upon entering into the collaboration agreement in january 2014. we will no longer be eligible to receive any milestone or other payments from novo nordisk . for the immediate future , our efforts and resources will be focused primarily on advancing our product candidate zp-triptan through clinical development , and raising capital to continue our clinical and commercial success . in addition to developing our own product candidate zp-triptan , we are actively seeking opportunities to evaluate collaboration with strategic partners to further the clinical and commercial development of our other product candidates . we also intend to selectively collaborate with other biopharmaceutical companies to explore other therapeutic uses for our microneedle patch system . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements , which have been prepared in accordance with united states generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported revenue generated and expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results could differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k , we believe that the accounting policies discussed below are those that are most critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . we are an emerging growth company as defined in the jumpstart our business startups act of 2012 , or the jobs act . emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies . we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards , and , therefore , will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies . 60 index to financial statements revenue recognition to date , we have not generated any revenue from product sales and do not expect to do so until one of our product candidates receives approval from the fda . the only revenue we have generated to date has been revenue generated from collaboration and license agreements for the development of our technology for proposed indications utilizing our microneedle patch system . collaboration and license agreements may include non-refundable upfront payments , partial or complete reimbursement of research and development costs , contingent payments based on the occurrence of specified events under our collaboration arrangements and royalties on sales of product candidates if they are successfully approved and commercialized . our performance obligations under the collaborations may include the transfer or license of intellectual property rights , provision of research and development services and related materials , and participation on development and or commercialization committees with the collaboration partners . story_separator_special_tag there was no cost of license fees revenue for the year ended december 31 , 2015. cost of license fee revenue for the year ended december 31 , 2014 was $ 0.1 million due to the royalty payment to alza attributable to our receipt of a $ 1.0 million license fee from novo nordisk upon execution of the collaboration and license agreement in january 2014. research and development expenses year ended december 31 , change 2015 2014 amount % ( in thousands ) research and development $ 20,366 $ 10,953 $ 9,413 86 % research and development expenses increased $ 9.4 million , or 86 % for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014. of this increase , $ 5.8 million was due to daily zp-pth phase 3 gmp manufacturing preparation and patient preference study conducted in connection with our then collaboration with lilly , $ 3.1 million was due to zp-triptan phase 1 clinical trial and related preclinical toxicology studies , $ 2.3 million was due to zp-glucagon phase 2 clinical trial , partially offset by a $ 0.6 million reduction in spending on our weekly zp-pth program and a $ 1.2 million reduction in spending on our other research and development projects . for the immediate future , our research and development efforts and resources will be focused primarily on advancing our product candidate zp-triptan through clinical development . while we are planning to pursue clinical development of our zp-triptan product candidate to a meaningful milestone , we remain open to opportunities with potential strategic partners to ensure our product candidate will receive the best chance of commercial success . we are actively seeking opportunities to evaluate collaborations with strategic partners to further the clinical and commercial development of our other product candidates . 67 index to financial statements general and administrative expenses year ended december 31 , change 2015 2014 amount % ( in thousands ) general and administrative $ 6,315 $ 4,420 $ 1,895 43 % general and administrative expenses increased $ 1.9 million , or 43 % , for the year ended december 31 , 2015 as compared to the same period in 2014. the increase was primarily due to approximately $ 1.2 million related to compliance , infrastructure and insurance expenses to support our operations as a public company and $ 0.7 million related to additional general and administrative personnel costs in support of our expanded research and development operations . other expenses replace_table_token_8_th interest expense , net , decreased $ 0.3 million for the year ended december 31 , 2015 as compared to the same period in 2014. the decrease in interest expense was primarily due to savings from the restructuring of our term loan with hercules in june 2015 at a lower interest rate . for the year ended december 31 , 2015 , we recorded other expense of approximately $ 97,000 as compared to other expense of approximately $ 93,000 for the same period in 2014. other expense for the year ended december 31 , 2015 consisted of an impairment charge on our long-term investment in zosano , inc. , a public shell corporation , partially offset by income related to the recovery of prior year property damage claim received from an insurance company . other expense for the year ended december 31 , 2014 was primarily related to the fair value of the 31,250 shares of common stock that we issued to bmv direct sotrs lp in june 2014 as an inducement for its subordination of the bmr note to the hercules term loan . warrant revaluation income or expense resulted from the re-measurement of our common stock warrant liability issued in connection with the hercules term loan . we record changes to the fair value of the common stock warrants as income or loss at each balance sheet date until they are exercised , reclassified , expired or converted into shares of our common stock . warrant revaluation income/expense changed by $ 0.2 million as a result of changes in fair value of our common stock . the gain on debt forgiveness of $ 0.5 million in 2014 was due to a one-time transaction in march 2014 resulting from the cancellation of zp group llc 's revolving line of credit with asahi kasei pharma usa , pursuant to the provisions of our joint venture termination agreement with asahi . loss on debt extinguishment was related to the restructuring and consolidation of our outstanding debt in june 2015. the amended hercules term loan has substantially different terms than the original loan and the original debt was considered extinguished . we accounted for the extinguishment based on the relative fair value of the loan and recorded a loss on debt extinguishment of $ 0.4 million in 2015 . 68 index to financial statements income taxes as of december 31 , 2015 , we had net deferred tax assets of $ 75.8 million . the deferred tax assets primarily consisted of federal and state tax net operating losses and research and development tax credit carryforwards . due to uncertainties surrounding our ability to generate future taxable income to realize these tax assets , a full valuation allowance has been established to offset our deferred tax assets . as of december 31 , 2015 , we had federal net operating loss carryforwards of approximately $ 172.7 million and state net operating loss carryforwards of approximately $ 169.6 million . if not utilized , the federal net operating loss carryforwards will begin to expire in 2026 and state net operating loss carryforwards will begin to expire in 2016. utilization of net operating loss carryforward may also be subject to an annual limitation due to the ownership change limitations . these annual limitations may result in the expiration of the net operating loss carryforwards before utilization . we have not performed an analysis under internal revenue code section 382 to determine whether our net operating
| debt financing we have funded , and will continue to fund , our operations in part through debt financing . during 2014 , we funded our operations predominantly through debt arrangements with certain related parties and with hercules technology growth capital , or hercules . in february 2014 , we sold $ 2.5 million of convertible promissory notes and in december 2014 , we sold an additional $ 1.3 million of convertible promissory notes to related parties participating in the debt financing . the convertible promissory notes were unsecured , subordinated notes and accrued simple interest at the rate of 8 % per annum . the principal and all unpaid and accrued interest on each of the convertible promissory notes automatically converted into shares of our common stock upon the closing of our initial public offering on january 30 , 2015 , at a conversion price equal to $ 9.35 per share ( or 85 % of our initial public offering price of $ 11.00 per share ) . in june 2014 , we entered into a $ 4 million term loan facility with hercules . in june 2015 , we entered into a first amendment to the loan and security agreement with hercules to increase the aggregate principal amount of the loan to $ 15.0 million ( the hercules term loan ) . upon the execution of the first amendment to the loan and security agreement , we used approximately $ 11.4 million of the hercules term loan to prepay all amounts owing under the secured promissory note held by bmv direct sotrs lp , an affiliate of biomed realty holdings , inc. the first amendment to the loan and security agreement with hercules provides that the $ 15.0 million principal balance will be subject to a 12-month interest-only period beginning july 1 , 2015 , followed by equal monthly installment payments of principal and interest , with all outstanding amounts due and payable on december 1 , 2018. the outstanding principal balance bears interest at a variable rate of the greater of ( i ) 7.95 % , or ( ii ) 7.95 % plus the prime rate as quoted in the wall street journal minus 5.25
| 1 |
cb-839 inhibits glutaminase , an enzyme required by cancer cells to utilize glutamine effectively . we are currently conducting three phase 1 clinical trials of cb-839 in the united states in patients with solid tumors , leukemias , lymphomas and multiple myeloma . the purpose of these trials is to evaluate the safety of cb-839 both as a single agent and in combination with approved therapies and to seek preliminary evidence of efficacy . pending input from the fda on the results of our phase 1 trials and phase 2 trial protocols , we plan to initiate one or more phase 2 clinical trials of cb-839 in 2016. we currently hold all commercial rights to cb-839 . our second program in tumor metabolism is focused on the hexokinase ii enzyme . a defining characteristic of most cancer cells is their increased uptake of glucose . cancer cells use glucose in a different manner than normal cells , but an obligate first step in all glucose utilizing pathways is phosphorylation of glucose by the enzyme hexokinase . due to their higher glucose needs , cancer cells frequently increase the level of this critical enzyme , specifically the isoform hexokinase ii . we believe inhibitors of hexokinase ii will significantly impede the ability of cancer cells to survive and proliferate and may lead to new approaches in treating cancer . our new program in hexokinase ii inhibitors was in-licensed from transtech pharma and we seek to identify and advance a drug candidate into clinical development as quickly as possible . we will provide additional details on our development plans and timelines in the near future as we undertake pre-clinical studies to profile our portfolio of hexokinase ii inhibitors . the field of tumor immunology seeks to activate the body 's own immune system to attack and kill cancer cells . our preclinical program in tumor immunology is focused on developing selective inhibitors of the enzyme arginase . arginase depletes arginine , a nutrient that is critical for the activation , growth and survival of the body 's cancer-fighting immune cells . we believe that inhibitors of arginase can promote an anti-tumor immune response by restoring arginine levels , thereby allowing activation of the body 's cancer-fighting immune cells . we are currently optimizing arginase inhibitors with the aim of submitting an ind application to the fda in early 2016. since our inception in 2010 , we have devoted substantially all of our resources to identifying and developing cb-839 , advancing our preclinical programs , conducting clinical trials and providing general and administrative support for these operations . we have not recorded revenue from product sales , collaboration activities or any other source . we have funded our operations to date primarily from the issuance and sale of convertible preferred stock and the initial public offering , or ipo , of our common stock that occurred in october 2014. in connection with the ipo , we sold 8,000,000 shares of common stock for proceeds of $ 71.6 million net of underwriting discounts and commissions and offering expenses . we have never been profitable and have incurred net losses in each year since inception . our net losses were $ 21.7 million , $ 12.4 million and $ 8.0 million for 2014 , 2013 and 2012. as of december 31 , 2014 we had an accumulated deficit of $ 51.9 million . substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations . 49 we expect to continue to incur significant expenses and increasing operating losses over at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities , as we : · advance product candidates through clinical trials ; · pursue regulatory approval of product candidates ; · operate as a public company ; · continue our preclinical programs and clinical development efforts ; · continue research activities for the discovery of new product candidates ; and · manufacture supplies for our preclinical studies and clinical trials . critical accounting polices and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with united states generally accepted accounting principles , or u.s. gaap . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . accrued research and development costs we record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers , which include the conduct of preclinical studies and clinical trials and contract manufacturing activities . we record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced , and include these costs in accrued liabilities in the balance sheet and within research and development expense in the statement of operations and comprehensive loss . story_separator_special_tag research and development research and development expenses increased $ 3.3 million , or 51 % , from $ 6.6 million for 2012 to $ 9.9 million for 2013. the increase was due to an increase of $ 2.1 million in external costs related to cb-839 development activities and manufacturing to support our phase 1 clinical trials , an increase of $ 0.7 million in connection with start-up activities to support our cb-839 phase 1 clinical trials , an increase of $ 0.5 million in personnel-related costs as a result of increased headcount and an increase of $ 0.2 million in professional services costs . these increases were partially offset by a decrease of $ 0.4 million in laboratory supplies costs . general and administrative general and administrative expenses increased $ 1.1 million , or 75 % , from $ 1.4 million for 2012 , to $ 2.5 million for 2013. the increase was due to an increase of $ 0.9 million in professional consulting expenses in connection with our market evaluation of cb-839 , our evaluation of potential partnership opportunities and accounting services . in addition , facility-related costs increased by $ 0.1 million due to our office expansion in the second half of 2013. liquidity and capital resources as of december 31 , 2014 , we had cash and cash equivalents totaling $ 102.0 million . in connection with our ipo that closed in october 2014 , we received cash proceeds of $ 71.6 million , net of underwriters ' discounts and commissions and expenses paid by us . prior to the ipo , our operations have been financed primarily by net proceeds from the sale of shares of our preferred stock . 53 our primary uses of cash are to fund operating expenses , primarily research and development expenditures . cash used to fund operating expenses is impacted by the timing of when we pay these expenses , as reflected in the change in our outstanding accounts payable and accrued expenses . we believe that our existing cash and cash equivalents as of december 31 , 2014 will be sufficient for us to meet our current operating plan for at least the next twelve months . however , our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties , and actual results could vary materially . in order to complete the process of obtaining regulatory approval for our product candidates and to build the sales , marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates , if approved , we will require substantial additional funding . we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect . because of the numerous risks and uncertainties associated with research , development and commercialization of pharmaceutical products , we are unable to estimate the exact amount of our operating capital requirements . our future funding requirements will depend on many factors , including , but not limited to : the timing and costs of our planned clinical trials for our product candidates ; the timing and costs of our planned preclinical studies of our product candidates ; our success in establishing and scaling commercial manufacturing capabilities ; the number and characteristics of product candidates that we pursue ; the outcome , timing and costs of seeking regulatory approvals ; subject to receipt of regulatory approval , revenue received from commercial sales of our product candidates ; the terms and timing of any future collaborations , licensing , consulting or other arrangements that we may establish ; the amount and timing of any payments we may be required to make in connection with the licensing , filing , prosecution , maintenance , defense and enforcement of any patents or patent applications or other intellectual property rights ; and the extent to which we in-license or acquire other products and technologies . we plan to continue to fund our operations and capital funding needs through equity and or debt financing . we may also consider collaborations or selectively partnering for clinical development and commercialization . the sale of additional equity would result in additional dilution to our stockholders . the incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations . if we are not able to secure adequate additional funding we may be forced to make reductions in spending , extend payment terms with suppliers , liquidate assets where possible , and or suspend or curtail planned programs . any of these actions could harm our business , results of operations and future prospects . the following table summarizes our cash flows for the periods indicated : replace_table_token_7_th story_separator_special_tag style= `` margin-top:6pt ; margin-bottom:0pt ; text-indent:4.54 % ; font-family : times new roman ; font-size:10pt ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; `` > we are an “ emerging growth company , ” as defined in the jobs act . under the jobs act , emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the jobs act until such time as those standards apply to private companies . we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards , and , therefore , will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies . 55 recent accounting pronouncements in june 2014 , the financial accounting standards board , or fasb issued asu 2014-10 , development stage entities ( topic 915 ) : elimination of certain financial reporting requirements , including an amendment to
| debt financing we have funded , and will continue to fund , our operations in part through debt financing . during 2014 , we funded our operations predominantly through debt arrangements with certain related parties and with hercules technology growth capital , or hercules . in february 2014 , we sold $ 2.5 million of convertible promissory notes and in december 2014 , we sold an additional $ 1.3 million of convertible promissory notes to related parties participating in the debt financing . the convertible promissory notes were unsecured , subordinated notes and accrued simple interest at the rate of 8 % per annum . the principal and all unpaid and accrued interest on each of the convertible promissory notes automatically converted into shares of our common stock upon the closing of our initial public offering on january 30 , 2015 , at a conversion price equal to $ 9.35 per share ( or 85 % of our initial public offering price of $ 11.00 per share ) . in june 2014 , we entered into a $ 4 million term loan facility with hercules . in june 2015 , we entered into a first amendment to the loan and security agreement with hercules to increase the aggregate principal amount of the loan to $ 15.0 million ( the hercules term loan ) . upon the execution of the first amendment to the loan and security agreement , we used approximately $ 11.4 million of the hercules term loan to prepay all amounts owing under the secured promissory note held by bmv direct sotrs lp , an affiliate of biomed realty holdings , inc. the first amendment to the loan and security agreement with hercules provides that the $ 15.0 million principal balance will be subject to a 12-month interest-only period beginning july 1 , 2015 , followed by equal monthly installment payments of principal and interest , with all outstanding amounts due and payable on december 1 , 2018. the outstanding principal balance bears interest at a variable rate of the greater of ( i ) 7.95 % , or ( ii ) 7.95 % plus the prime rate as quoted in the wall street journal minus 5.25
| 0 |
cb-839 inhibits glutaminase , an enzyme required by cancer cells to utilize glutamine effectively . we are currently conducting three phase 1 clinical trials of cb-839 in the united states in patients with solid tumors , leukemias , lymphomas and multiple myeloma . the purpose of these trials is to evaluate the safety of cb-839 both as a single agent and in combination with approved therapies and to seek preliminary evidence of efficacy . pending input from the fda on the results of our phase 1 trials and phase 2 trial protocols , we plan to initiate one or more phase 2 clinical trials of cb-839 in 2016. we currently hold all commercial rights to cb-839 . our second program in tumor metabolism is focused on the hexokinase ii enzyme . a defining characteristic of most cancer cells is their increased uptake of glucose . cancer cells use glucose in a different manner than normal cells , but an obligate first step in all glucose utilizing pathways is phosphorylation of glucose by the enzyme hexokinase . due to their higher glucose needs , cancer cells frequently increase the level of this critical enzyme , specifically the isoform hexokinase ii . we believe inhibitors of hexokinase ii will significantly impede the ability of cancer cells to survive and proliferate and may lead to new approaches in treating cancer . our new program in hexokinase ii inhibitors was in-licensed from transtech pharma and we seek to identify and advance a drug candidate into clinical development as quickly as possible . we will provide additional details on our development plans and timelines in the near future as we undertake pre-clinical studies to profile our portfolio of hexokinase ii inhibitors . the field of tumor immunology seeks to activate the body 's own immune system to attack and kill cancer cells . our preclinical program in tumor immunology is focused on developing selective inhibitors of the enzyme arginase . arginase depletes arginine , a nutrient that is critical for the activation , growth and survival of the body 's cancer-fighting immune cells . we believe that inhibitors of arginase can promote an anti-tumor immune response by restoring arginine levels , thereby allowing activation of the body 's cancer-fighting immune cells . we are currently optimizing arginase inhibitors with the aim of submitting an ind application to the fda in early 2016. since our inception in 2010 , we have devoted substantially all of our resources to identifying and developing cb-839 , advancing our preclinical programs , conducting clinical trials and providing general and administrative support for these operations . we have not recorded revenue from product sales , collaboration activities or any other source . we have funded our operations to date primarily from the issuance and sale of convertible preferred stock and the initial public offering , or ipo , of our common stock that occurred in october 2014. in connection with the ipo , we sold 8,000,000 shares of common stock for proceeds of $ 71.6 million net of underwriting discounts and commissions and offering expenses . we have never been profitable and have incurred net losses in each year since inception . our net losses were $ 21.7 million , $ 12.4 million and $ 8.0 million for 2014 , 2013 and 2012. as of december 31 , 2014 we had an accumulated deficit of $ 51.9 million . substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations . 49 we expect to continue to incur significant expenses and increasing operating losses over at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities , as we : · advance product candidates through clinical trials ; · pursue regulatory approval of product candidates ; · operate as a public company ; · continue our preclinical programs and clinical development efforts ; · continue research activities for the discovery of new product candidates ; and · manufacture supplies for our preclinical studies and clinical trials . critical accounting polices and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with united states generally accepted accounting principles , or u.s. gaap . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . accrued research and development costs we record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers , which include the conduct of preclinical studies and clinical trials and contract manufacturing activities . we record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced , and include these costs in accrued liabilities in the balance sheet and within research and development expense in the statement of operations and comprehensive loss . story_separator_special_tag research and development research and development expenses increased $ 3.3 million , or 51 % , from $ 6.6 million for 2012 to $ 9.9 million for 2013. the increase was due to an increase of $ 2.1 million in external costs related to cb-839 development activities and manufacturing to support our phase 1 clinical trials , an increase of $ 0.7 million in connection with start-up activities to support our cb-839 phase 1 clinical trials , an increase of $ 0.5 million in personnel-related costs as a result of increased headcount and an increase of $ 0.2 million in professional services costs . these increases were partially offset by a decrease of $ 0.4 million in laboratory supplies costs . general and administrative general and administrative expenses increased $ 1.1 million , or 75 % , from $ 1.4 million for 2012 , to $ 2.5 million for 2013. the increase was due to an increase of $ 0.9 million in professional consulting expenses in connection with our market evaluation of cb-839 , our evaluation of potential partnership opportunities and accounting services . in addition , facility-related costs increased by $ 0.1 million due to our office expansion in the second half of 2013. liquidity and capital resources as of december 31 , 2014 , we had cash and cash equivalents totaling $ 102.0 million . in connection with our ipo that closed in october 2014 , we received cash proceeds of $ 71.6 million , net of underwriters ' discounts and commissions and expenses paid by us . prior to the ipo , our operations have been financed primarily by net proceeds from the sale of shares of our preferred stock . 53 our primary uses of cash are to fund operating expenses , primarily research and development expenditures . cash used to fund operating expenses is impacted by the timing of when we pay these expenses , as reflected in the change in our outstanding accounts payable and accrued expenses . we believe that our existing cash and cash equivalents as of december 31 , 2014 will be sufficient for us to meet our current operating plan for at least the next twelve months . however , our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties , and actual results could vary materially . in order to complete the process of obtaining regulatory approval for our product candidates and to build the sales , marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates , if approved , we will require substantial additional funding . we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect . because of the numerous risks and uncertainties associated with research , development and commercialization of pharmaceutical products , we are unable to estimate the exact amount of our operating capital requirements . our future funding requirements will depend on many factors , including , but not limited to : the timing and costs of our planned clinical trials for our product candidates ; the timing and costs of our planned preclinical studies of our product candidates ; our success in establishing and scaling commercial manufacturing capabilities ; the number and characteristics of product candidates that we pursue ; the outcome , timing and costs of seeking regulatory approvals ; subject to receipt of regulatory approval , revenue received from commercial sales of our product candidates ; the terms and timing of any future collaborations , licensing , consulting or other arrangements that we may establish ; the amount and timing of any payments we may be required to make in connection with the licensing , filing , prosecution , maintenance , defense and enforcement of any patents or patent applications or other intellectual property rights ; and the extent to which we in-license or acquire other products and technologies . we plan to continue to fund our operations and capital funding needs through equity and or debt financing . we may also consider collaborations or selectively partnering for clinical development and commercialization . the sale of additional equity would result in additional dilution to our stockholders . the incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations . if we are not able to secure adequate additional funding we may be forced to make reductions in spending , extend payment terms with suppliers , liquidate assets where possible , and or suspend or curtail planned programs . any of these actions could harm our business , results of operations and future prospects . the following table summarizes our cash flows for the periods indicated : replace_table_token_7_th story_separator_special_tag style= `` margin-top:6pt ; margin-bottom:0pt ; text-indent:4.54 % ; font-family : times new roman ; font-size:10pt ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; `` > we are an “ emerging growth company , ” as defined in the jobs act . under the jobs act , emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the jobs act until such time as those standards apply to private companies . we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards , and , therefore , will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies . 55 recent accounting pronouncements in june 2014 , the financial accounting standards board , or fasb issued asu 2014-10 , development stage entities ( topic 915 ) : elimination of certain financial reporting requirements , including an amendment to
| cash flows from operating activities cash used in operating activities for the year ended december 31 , 2014 was $ 19.2 million , consisting of a net loss of $ 21.7 million , which was offset by non-cash charges $ 0.4 million for depreciation and amortization expense and $ 0.7 million for stock-based compensation . the change in our net operating assets and liabilities was primarily due to a $ 1.5 million increase in prepaid expenses and other current assets primarily related to our prepayment of clinical trial activities and directors and officers liability insurance , a $ 2.6 million increase in accounts payable and accrued liabilities related to an increase in our research and development activities , and a $ 0.4 million increase in deferred rent . cash used in operating activities for 2013 was $ 11.8 million , consisting of a net loss of $ 12.4 million , which was offset in part by non-cash charges of $ 0.3 million for depreciation and amortization expense and $ 70,000 for stock-based compensation . the change 54 in our net operating assets and liabilities was due to a $ 0.4 million increase in our accounts payable and accrued liabilities related to an increase in our research and development activities and an increase of $ 0.3 million in prepaid expenses and other current assets related to our prepayment for clinical trial activities .
| 1 |
except as otherwise required by the context , references in this annual report to : “ great american , ” “ the “ company , ” “ we , ” “ us ” or “ our ” refer to the combined business of great american group , inc. and all of its subsidiaries after giving effect to ( i ) the contribution to great american group , inc. of all of the membership interests of great american group , llc by the members of great american , which transaction is referred to herein as the “ contribution ” , and ( ii ) the merger of alternative asset management acquisition corp. ( “ aamac ” ) with and into its wholly-owned subsidiary , aamac merger sub , inc. , referred to herein as “ merger sub ” , in each case , which occurred on july 31 , 2009 , referred to herein as the “ merger ” . the contribution and merger are referred to herein collectively as the “ acquisition ” ; “ gag , llc ” refers to great american group , llc ; the “ great american members ” refers to the members of great american group , llc prior to the acquisition ; “ phantom equityholders ” refers to certain members of senior management of great american group , llc prior to the acquisition that were participants in a deferred compensation plan . 21 the acquisition on july 31 , 2009 , the company , gag , llc and aamac completed the acquisition . as a result of the acquisition , gag , llc and aamac became subsidiaries of the company . immediately following the consummation of the acquisition , the former shareholders of aamac had an approximate 63 % voting interest in the company and the great american members had an approximate 37 % voting interest in the company . we received net proceeds of $ 69.3 million from aamac as a result of the acquisition and issued 19,346,626 shares of our common stock to aamac shareholders . upon the closing of the acquisition , the great american members received 10,560,000 shares of our common stock and $ 82.4 million consisting of ( i ) cash distributions totaling $ 31.7 million from gag , llc and ( ii ) an aggregate of $ 50.7 million in unsecured subordinated promissory notes . unsecured subordinated promissory notes amounting to an aggregate of $ 9.3 million were issued to the phantom equityholders in settlement of accrued compensation payable pursuant to a deferred compensation plan . notes payable we have entered into multiple amendments to and waivers of our obligations under the unsecured subordinated promissory notes issued in connection with the acquisition . as a result of these amendments and waivers , in 2010 the interest rate was reduced to 3.75 % with respect to an aggregate of $ 52.4 million of the then-outstanding $ 55.6 million in promissory notes . in addition , the maturity date for the then-outstanding $ 47.0 million in notes payable to the great american members was extended to july 31 , 2018 , subject to annual prepayments based upon our cash flow , provided that we are not obligated to make such prepayments if our minimum adjusted cash balance is below $ 20.0 million . the 2010 amendments and waivers also permitted us to defer the payment of interest owed under $ 52.4 million of the notes until july 31 , 2011. effective july 31 , 2011 , we entered into individual amendments with the great american members that increased the principal amount of the promissory notes for the $ 1.8 million of accrued interest that was due to them on july 31 , 2011. the addition to the principal amount will accrue interest at the note rate of 3.75 % and continue to be subject to annual prepayments based upon our cash flow and the maintenance of a minimum adjusted cash balance as provided in the notes prior to the capitalization of the accrued interest . we are not required to make any principal prepayments under these notes for the fiscal years ended december 31 , 2010 and 2011. also effective july 31 , 2011 , we entered into agreements permitting us to defer payment of $ 1.4 million in interest owed to the phantom equityholders from july 31 , 2011 to the fourth quarter of 2011. as of december 31 , 2013 , there was $ 48.8 million in aggregate principal amount outstanding under the notes payable to the great american members and $ 1.7 million in aggregate principal amount outstanding under the notes payable to the phantom equityholders . of this amount , $ 49.8 million accrues interest at 3.75 % and $ 0.7 million accrues interest at 12.0 % . on january 31 , 2014 , the company paid in full the $ 0.7 million of principal balance for the notes to the phantom equityholders that had the 12.0 % interest rate . overview we are a leading provider of asset disposition , valuation and appraisal , and real estate consulting services to a wide range of retail , wholesale and industrial clients , as well as lenders , capital providers , private equity investors and professional service firms throughout the united states , canada and europe . we operate our business in two segments : auction and liquidation solutions and valuation and appraisal services . our auction and liquidation segment seeks to assist clients in maximizing return and recovery rates through the efficient disposition of assets and provide clients with capital advisory , financing and real estate services . such assets include multi-location retail inventory , wholesale inventory , trade fixtures , machinery and equipment , intellectual property and real property . our valuation and appraisal services segment provides our clients with independent appraisals in connection with asset-based loans , acquisitions , divestitures and other business needs . story_separator_special_tag the revenues from lending activities during year ended december 31 , 2012 included interest income and monitoring fees of $ 0.9 million and amortization of discount of $ 4.1 million on a loan receivable related to lending activities in the united kingdom . there were no lending activities in the united kingdom that generated financing revenues during the year ended december 31 , 2013. the decrease in services and fees revenue in the wholesale and industrial auction business was primarily due to a decrease in number of engagements during 2013 as compared to the same period in 2012. the decrease in revenues from our ga keen realty advisors division in 2013 was primarily due to a decrease in the number and size of real estate consulting engagements during 2013 as compared to the same period in 2012. revenues from services and fees during 2013 for retail liquidation engagements included revenues of $ 8.1 million from our participation in the joint venture involving the liquidation of inventory for the going-out-of-business sale of 568 stores of women 's clothing retailer fashion bug . the increase in revenues from our ga capital division was primarily due to an increase in fees earned on capital advisory engagements in 2013 as compared to the same period in 2012. revenues from the sale of goods increased $ 1.9 million , to $ 10.0 million during the year ended december 31 , 2013 , from $ 8.1 million during the year ended december 31 , 2012. in 2013 , revenues from sale of goods included $ 9.3 million of revenues related to the sale of four oil rigs in the third quarter of 2013 that was included in goods held for sale or auction at december 31 , 2012 as more fully discussed above and in note 2 to the consolidated financial statements . gross margin in the auction and liquidation segment for services and fees decreased to 65.7 % of revenues during the year ended december 31 , 2013 , as compared to 69.3 % of revenues during the year ended december 31 , 2012. the decrease in the gross margin during the year ended december 31 , 2013 was primarily due to an increase in revenues earned from lower-margin cost plus fee based liquidation engagements in 2013 as compared to higher margin liquidation engagements where we provided a minimum recovery value for goods sold at bankruptcy liquidation sales . we typically earn higher margins on these types of engagements where we provide a minimum recovery value for goods sold as compared to fee and commission engagements . gross margin from the sales of goods where we held title improved to 20.3 % during the year ended december 31 , 2013 as compared to a gross margin of 10.3 % during the year ended december 31 , 2012. the gross margin in 2013 was favorably impacted by the sale of four oil rigs under a sales-type lease . the gross margins from the sales of goods fluctuates widely from period to period based upon the volume and mix of goods that we take title to in our wholesale auction and liquidation business . these fluctuations make predictions regarding the expected trends in gross margin from the sales of goods inherently uncertain . 26 valuation and appraisal segment : replace_table_token_6_th revenues in the valuation and appraisal segment increased $ 2.1 million , or 8.1 % , to $ 27.6 million during the year ended december 31 , 2013 from $ 25.5 million during the year ended december 31 , 2012. the increase in revenues was primarily due to an increase in revenues of ( a ) $ 0.2 million related to appraisal engagements where we perform valuations for the monitoring of collateral for financial institutions , lenders , and private equity investors ; ( b ) $ 0.9 million for appraisals for machinery and equipment and intellectual property ; and ( c ) $ 1.0 million as a result of the expansion of the appraisal operations in the united kingdom . gross margins in the valuation and appraisal segment decreased to 52.7 % of revenues during the year ended december 31 , 2013 as compared to 54.6 % of revenues during the year ended december 31 , 2012. gross margins in 2013 were unfavorably impacted by an increase in headcount that resulted in an increase in salaries , wages and benefits in 2013 as compared to the same period in 2012. uk retail stores segment : replace_table_token_7_th revenues and cost of goods sold in the uk retail stores segment are from the operation of ten retail stores and internet operations of shoon in the united kingdom . revenues from the sale of retail goods from the shoon stores in 2013 included sales for seven months for the period from january 1 , 2013 through july 31 , 2013. in august 2013 , the shareholder agreement of shoon was amended and restated to eliminate our control rights which resulted in the deconsolidation of shoon . as such , the operating results of shoon are not consolidated with the company 's for any periods after july 31 , 2013. in 2012 , revenues from the sale of retail goods from the shoon included approximately eight months of sales for the period from may 4 , 2012 to december 31 , 2012 , as a result of our acquisition of shoon on may 4 , 2012. the decrease in revenues from the sale of retail goods is primarily due to fewer operating days of the shoon stores in 2013 as compared to the prior year . the decrease in revenues in 2013 was also due to an increase in promotions that resulted in a decrease in average selling prices as compared to the prior year . the decrease in average selling prices from the increase in promotions in 2013 resulted in a decrease in the gross margin to 42.5 % in 2013 , from the 46.4 % gross margin during
| cash flows from operating activities cash used in operating activities for the year ended december 31 , 2014 was $ 19.2 million , consisting of a net loss of $ 21.7 million , which was offset by non-cash charges $ 0.4 million for depreciation and amortization expense and $ 0.7 million for stock-based compensation . the change in our net operating assets and liabilities was primarily due to a $ 1.5 million increase in prepaid expenses and other current assets primarily related to our prepayment of clinical trial activities and directors and officers liability insurance , a $ 2.6 million increase in accounts payable and accrued liabilities related to an increase in our research and development activities , and a $ 0.4 million increase in deferred rent . cash used in operating activities for 2013 was $ 11.8 million , consisting of a net loss of $ 12.4 million , which was offset in part by non-cash charges of $ 0.3 million for depreciation and amortization expense and $ 70,000 for stock-based compensation . the change 54 in our net operating assets and liabilities was due to a $ 0.4 million increase in our accounts payable and accrued liabilities related to an increase in our research and development activities and an increase of $ 0.3 million in prepaid expenses and other current assets related to our prepayment for clinical trial activities .
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except as otherwise required by the context , references in this annual report to : “ great american , ” “ the “ company , ” “ we , ” “ us ” or “ our ” refer to the combined business of great american group , inc. and all of its subsidiaries after giving effect to ( i ) the contribution to great american group , inc. of all of the membership interests of great american group , llc by the members of great american , which transaction is referred to herein as the “ contribution ” , and ( ii ) the merger of alternative asset management acquisition corp. ( “ aamac ” ) with and into its wholly-owned subsidiary , aamac merger sub , inc. , referred to herein as “ merger sub ” , in each case , which occurred on july 31 , 2009 , referred to herein as the “ merger ” . the contribution and merger are referred to herein collectively as the “ acquisition ” ; “ gag , llc ” refers to great american group , llc ; the “ great american members ” refers to the members of great american group , llc prior to the acquisition ; “ phantom equityholders ” refers to certain members of senior management of great american group , llc prior to the acquisition that were participants in a deferred compensation plan . 21 the acquisition on july 31 , 2009 , the company , gag , llc and aamac completed the acquisition . as a result of the acquisition , gag , llc and aamac became subsidiaries of the company . immediately following the consummation of the acquisition , the former shareholders of aamac had an approximate 63 % voting interest in the company and the great american members had an approximate 37 % voting interest in the company . we received net proceeds of $ 69.3 million from aamac as a result of the acquisition and issued 19,346,626 shares of our common stock to aamac shareholders . upon the closing of the acquisition , the great american members received 10,560,000 shares of our common stock and $ 82.4 million consisting of ( i ) cash distributions totaling $ 31.7 million from gag , llc and ( ii ) an aggregate of $ 50.7 million in unsecured subordinated promissory notes . unsecured subordinated promissory notes amounting to an aggregate of $ 9.3 million were issued to the phantom equityholders in settlement of accrued compensation payable pursuant to a deferred compensation plan . notes payable we have entered into multiple amendments to and waivers of our obligations under the unsecured subordinated promissory notes issued in connection with the acquisition . as a result of these amendments and waivers , in 2010 the interest rate was reduced to 3.75 % with respect to an aggregate of $ 52.4 million of the then-outstanding $ 55.6 million in promissory notes . in addition , the maturity date for the then-outstanding $ 47.0 million in notes payable to the great american members was extended to july 31 , 2018 , subject to annual prepayments based upon our cash flow , provided that we are not obligated to make such prepayments if our minimum adjusted cash balance is below $ 20.0 million . the 2010 amendments and waivers also permitted us to defer the payment of interest owed under $ 52.4 million of the notes until july 31 , 2011. effective july 31 , 2011 , we entered into individual amendments with the great american members that increased the principal amount of the promissory notes for the $ 1.8 million of accrued interest that was due to them on july 31 , 2011. the addition to the principal amount will accrue interest at the note rate of 3.75 % and continue to be subject to annual prepayments based upon our cash flow and the maintenance of a minimum adjusted cash balance as provided in the notes prior to the capitalization of the accrued interest . we are not required to make any principal prepayments under these notes for the fiscal years ended december 31 , 2010 and 2011. also effective july 31 , 2011 , we entered into agreements permitting us to defer payment of $ 1.4 million in interest owed to the phantom equityholders from july 31 , 2011 to the fourth quarter of 2011. as of december 31 , 2013 , there was $ 48.8 million in aggregate principal amount outstanding under the notes payable to the great american members and $ 1.7 million in aggregate principal amount outstanding under the notes payable to the phantom equityholders . of this amount , $ 49.8 million accrues interest at 3.75 % and $ 0.7 million accrues interest at 12.0 % . on january 31 , 2014 , the company paid in full the $ 0.7 million of principal balance for the notes to the phantom equityholders that had the 12.0 % interest rate . overview we are a leading provider of asset disposition , valuation and appraisal , and real estate consulting services to a wide range of retail , wholesale and industrial clients , as well as lenders , capital providers , private equity investors and professional service firms throughout the united states , canada and europe . we operate our business in two segments : auction and liquidation solutions and valuation and appraisal services . our auction and liquidation segment seeks to assist clients in maximizing return and recovery rates through the efficient disposition of assets and provide clients with capital advisory , financing and real estate services . such assets include multi-location retail inventory , wholesale inventory , trade fixtures , machinery and equipment , intellectual property and real property . our valuation and appraisal services segment provides our clients with independent appraisals in connection with asset-based loans , acquisitions , divestitures and other business needs . story_separator_special_tag the revenues from lending activities during year ended december 31 , 2012 included interest income and monitoring fees of $ 0.9 million and amortization of discount of $ 4.1 million on a loan receivable related to lending activities in the united kingdom . there were no lending activities in the united kingdom that generated financing revenues during the year ended december 31 , 2013. the decrease in services and fees revenue in the wholesale and industrial auction business was primarily due to a decrease in number of engagements during 2013 as compared to the same period in 2012. the decrease in revenues from our ga keen realty advisors division in 2013 was primarily due to a decrease in the number and size of real estate consulting engagements during 2013 as compared to the same period in 2012. revenues from services and fees during 2013 for retail liquidation engagements included revenues of $ 8.1 million from our participation in the joint venture involving the liquidation of inventory for the going-out-of-business sale of 568 stores of women 's clothing retailer fashion bug . the increase in revenues from our ga capital division was primarily due to an increase in fees earned on capital advisory engagements in 2013 as compared to the same period in 2012. revenues from the sale of goods increased $ 1.9 million , to $ 10.0 million during the year ended december 31 , 2013 , from $ 8.1 million during the year ended december 31 , 2012. in 2013 , revenues from sale of goods included $ 9.3 million of revenues related to the sale of four oil rigs in the third quarter of 2013 that was included in goods held for sale or auction at december 31 , 2012 as more fully discussed above and in note 2 to the consolidated financial statements . gross margin in the auction and liquidation segment for services and fees decreased to 65.7 % of revenues during the year ended december 31 , 2013 , as compared to 69.3 % of revenues during the year ended december 31 , 2012. the decrease in the gross margin during the year ended december 31 , 2013 was primarily due to an increase in revenues earned from lower-margin cost plus fee based liquidation engagements in 2013 as compared to higher margin liquidation engagements where we provided a minimum recovery value for goods sold at bankruptcy liquidation sales . we typically earn higher margins on these types of engagements where we provide a minimum recovery value for goods sold as compared to fee and commission engagements . gross margin from the sales of goods where we held title improved to 20.3 % during the year ended december 31 , 2013 as compared to a gross margin of 10.3 % during the year ended december 31 , 2012. the gross margin in 2013 was favorably impacted by the sale of four oil rigs under a sales-type lease . the gross margins from the sales of goods fluctuates widely from period to period based upon the volume and mix of goods that we take title to in our wholesale auction and liquidation business . these fluctuations make predictions regarding the expected trends in gross margin from the sales of goods inherently uncertain . 26 valuation and appraisal segment : replace_table_token_6_th revenues in the valuation and appraisal segment increased $ 2.1 million , or 8.1 % , to $ 27.6 million during the year ended december 31 , 2013 from $ 25.5 million during the year ended december 31 , 2012. the increase in revenues was primarily due to an increase in revenues of ( a ) $ 0.2 million related to appraisal engagements where we perform valuations for the monitoring of collateral for financial institutions , lenders , and private equity investors ; ( b ) $ 0.9 million for appraisals for machinery and equipment and intellectual property ; and ( c ) $ 1.0 million as a result of the expansion of the appraisal operations in the united kingdom . gross margins in the valuation and appraisal segment decreased to 52.7 % of revenues during the year ended december 31 , 2013 as compared to 54.6 % of revenues during the year ended december 31 , 2012. gross margins in 2013 were unfavorably impacted by an increase in headcount that resulted in an increase in salaries , wages and benefits in 2013 as compared to the same period in 2012. uk retail stores segment : replace_table_token_7_th revenues and cost of goods sold in the uk retail stores segment are from the operation of ten retail stores and internet operations of shoon in the united kingdom . revenues from the sale of retail goods from the shoon stores in 2013 included sales for seven months for the period from january 1 , 2013 through july 31 , 2013. in august 2013 , the shareholder agreement of shoon was amended and restated to eliminate our control rights which resulted in the deconsolidation of shoon . as such , the operating results of shoon are not consolidated with the company 's for any periods after july 31 , 2013. in 2012 , revenues from the sale of retail goods from the shoon included approximately eight months of sales for the period from may 4 , 2012 to december 31 , 2012 , as a result of our acquisition of shoon on may 4 , 2012. the decrease in revenues from the sale of retail goods is primarily due to fewer operating days of the shoon stores in 2013 as compared to the prior year . the decrease in revenues in 2013 was also due to an increase in promotions that resulted in a decrease in average selling prices as compared to the prior year . the decrease in average selling prices from the increase in promotions in 2013 resulted in a decrease in the gross margin to 42.5 % in 2013 , from the 46.4 % gross margin during
| liquidity and capital resources our operations have been funded through a combination of our existing cash on hand , operating profits generated from operations , borrowings under our revolving credit facility , and special purpose financing arrangements . during the years ended december 31 , 2013 , 2012 and 2011 we generated net income of $ 1.1 million , $ 3.5 million and $ 0.6 million , respectively . our cash flows and profitability are impacted by the number and size of retail liquidation engagements we perform on a quarterly or annual basis . our cash flows are also impacted by our lending activities and interest expense on the $ 50.5 million of subordinated , unsecured promissory notes payable to the great american members and phantom equityholders . these factors have resulted in net cash used in operating activities of $ 3.2 million during the year ended december 31 , 2013 , net cash provided by operating activities of $ 16.2 million during the year ended december 31 , 2012 and net cash used in operating activities of $ 2.0 million during the year ended december 31 , 2011. as of december 31 , 2013 , we had $ 18.9 million in unrestricted cash , $ 0.3 million of restricted cash , $ 0.3 million of borrowings outstanding on our accounts receivable revolving credit facility and $ 5.7 million of borrowing outstanding under our $ 100.0 million asset based credit facility . we believe that our current cash and cash equivalents , funds available under our asset based credit facilities and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months . we continue to monitor our financial performance to ensure sufficient liquidity to fund operations . our principal sources of liquidity to finance our business is our existing cash on hand , cash flows generated from operating activities , funds available under revolving credit facilities and special purpose financing arrangements .
| 1 |
in addition , we generate revenues from subscription agreements for the receipt of periodic benchmark reports , digests and other publications , which are most often associated with our real estate offerings that are recognized upon delivery of such reports or data updates . fees are primarily paid in arrears after the offering is delivered . we also realize one-time fees related to customized reports , historical data sets and certain implementation and consulting services , as well as from certain offerings that are purchased on a non-renewal basis . in evaluating our financial performance , we focus on revenue and profit growth , including results accounted for under accounting principles generally accepted in the united states ( “ gaap ” ) as well as non-gaap measures , for the company as a whole and by operating segment . in addition , we focus on operating metrics , including run 42 rate , subscription sales and aggregate retention rate to manage the business . our business is not highly capital intensive and , as such , we expect to continue to convert a high percentage of our profits into excess cash in the future . our growth strategy includes : ( a ) creating broad and innovative research-driven content , ( b ) expanding our client base and deepening existing client relationships , ( c ) developing flexible and scalable technology , ( d ) expanding value-added service offerings and ( e ) executing strategic relationships and acquisitions . key financial metrics and drivers as discussed in the previous section , we utilize a portfolio of key financial metrics to manage the company , including gaap and non-gaap measures . as detailed below , we review revenues by type and by segment , or major product line . we also review expenses by activity , which provides more transparency into how resources are being deployed . in addition , we utilize operating metrics including run rate , subscription sales and aggregate retention rate , to analyze past performance and to provide insight into our latest reported portfolio of recurring business . in the discussion that follows , we provide variances excluding the impact of foreign currency exchange rate fluctuations when the impact is not considered negligible . foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period . it should be noted that while a substantial portion of our fees for index-linked investment products are invoiced in u.s. dollars , the fees are based on the investment product 's assets , of which two-thirds are invested in underlying securities that are dominated in currencies other than the u.s. dollar . the underlying impact of such will not be reflected in the variances excluding the impact of foreign currency exchange rate fluctuations . revenues our revenues are characterized by type , which broadly reflects the nature of how they are recognized or earned . our revenue types are recurring subscription , asset-based fees and non-recurring revenues . we also group our revenues by segment and provide the revenue type within each segment . see part 1 , item 1 . “ business—our operating segments ” above for additional details on the products and services that we offer . recurring subscription revenues represent fees earned from clients primarily under renewable contracts or agreements and are recognized in most cases ratably over the term of the license or service pursuant to the contract terms . the contracts state the terms under which these fees are to be calculated . the fees are recognized as we provide the product and service to the client over the license period and are generally billed in advance , prior to the license start date . when implementation services are included , we recognize revenues ratably from the date the application is put into production through the end of the license period . revenues associated with implementation services , which are allocated based on msci 's best estimated sales price for such implementation services , are recognized ratably over the useful life of those services . revenues from subscription agreements for the receipt of periodic benchmark reports , digests , and other publications , which are most often associated with our real estate offerings , are recognized upon delivery of such reports or data updates . asset-based fees are principally recognized based on the estimated aum linked to our indexes from independent third-party sources or the most recently reported information provided by the client . asset-based fees include revenues related to futures and options contracts linked to our indexes , which are primarily based on trading volumes . non-recurring revenues primarily represent fees earned on products and services where we do not have renewal contracts and primarily include revenues for providing historical data , certain implementation services and other special client requests . based on the nature of the services provided , non-recurring revenues are recognized upon delivery or over the service period . effective january 1 , 2018 , msci adopted the new revenue standard as set forth under asc subtopic 606-10 , “ revenue from contracts with customers . ” see “ — recent accounting standards updates ” below for additional information . 43 operating expenses we group our operating expenses into the following activity categories : cost of revenues ; selling and marketing ; research and development ( “ r & d ” ) ; general and administrative ( “ g & a ” ) ; amortization of intangible assets ; and depreciation and amortization of property , equipment and leasehold improvements . costs are assigned to these activity categories based on the nature of the expense or , when not directly attributable , an estimate is allocated based on the type of effort involved . story_separator_special_tag the following table presents the value of aum in etfs linked to msci indexes and the sequential change of such assets as of the end of each of the periods indicated : replace_table_token_9_th source : bloomberg and msci ( 1 ) the historical values of the assets in etfs linked to our indexes as of the last day of the month and the monthly average balance can be found under the link “ aum in etfs linked to msci indexes ” on our investor relations homepage at http : //ir.msci.com . this information is updated on or about the second u.s. business day of each month . information contained on our website is not incorporated by reference into this annual report on form 10-k or any other report filed with the sec . ( 2 ) the value of assets under management in etfs linked to msci indexes is calculated by multiplying the etf net asset value by the number of shares outstanding . ( 3 ) the aum in etfs numbers also include aum in exchange traded notes , the value of which is less than 1.0 % of the aum amounts presented . 49 for the year ended december 31 , 2017 , the average value of aum in etfs linked to msci equity indexes was $ 621.4 billion , up $ 175.0 billion , or 39.2 % , from $ 446.4 billion for the year ended december 31 , 2016. non-recurring revenues decreased 6.4 % to $ 25.1 million for the year ended december 31 , 2017 , compared to $ 26.8 million for the year ended december 31 , 2016 , primarily resulting from lower one-time sales of analytics products . the following table presents operating revenues by reportable segment and revenue type for the years indicated : replace_table_token_10_th refer to the section titled , “ segment results of operations ” for an explanation of the results . operating expenses operating expenses increased 4.9 % to $ 695.0 million for the year ended december 31 , 2017 compared to $ 662.6 million for the year ended december 31 , 2016. adjusted for the impact of foreign currency exchange rate fluctuations , operating expenses increased 5.1 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. the following table presents operating expenses by activity for the years indicated : replace_table_token_11_th 50 cost of revenues cost of revenues for the year ended december 31 , 2017 increased 8.6 % to $ 273.9 million compared to $ 252.1 million for the year ended december 31 , 2016 , reflecting increases across all three reporting segments . the change was driven by increases in compensation and benefit costs , primarily relating to wages and salaries , severance and incentive compensation , as well as higher non-compensation information technology costs , market data costs , occupancy costs , personnel related costs and travel and entertainment costs . selling and marketing selling and marketing expenses for the year ended december 31 , 2017 increased 6.4 % to $ 177.3 million compared to $ 166.7 million for the year ended december 31 , 2016 , reflecting increases in the index and all other segments . the change was driven by an overall increase in compensation and benefit costs , relating to incentive compensation , severance , wages and salaries and benefits , as well as higher non-compensation marketing costs and travel and entertainment costs . research and development r & d expenses for the year ended december 31 , 2017 increased 0.9 % to $ 75.9 million compared to $ 75.2 million for the year ended december 31 , 2016 , reflecting higher investments in the analytics segment and esg within the all other segment , offset by decreases in the index segment . the change was driven by higher non-compensation information technology costs partially offset by lower occupancy costs . general and administrative g & a expenses for the year ended december 31 , 2017 increased 0.8 % to $ 87.9 million compared to $ 87.2 million for the year ended december 31 , 2016 , driven by higher costs in the index segment partially offset by lower costs in real estate within the all other segment . the change was driven by an increase in compensation and benefits costs , primarily relating to an increase in wages and salaries and benefits , partially offset by a decrease in severance , as well as the impact of lower non-compensation professional fees . the following table presents operating expenses using compensation and non-compensation categories , rather than using activity categories , for the years indicated : replace_table_token_12_th compensation and benefits costs are our most significant expense and typically represent more than 60 % of our operating expenses or more than 70 % of the combined total of the cost of revenues , selling and marketing , r & d and g & a expense categories . we had 3,038 employees as of december 31 , 2017 compared to 2,862 employees as of december 31 , 2016. our continued growth in emerging market centers around the world is an important factor in our ability to manage and control the growth of our compensation and benefits expenses . as of december 31 , 2017 , 59.0 % of our employees were located in emerging market centers compared to 56.2 % of our employees as of december 31 , 2016 . 51 compensation and benefits costs for the year ended december 31 , 2017 increased 6.4 % to $ 440.9 million compared to $ 414.3 million for the year ended december 31 , 2016 , primarily driven by increases in wages and salaries , incentive compensation , severance and benefits . non-compensation expenses for the year ended december 31 , 2017 increased 4.3 % to $ 174.1 million compared to $ 166.9 million for the year ended december 31 , 2016 , primarily driven by higher information technology
| liquidity and capital resources our operations have been funded through a combination of our existing cash on hand , operating profits generated from operations , borrowings under our revolving credit facility , and special purpose financing arrangements . during the years ended december 31 , 2013 , 2012 and 2011 we generated net income of $ 1.1 million , $ 3.5 million and $ 0.6 million , respectively . our cash flows and profitability are impacted by the number and size of retail liquidation engagements we perform on a quarterly or annual basis . our cash flows are also impacted by our lending activities and interest expense on the $ 50.5 million of subordinated , unsecured promissory notes payable to the great american members and phantom equityholders . these factors have resulted in net cash used in operating activities of $ 3.2 million during the year ended december 31 , 2013 , net cash provided by operating activities of $ 16.2 million during the year ended december 31 , 2012 and net cash used in operating activities of $ 2.0 million during the year ended december 31 , 2011. as of december 31 , 2013 , we had $ 18.9 million in unrestricted cash , $ 0.3 million of restricted cash , $ 0.3 million of borrowings outstanding on our accounts receivable revolving credit facility and $ 5.7 million of borrowing outstanding under our $ 100.0 million asset based credit facility . we believe that our current cash and cash equivalents , funds available under our asset based credit facilities and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months . we continue to monitor our financial performance to ensure sufficient liquidity to fund operations . our principal sources of liquidity to finance our business is our existing cash on hand , cash flows generated from operating activities , funds available under revolving credit facilities and special purpose financing arrangements .
| 0 |
in addition , we generate revenues from subscription agreements for the receipt of periodic benchmark reports , digests and other publications , which are most often associated with our real estate offerings that are recognized upon delivery of such reports or data updates . fees are primarily paid in arrears after the offering is delivered . we also realize one-time fees related to customized reports , historical data sets and certain implementation and consulting services , as well as from certain offerings that are purchased on a non-renewal basis . in evaluating our financial performance , we focus on revenue and profit growth , including results accounted for under accounting principles generally accepted in the united states ( “ gaap ” ) as well as non-gaap measures , for the company as a whole and by operating segment . in addition , we focus on operating metrics , including run 42 rate , subscription sales and aggregate retention rate to manage the business . our business is not highly capital intensive and , as such , we expect to continue to convert a high percentage of our profits into excess cash in the future . our growth strategy includes : ( a ) creating broad and innovative research-driven content , ( b ) expanding our client base and deepening existing client relationships , ( c ) developing flexible and scalable technology , ( d ) expanding value-added service offerings and ( e ) executing strategic relationships and acquisitions . key financial metrics and drivers as discussed in the previous section , we utilize a portfolio of key financial metrics to manage the company , including gaap and non-gaap measures . as detailed below , we review revenues by type and by segment , or major product line . we also review expenses by activity , which provides more transparency into how resources are being deployed . in addition , we utilize operating metrics including run rate , subscription sales and aggregate retention rate , to analyze past performance and to provide insight into our latest reported portfolio of recurring business . in the discussion that follows , we provide variances excluding the impact of foreign currency exchange rate fluctuations when the impact is not considered negligible . foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period . it should be noted that while a substantial portion of our fees for index-linked investment products are invoiced in u.s. dollars , the fees are based on the investment product 's assets , of which two-thirds are invested in underlying securities that are dominated in currencies other than the u.s. dollar . the underlying impact of such will not be reflected in the variances excluding the impact of foreign currency exchange rate fluctuations . revenues our revenues are characterized by type , which broadly reflects the nature of how they are recognized or earned . our revenue types are recurring subscription , asset-based fees and non-recurring revenues . we also group our revenues by segment and provide the revenue type within each segment . see part 1 , item 1 . “ business—our operating segments ” above for additional details on the products and services that we offer . recurring subscription revenues represent fees earned from clients primarily under renewable contracts or agreements and are recognized in most cases ratably over the term of the license or service pursuant to the contract terms . the contracts state the terms under which these fees are to be calculated . the fees are recognized as we provide the product and service to the client over the license period and are generally billed in advance , prior to the license start date . when implementation services are included , we recognize revenues ratably from the date the application is put into production through the end of the license period . revenues associated with implementation services , which are allocated based on msci 's best estimated sales price for such implementation services , are recognized ratably over the useful life of those services . revenues from subscription agreements for the receipt of periodic benchmark reports , digests , and other publications , which are most often associated with our real estate offerings , are recognized upon delivery of such reports or data updates . asset-based fees are principally recognized based on the estimated aum linked to our indexes from independent third-party sources or the most recently reported information provided by the client . asset-based fees include revenues related to futures and options contracts linked to our indexes , which are primarily based on trading volumes . non-recurring revenues primarily represent fees earned on products and services where we do not have renewal contracts and primarily include revenues for providing historical data , certain implementation services and other special client requests . based on the nature of the services provided , non-recurring revenues are recognized upon delivery or over the service period . effective january 1 , 2018 , msci adopted the new revenue standard as set forth under asc subtopic 606-10 , “ revenue from contracts with customers . ” see “ — recent accounting standards updates ” below for additional information . 43 operating expenses we group our operating expenses into the following activity categories : cost of revenues ; selling and marketing ; research and development ( “ r & d ” ) ; general and administrative ( “ g & a ” ) ; amortization of intangible assets ; and depreciation and amortization of property , equipment and leasehold improvements . costs are assigned to these activity categories based on the nature of the expense or , when not directly attributable , an estimate is allocated based on the type of effort involved . story_separator_special_tag the following table presents the value of aum in etfs linked to msci indexes and the sequential change of such assets as of the end of each of the periods indicated : replace_table_token_9_th source : bloomberg and msci ( 1 ) the historical values of the assets in etfs linked to our indexes as of the last day of the month and the monthly average balance can be found under the link “ aum in etfs linked to msci indexes ” on our investor relations homepage at http : //ir.msci.com . this information is updated on or about the second u.s. business day of each month . information contained on our website is not incorporated by reference into this annual report on form 10-k or any other report filed with the sec . ( 2 ) the value of assets under management in etfs linked to msci indexes is calculated by multiplying the etf net asset value by the number of shares outstanding . ( 3 ) the aum in etfs numbers also include aum in exchange traded notes , the value of which is less than 1.0 % of the aum amounts presented . 49 for the year ended december 31 , 2017 , the average value of aum in etfs linked to msci equity indexes was $ 621.4 billion , up $ 175.0 billion , or 39.2 % , from $ 446.4 billion for the year ended december 31 , 2016. non-recurring revenues decreased 6.4 % to $ 25.1 million for the year ended december 31 , 2017 , compared to $ 26.8 million for the year ended december 31 , 2016 , primarily resulting from lower one-time sales of analytics products . the following table presents operating revenues by reportable segment and revenue type for the years indicated : replace_table_token_10_th refer to the section titled , “ segment results of operations ” for an explanation of the results . operating expenses operating expenses increased 4.9 % to $ 695.0 million for the year ended december 31 , 2017 compared to $ 662.6 million for the year ended december 31 , 2016. adjusted for the impact of foreign currency exchange rate fluctuations , operating expenses increased 5.1 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. the following table presents operating expenses by activity for the years indicated : replace_table_token_11_th 50 cost of revenues cost of revenues for the year ended december 31 , 2017 increased 8.6 % to $ 273.9 million compared to $ 252.1 million for the year ended december 31 , 2016 , reflecting increases across all three reporting segments . the change was driven by increases in compensation and benefit costs , primarily relating to wages and salaries , severance and incentive compensation , as well as higher non-compensation information technology costs , market data costs , occupancy costs , personnel related costs and travel and entertainment costs . selling and marketing selling and marketing expenses for the year ended december 31 , 2017 increased 6.4 % to $ 177.3 million compared to $ 166.7 million for the year ended december 31 , 2016 , reflecting increases in the index and all other segments . the change was driven by an overall increase in compensation and benefit costs , relating to incentive compensation , severance , wages and salaries and benefits , as well as higher non-compensation marketing costs and travel and entertainment costs . research and development r & d expenses for the year ended december 31 , 2017 increased 0.9 % to $ 75.9 million compared to $ 75.2 million for the year ended december 31 , 2016 , reflecting higher investments in the analytics segment and esg within the all other segment , offset by decreases in the index segment . the change was driven by higher non-compensation information technology costs partially offset by lower occupancy costs . general and administrative g & a expenses for the year ended december 31 , 2017 increased 0.8 % to $ 87.9 million compared to $ 87.2 million for the year ended december 31 , 2016 , driven by higher costs in the index segment partially offset by lower costs in real estate within the all other segment . the change was driven by an increase in compensation and benefits costs , primarily relating to an increase in wages and salaries and benefits , partially offset by a decrease in severance , as well as the impact of lower non-compensation professional fees . the following table presents operating expenses using compensation and non-compensation categories , rather than using activity categories , for the years indicated : replace_table_token_12_th compensation and benefits costs are our most significant expense and typically represent more than 60 % of our operating expenses or more than 70 % of the combined total of the cost of revenues , selling and marketing , r & d and g & a expense categories . we had 3,038 employees as of december 31 , 2017 compared to 2,862 employees as of december 31 , 2016. our continued growth in emerging market centers around the world is an important factor in our ability to manage and control the growth of our compensation and benefits expenses . as of december 31 , 2017 , 59.0 % of our employees were located in emerging market centers compared to 56.2 % of our employees as of december 31 , 2016 . 51 compensation and benefits costs for the year ended december 31 , 2017 increased 6.4 % to $ 440.9 million compared to $ 414.3 million for the year ended december 31 , 2016 , primarily driven by increases in wages and salaries , incentive compensation , severance and benefits . non-compensation expenses for the year ended december 31 , 2017 increased 4.3 % to $ 174.1 million compared to $ 166.9 million for the year ended december 31 , 2016 , primarily driven by higher information technology
| cash dividends on september 17 , 2014 , our board of directors approved a plan to initiate a regular quarterly cash dividend to our shareholders . on october 30 , 2014 , we began paying regular quarterly cash dividends and have paid such dividends each quarter thereafter . on january 30 , 2018 , the board of directors declared a quarterly dividend of $ 0.38 per share of common stock to be paid on march 15 , 2018 to shareholders of record as of the close of trading on february 16 , 2018. cash flows the following table presents the company 's cash and cash equivalents as of the dates indicated : as of december 31 , december 31 , 2017 2016 ( in thousands ) cash and cash equivalents $ 889,502 $ 791,834 the following table presents the breakdown of the company 's cash flows for the periods indicated : 71 replace_table_token_35_th cash and cash equivalents cash and cash equivalents were $ 889.5 million and $ 791.8 million as of december 31 , 2017 and 2016 , respectively . msci seeks to maintain minimum cash balances globally of approximately $ 200.0 million to $ 250.0 million for general operating purposes . as of december 31 , 2017 and 2016 , $ 503.0 million and $ 208.2 million , respectively , of the cash and cash equivalents were held by foreign subsidiaries . as a result of tax reform , msci can now more efficiently access a significant portion of its cash held outside of the u.s. in the short-term without being subject to u.s. income taxes . repatriation of some foreign cash may be subject to certain withholding taxes in local jurisdictions and other distribution restrictions . the increase in cash and cash equivalents held by foreign subsidiaries primarily reflects ongoing efforts to better align our tax profile with our global operating footprint . the global cash and cash equivalent balances that are maintained will be available to meet our global needs whether for general corporate purpose or other needs , including acquisitions or expansion of our products .
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$ 4.9 million of the purchase price was attributed to goodwill and $ 2.5 million of the purchase price was attributed to the estimated fair values of the tangible net assets acquired . the goodwill is deductible for tax purposes . the transaction was accounted for as a business combination . net sales , earnings and pro forma results of operations have not been presented because they are not material to our consolidated financial statements . for more information , refer to note 8 to the consolidated financial statements . on july 1 , 2017 , we acquired aptovision , a privately-held provider of uncompressed , zero-frame latency , video-over-ip solutions addressing the professional audio visual market . the unique combination of aptovision 's advanced algorithms for real-time , full bandwidth video transmission over ip networks , and our industry leading high-speed signal integrity and chip development expertise is expected to enable the adoption of sdvoe accelerating this natural progression in the evolution of video transport . under the terms of the share purchase agreement with aptovision , we acquired all of the outstanding equity interest in aptovision for a cash payment of $ 17.6 million at closing , net of acquired cash , and a commitment to pay additional contingent consideration ( the `` aptovision earn-out `` ) of up to a maximum of $ 47.0 million over three years if certain goals are achieved in each of the earn-out periods . to date , we have made $ 9.4 million in payments related to the aptovision earn-out , and based on our assessment of performance , we do not expect to make any future payments . acquisition-related transaction costs of $ 1.6 million were accounted for as an expense in the period in which the costs were incurred and were presented in `` selling , general and administrative `` ( `` sg & a `` ) expense in the consolidated statements of income . see note 3 and note 14 to the consolidated financial statements for additional information on our acquisitions and contingent consideration . 33 factors affecting our performance most of our sales to customers are made on the basis of individual customer purchase orders . many customers include cancellation provisions in their purchase orders . trends within the industry toward shorter lead-times and `` just-in-time `` deliveries have resulted in our reduced ability to predict future shipments . as a result , we rely on orders received and shipped within the same quarter for a significant portion of our sales . sales made directly to custome rs during fiscal years 2020 , 2019 and 2018 were approximately 28 % , 32 % and 34 % of net sales , respectively . the remaining 72 % , 68 % and 66 % of net sales , respectively , were made through independent distributors . our business relies on foreign-based entities . most of our outside subcontractors and suppliers , including third-party foundries that supply silicon waf ers , are located in foreign countries , including china , israel and south korea . in fiscal years 2020 , 2019 and 2018 , 24 % , 16 % and 20 % , respectively , of our silicon in terms of cost of wafers was supplied by a third-party foundry in china , and 11 % , 11 % and 14 % , respectively , of our silicon in terms of cost of wafers was supplied by a third-party foundry in israel . these percentages could be higher in future periods . foreign sales for fiscal years 2020 , 2019 and 2018 constituted appro ximately 91 % , 89 % and 91 % , respectively , of our net sales . approximately 77 % , 76 % and 75 % of net sales in fiscal years 2020 , 2019 and 2018 , respectively , were to customers located in the asia-pacific region . the remaining foreign sales were primarily to customers in europe , canada and mexico . we use several metrics as indicators of future potential growth . the indicators that we believe best correlate to potential future sales growth are design wins and new product releases . there are many factors that may cause a design win or new product release to not result in sales , including a customer decision not to go to system production , a change in a customer 's perspective regarding a product 's value or a customer 's product failing in the end market . as a result , although a design win or new product introduction is an important step towards generating future sales , it does not inevitably result in us being awarded business or receiving a purchase commitment . inflationary factors have not had a significant effect on our performance over the past several years . a significant increase in inflation would affect our future performance if we were unable to pass these higher costs on to our customers . we are continuing to monitor the near term geopolitical uncertainty and the recent export restrictions on shipments to huawei technologies co. , ltd. ( `` huawei `` ) and certain of its affiliates , as well as the recent novel coronavirus outbreak . the following discussion reflects our current assessment of the near term impact of this uncertainty . revenue we derive our revenue primarily from the sale of semiconductor products into various end markets . revenue is recognized when control of these products is transferred to our customers , in an amount that reflects the consideration we expect to be entitled to in exchange for these products . control is generally transferred when products are shipped and , to a lesser extent , when the products are delivered . recovery of costs associated with product design and engineering services are recognized during the period in which services are performed and are reported as a reduction to product development and engineering expense . story_separator_special_tag at that date , we also had $ 293.3 million in cash and cash equivalents and $ 197.0 million of outstanding borrowings on our credit facility , which had $ 403.0 million of undrawn capacity . we incur significant expenditures in order to fund the development , design , and manufacture of new products . we intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities , which may require 38 additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products . certain of these expenditures , particularly the addition of design engineers , do not generate significant payback in the short-term . we plan to finance these expenditures with cash generated by our operations and our existing cash balances . a meaningful portion of our capital resources , and the liquidity they represent , are held by our foreign subsidiaries . as of january 26 , 2020 , our foreign subsidiaries held approximately $ 261.9 million of cash and cash equivalents , compared to $ 253.1 million at january 27 , 2019 . in connection with the enactment of the tax act , all historic and current foreign earnings are taxed in the u.s. and are subject to a 5 % withholding tax , if repatriated . we have determined that we will repatriate back to the u.s. approximately $ 240.0 million of foreign earnings , of which $ 156.1 million has been repatriated since fiscal year 2019. as of january 26 , 2020 , our foreign subsidiaries had $ 547.9 million of unremitted earnings for which no taxes have been provided . those historical earnings have been and are expected to continue to be permanently reinvested . story_separator_special_tag stock options . such exercises are independent decisions made by grantees and are influenced most directly by the stock price and the expiration dates of stock option awards . such proceeds are difficult to forecast , resulting from several factors which are outside our control . we believe that such proceeds will remain a nominal source of cash in the future . stock repurchase program we currently have in effect a stock repurchase program that was initially approved by our board of directors in march 2008. this program represents one of our principal efforts to return value to our stockholders . during fiscal years 2020 , 2019 and 2018 , we repurchased shares of common stock under this program for $ 70.2 million , $ 116.2 million and $ 14.8 million , respectively . as of january 26 , 2020 , we had repurchased $ 337.8 million in shares of our common stock under the program since inception and the remaining authorization under the program was $ 110.6 million . credit facility on november 7 , 2019 , we , with certain of our domestic subsidiaries as guarantors , entered into an amended and restated credit agreement ( the `` credit agreement `` ) with the lenders party thereto and hsbc bank usa , national association , as administrative agent , swing line lender and letter of credit issuer in order to provide a more flexible borrowing structure by expanding the borrowing capacity of the revolving loans under the senior secured first lien credit facility ( the `` credit facility `` ) to $ 600.0 million , eliminating the term loans and extending the maturity to november 7 , 2024. up to $ 40.0 million of the revolving loans may be used to obtain letters of credit , up to $ 25.0 million of the revolving loans may be used to obtain swing line loans , and up to $ 40.0 million of the revolving loans may be used to obtain revolving loans and letters of credit in certain currencies other than u.s. dollars ( `` alternative currencies `` ) . the proceeds of the credit facility may be used by us for capital expenditures , permitted acquisitions , permitted dividends , working capital and general corporate purposes . a portion of the proceeds of the credit facility were used to repay in full all of the obligations outstanding under our then existing senior secured first lien credit facility and to pay transaction costs in connection with such refinancing . in fiscal year 2020 , we received $ 201.0 million in proceeds from our revolving loans and made payments that totaled $ 101.0 million and $ 115.3 million on our revolving loans and on our previous term loans , respectively . as of january 26 , 2020 , we had $ 197.0 million of outstanding borrowings under our revolving loans , which had $ 403.0 million of undrawn borrowing capacity . the amendment of the credit agreement in the fourth quarter of fiscal year 2020 resulted in a loss on early extinguishment of debt totaling $ 0.5 million , related to the write off of unamortized discounts and loan costs , which were presented in `` non-operating income , net `` in the statements of income . the credit agreement provides that , subject to certain customary conditions , including obtaining commitments with respect thereto , we may request the establishment of one or more term loan facilities and or increases to the revolving loans in a principal amount not to exceed ( a ) $ 300.0 million , plus ( b ) an unlimited amount , so long as our consolidated leverage ratio , determined on a pro forma basis , does not exceed 3.00 to 1.00. however , the lenders are not required to provide such increase upon our request . interest on loans made under the credit facility in u.s. dollars accrues , at our option , at a rate per annum equal to ( 1 ) the base rate ( as defined below ) plus a margin ranging from 0.25 % to 1.25 % depending upon our consolidated leverage ratio or ( 2 ) libor ( determined with respect to
| cash dividends on september 17 , 2014 , our board of directors approved a plan to initiate a regular quarterly cash dividend to our shareholders . on october 30 , 2014 , we began paying regular quarterly cash dividends and have paid such dividends each quarter thereafter . on january 30 , 2018 , the board of directors declared a quarterly dividend of $ 0.38 per share of common stock to be paid on march 15 , 2018 to shareholders of record as of the close of trading on february 16 , 2018. cash flows the following table presents the company 's cash and cash equivalents as of the dates indicated : as of december 31 , december 31 , 2017 2016 ( in thousands ) cash and cash equivalents $ 889,502 $ 791,834 the following table presents the breakdown of the company 's cash flows for the periods indicated : 71 replace_table_token_35_th cash and cash equivalents cash and cash equivalents were $ 889.5 million and $ 791.8 million as of december 31 , 2017 and 2016 , respectively . msci seeks to maintain minimum cash balances globally of approximately $ 200.0 million to $ 250.0 million for general operating purposes . as of december 31 , 2017 and 2016 , $ 503.0 million and $ 208.2 million , respectively , of the cash and cash equivalents were held by foreign subsidiaries . as a result of tax reform , msci can now more efficiently access a significant portion of its cash held outside of the u.s. in the short-term without being subject to u.s. income taxes . repatriation of some foreign cash may be subject to certain withholding taxes in local jurisdictions and other distribution restrictions . the increase in cash and cash equivalents held by foreign subsidiaries primarily reflects ongoing efforts to better align our tax profile with our global operating footprint . the global cash and cash equivalent balances that are maintained will be available to meet our global needs whether for general corporate purpose or other needs , including acquisitions or expansion of our products .
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$ 4.9 million of the purchase price was attributed to goodwill and $ 2.5 million of the purchase price was attributed to the estimated fair values of the tangible net assets acquired . the goodwill is deductible for tax purposes . the transaction was accounted for as a business combination . net sales , earnings and pro forma results of operations have not been presented because they are not material to our consolidated financial statements . for more information , refer to note 8 to the consolidated financial statements . on july 1 , 2017 , we acquired aptovision , a privately-held provider of uncompressed , zero-frame latency , video-over-ip solutions addressing the professional audio visual market . the unique combination of aptovision 's advanced algorithms for real-time , full bandwidth video transmission over ip networks , and our industry leading high-speed signal integrity and chip development expertise is expected to enable the adoption of sdvoe accelerating this natural progression in the evolution of video transport . under the terms of the share purchase agreement with aptovision , we acquired all of the outstanding equity interest in aptovision for a cash payment of $ 17.6 million at closing , net of acquired cash , and a commitment to pay additional contingent consideration ( the `` aptovision earn-out `` ) of up to a maximum of $ 47.0 million over three years if certain goals are achieved in each of the earn-out periods . to date , we have made $ 9.4 million in payments related to the aptovision earn-out , and based on our assessment of performance , we do not expect to make any future payments . acquisition-related transaction costs of $ 1.6 million were accounted for as an expense in the period in which the costs were incurred and were presented in `` selling , general and administrative `` ( `` sg & a `` ) expense in the consolidated statements of income . see note 3 and note 14 to the consolidated financial statements for additional information on our acquisitions and contingent consideration . 33 factors affecting our performance most of our sales to customers are made on the basis of individual customer purchase orders . many customers include cancellation provisions in their purchase orders . trends within the industry toward shorter lead-times and `` just-in-time `` deliveries have resulted in our reduced ability to predict future shipments . as a result , we rely on orders received and shipped within the same quarter for a significant portion of our sales . sales made directly to custome rs during fiscal years 2020 , 2019 and 2018 were approximately 28 % , 32 % and 34 % of net sales , respectively . the remaining 72 % , 68 % and 66 % of net sales , respectively , were made through independent distributors . our business relies on foreign-based entities . most of our outside subcontractors and suppliers , including third-party foundries that supply silicon waf ers , are located in foreign countries , including china , israel and south korea . in fiscal years 2020 , 2019 and 2018 , 24 % , 16 % and 20 % , respectively , of our silicon in terms of cost of wafers was supplied by a third-party foundry in china , and 11 % , 11 % and 14 % , respectively , of our silicon in terms of cost of wafers was supplied by a third-party foundry in israel . these percentages could be higher in future periods . foreign sales for fiscal years 2020 , 2019 and 2018 constituted appro ximately 91 % , 89 % and 91 % , respectively , of our net sales . approximately 77 % , 76 % and 75 % of net sales in fiscal years 2020 , 2019 and 2018 , respectively , were to customers located in the asia-pacific region . the remaining foreign sales were primarily to customers in europe , canada and mexico . we use several metrics as indicators of future potential growth . the indicators that we believe best correlate to potential future sales growth are design wins and new product releases . there are many factors that may cause a design win or new product release to not result in sales , including a customer decision not to go to system production , a change in a customer 's perspective regarding a product 's value or a customer 's product failing in the end market . as a result , although a design win or new product introduction is an important step towards generating future sales , it does not inevitably result in us being awarded business or receiving a purchase commitment . inflationary factors have not had a significant effect on our performance over the past several years . a significant increase in inflation would affect our future performance if we were unable to pass these higher costs on to our customers . we are continuing to monitor the near term geopolitical uncertainty and the recent export restrictions on shipments to huawei technologies co. , ltd. ( `` huawei `` ) and certain of its affiliates , as well as the recent novel coronavirus outbreak . the following discussion reflects our current assessment of the near term impact of this uncertainty . revenue we derive our revenue primarily from the sale of semiconductor products into various end markets . revenue is recognized when control of these products is transferred to our customers , in an amount that reflects the consideration we expect to be entitled to in exchange for these products . control is generally transferred when products are shipped and , to a lesser extent , when the products are delivered . recovery of costs associated with product design and engineering services are recognized during the period in which services are performed and are reported as a reduction to product development and engineering expense . story_separator_special_tag at that date , we also had $ 293.3 million in cash and cash equivalents and $ 197.0 million of outstanding borrowings on our credit facility , which had $ 403.0 million of undrawn capacity . we incur significant expenditures in order to fund the development , design , and manufacture of new products . we intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities , which may require 38 additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products . certain of these expenditures , particularly the addition of design engineers , do not generate significant payback in the short-term . we plan to finance these expenditures with cash generated by our operations and our existing cash balances . a meaningful portion of our capital resources , and the liquidity they represent , are held by our foreign subsidiaries . as of january 26 , 2020 , our foreign subsidiaries held approximately $ 261.9 million of cash and cash equivalents , compared to $ 253.1 million at january 27 , 2019 . in connection with the enactment of the tax act , all historic and current foreign earnings are taxed in the u.s. and are subject to a 5 % withholding tax , if repatriated . we have determined that we will repatriate back to the u.s. approximately $ 240.0 million of foreign earnings , of which $ 156.1 million has been repatriated since fiscal year 2019. as of january 26 , 2020 , our foreign subsidiaries had $ 547.9 million of unremitted earnings for which no taxes have been provided . those historical earnings have been and are expected to continue to be permanently reinvested . story_separator_special_tag stock options . such exercises are independent decisions made by grantees and are influenced most directly by the stock price and the expiration dates of stock option awards . such proceeds are difficult to forecast , resulting from several factors which are outside our control . we believe that such proceeds will remain a nominal source of cash in the future . stock repurchase program we currently have in effect a stock repurchase program that was initially approved by our board of directors in march 2008. this program represents one of our principal efforts to return value to our stockholders . during fiscal years 2020 , 2019 and 2018 , we repurchased shares of common stock under this program for $ 70.2 million , $ 116.2 million and $ 14.8 million , respectively . as of january 26 , 2020 , we had repurchased $ 337.8 million in shares of our common stock under the program since inception and the remaining authorization under the program was $ 110.6 million . credit facility on november 7 , 2019 , we , with certain of our domestic subsidiaries as guarantors , entered into an amended and restated credit agreement ( the `` credit agreement `` ) with the lenders party thereto and hsbc bank usa , national association , as administrative agent , swing line lender and letter of credit issuer in order to provide a more flexible borrowing structure by expanding the borrowing capacity of the revolving loans under the senior secured first lien credit facility ( the `` credit facility `` ) to $ 600.0 million , eliminating the term loans and extending the maturity to november 7 , 2024. up to $ 40.0 million of the revolving loans may be used to obtain letters of credit , up to $ 25.0 million of the revolving loans may be used to obtain swing line loans , and up to $ 40.0 million of the revolving loans may be used to obtain revolving loans and letters of credit in certain currencies other than u.s. dollars ( `` alternative currencies `` ) . the proceeds of the credit facility may be used by us for capital expenditures , permitted acquisitions , permitted dividends , working capital and general corporate purposes . a portion of the proceeds of the credit facility were used to repay in full all of the obligations outstanding under our then existing senior secured first lien credit facility and to pay transaction costs in connection with such refinancing . in fiscal year 2020 , we received $ 201.0 million in proceeds from our revolving loans and made payments that totaled $ 101.0 million and $ 115.3 million on our revolving loans and on our previous term loans , respectively . as of january 26 , 2020 , we had $ 197.0 million of outstanding borrowings under our revolving loans , which had $ 403.0 million of undrawn borrowing capacity . the amendment of the credit agreement in the fourth quarter of fiscal year 2020 resulted in a loss on early extinguishment of debt totaling $ 0.5 million , related to the write off of unamortized discounts and loan costs , which were presented in `` non-operating income , net `` in the statements of income . the credit agreement provides that , subject to certain customary conditions , including obtaining commitments with respect thereto , we may request the establishment of one or more term loan facilities and or increases to the revolving loans in a principal amount not to exceed ( a ) $ 300.0 million , plus ( b ) an unlimited amount , so long as our consolidated leverage ratio , determined on a pro forma basis , does not exceed 3.00 to 1.00. however , the lenders are not required to provide such increase upon our request . interest on loans made under the credit facility in u.s. dollars accrues , at our option , at a rate per annum equal to ( 1 ) the base rate ( as defined below ) plus a margin ranging from 0.25 % to 1.25 % depending upon our consolidated leverage ratio or ( 2 ) libor ( determined with respect to
| cash flows one of our primary goals is to improve the cash flows from our existing business activities . additionally , we will continue to seek to maintain or improve our existing business performance and deploy our accumulated cash balances in the most effective manner through alternatives such as capital expenditures , and potentially , acquisitions and other investments that support achievement of our business strategies . acquisitions may be made for either cash or stock consideration , or a combination of both . in summary , our cash flows for each period were as follows : replace_table_token_13_th operating activities net cash provided by operating activities is due to net income , adjusted for non-cash items , and fluctuations in operating assets and liabilities . operating cash flows for fiscal year 2020 were favorably impacted by $ 1.0 million of proceeds received from the hilight settlement and unfavorably impacted by a $ 9.3 million increase in net inventory . operating cash flows for fiscal year 2019 were favorably impacted by $ 8.0 million of proceeds received from the hilight settlement . investing activities net cash used in investing activities is primarily attributable to capital expenditures and purchases of investments , net of proceeds from sales of property , plant and equipment and proceeds from sales of investments .
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grounds slots , a slot facility in louisiana adjacent to fair grounds , which operates approximately 625 slot machines ; and video services , llc ( “ vsi ” ) , the owner and operator of approximately 725 video poker machines in louisiana . 3. online business , which includes : twinspires , an advance deposit wagering ( “ adw ” ) business that is licensed as a multi-jurisdictional simulcasting and interactive wagering hub in the state of oregon . 39 fair grounds account wagering ( “ faw ” ) , an adw business that is licensed in the state of louisiana ; velocity , a business that is licensed in the british dependency isle of man focusing on high wagering-volume international customers ; luckity , an adw business launched during october 2012 that offers over 20 unique online games with outcomes based on and determined by pari-mutuel wagers on live horseraces ; bloodstock research information services ( “ bris ” ) , a data service provider for the equine industry ; and our equity investment in hrtv , llc ( “ hrtv ” ) , a horseracing television channel . 4. other investments , which includes : united tote company and united tote canada ( collectively “ united tote ” ) , which manufactures and operates pari-mutuel wagering systems for racetracks , otbs and other pari-mutuel wagering businesses ; bluff media ( `` bluff `` ) , a multimedia poker content brand and publishing company , acquired by the company on february 10 , 2012 ; our equity investment in miami valley gaming & racing , llc ( `` mvg `` ) , a joint venture to develop a harness racetrack and video lottery terminal facility in ohio ; and our other minor investments . in order to evaluate the performance of these operating segments internally , we use ebitda ( defined as earnings before interest , taxes , depreciation and amortization ) as a key performance measure of the results of operations . we believe that the use of ebitda enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner . during the year ended december 31 , 2012 , total handle for the pari-mutuel industry , according to figures published by equibase , increased 1.0 % compared to the same period of 2011. twinspires handle increased $ 84.6 million , or 10.9 % , during the year ended december 31 , 2012 , as compared to the same period of 2011 , primarily from growth in new , organic customers and an increase in average daily wagering . pari-mutuel handle from our racing operations remained flat during the year ended december 31 , 2012 , compared to the same period of 2011. we believe that , despite uncertain economic conditions , we are in a strong financial position . as of december 31 , 2012 , there was $ 159 million of borrowing capacity available under our revolving credit facility . to date , we have not experienced any limitations in our ability to access this source of liquidity . recent developments miami valley gaming & racing joint venture during march 2012 , we announced an agreement to enter into a 50 % joint venture with delaware north companies gaming & entertainment inc. ( `` dnc `` ) to develop a new harness racetrack and video lottery terminal ( `` vlt `` ) gaming facility in monroe , ohio . on december 21 , 2012 , mvg completed the purchase of the harness racing licenses and certain assets held by lebanon trotting club inc. and miami valley trotting inc. for total consideration of $ 60.0 million , of which $ 10.0 million was funded at closing with the remainder to be funded through a $ 50.0 million note payable over a six year term effective upon the commencement of gaming operations . in addition , there is a potential contingent consideration payment of $ 10.0 million based on the financial performance of the facility during the seven year period after gaming operations commence . construction began in december 2012 on a new gaming and racing facility located in monroe , ohio . the new facility is expected to open in the first quarter of 2014 , and will include a 5/8-mile harness racing track and a 186,000-square-foot gaming facility , featuring up to 2,500 vlts on the 120-acre site . mvg will invest approximately $ 215 million in the new facility , including the $ 50 million license fee payable to the ohio lottery commission . during the year ended december 31 , 2012 , we funded $ 19.9 million in initial capital contributions to the joint venture . riverwalk casino hotel acquisition on october 23 , 2012 , we completed our acquisition of riverwalk in vicksburg , mississippi for cash consideration of approximately $ 145.6 million . the transaction includes the acquisition of a 25,000-square-foot casino , an 80-room hotel , a 5,600-square-foot event center and dining facilities on approximately 22 acres of land . the acquisition continues our diversification and growth strategies to invest in assets with an expected yield on investment to enhance shareholder value . we financed the acquisition with borrowings under our amended and restated credit facility . 40 illinois income taxes during october 2012 , we funded a $ 2.9 million income tax payment to the state of illinois related to a dispute over state income tax apportionment methodology which is recorded as an other asset that we believe will be recoverable in a future period . we filed our state income tax returns related to the years 2002 through 2005 following the methodology prescribed by illinois statute , however the state of illinois has taken a contrary tax position . story_separator_special_tag “ financial statements and supplementary data ” of this annual report on form 10-k. consolidated net revenues our net revenues and earnings are influenced by our racing calendar . therefore , revenues and operating results for any interim quarter are not generally indicative of the revenues and operating results for the year , and may not be comparable with results for the corresponding period of the previous year . we historically have had fewer live racing days during the first quarter of each year , and the majority of our live racing revenue occurs during the second quarter , with the running of the kentucky derby and kentucky oaks . information regarding racing dates at our facilities for 2013 and 2012 is included in subheading “ c . live racing ” in item 1 . “ business ” of this annual report on form 10-k. our consolidated statements of comprehensive income include net revenues and operating expenses associated with our racing operations , gaming , online business and other investments operating segments and are defined as follows : racing : net revenues and corresponding operating expenses associated with commissions earned on wagering at the company 's racetracks , otbs and simulcast fees earned from other wagering sites . in addition , amounts include ancillary revenues and expenses generated by the pari-mutuel facilities including admissions , sponsorships and licensing rights , food and beverage sales and fees for the alternative uses of its facilities . gaming : net revenues and corresponding operating expenses generated from slot machines , table games and video poker . in addition , it includes ancillary revenues and expenses generated by food and beverage sales , hotel operations revenue and miscellaneous other revenue . online : net revenues and corresponding operating expenses generated by the company 's adw business from wagering through the internet , telephone or other mobile devices on pari-mutuel events . in addition , it includes the company 's information business that provides data information and processing services to the equine industry . other : net revenues and corresponding operating expenses generated by united tote , the company 's provider of pari-mutuel wagering systems and bluff . during the year ended december 31 , 2012 , the company merged the operations of churchill downs simulcast productions ( `` cdsp `` ) , the company 's provider of television production services , which was previously included in our other investments operating segment , with its racing operations operating segment . net revenues and operating expenses of cdsp for the years ended december 31 , 2011 and 2010 , have been reclassified to conform to the current year presentation . there was no impact from these reclassifications on consolidated net revenues , operating income , results of continuing operations , or cash flows . pari-mutuel revenues are recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state 's racing regulatory body . gaming revenues represent net gaming wins , which is the difference between gaming wins and losses . other operating revenues such as admissions , programs and concession revenues are recognized once delivery of the product or service has occurred . our customer loyalty programs offer incentives to customers who wager at the company 's racetracks , through our advance deposit wagering platform , twinspires.com , or at our gaming facilities . the tsc elite program , which was introduced during the year ended december 31 , 2012 , to replace the previous program , twinspires club , is offered for pari-mutuel wagering at the company 's racetracks or through twinspires.com . the player 's club is offered at the company 's gaming facilities in louisiana , florida and mississippi . under the programs , customers are able to accumulate points over time that they may redeem for cash , free play , merchandise or food and beverage items at their discretion under the terms of the programs . as a result of the ability of the customer to accumulate points , we accrue the cost of points , after consideration of estimated forfeitures , as they are earned . under the tsc elite program , the estimated value of the cost to redeem points is recorded as the points are earned . to arrive at the estimated cost associated with points , estimates and assumptions are made regarding incremental costs of the benefits , rates and the mix of goods and services for which points will be redeemed . under the player 's club program , the retail value of the points-based cash awards or complimentary goods and services is netted against revenue as a promotional allowance . as of december 31 , 2012 and 2011 , the reward point liability was $ 2.1 million and $ 2.6 million , respectively . approximately 50 % of our annual revenues are generated by pari-mutuel wagering on live and simulcast racing content through otbs and adw providers . live racing handle includes patron wagers made on live races at our racetracks and also wagers made on imported simulcast signals by patrons at our racetracks during live meets . import simulcasting handle includes wagers on imported signals at our racetracks when the respective tracks are not conducting live racing meets , at our otbs and through our adw providers throughout the year . export handle includes all patron wagers made on live racing signals sent to other 44 tracks , otbs and adw providers . advance deposit wagering consists of patron wagers through an advance deposit account . we retain as revenue a pre-determined percentage or commission on the total amount wagered , and the balance is distributed to the winning patrons . the gross percentages earned approximated 10 % of handle for our racing operations and 20 % of handle for our online business.l . certain key operating statistics specific to the gaming industry are included in our discussion of performance of
| cash flows one of our primary goals is to improve the cash flows from our existing business activities . additionally , we will continue to seek to maintain or improve our existing business performance and deploy our accumulated cash balances in the most effective manner through alternatives such as capital expenditures , and potentially , acquisitions and other investments that support achievement of our business strategies . acquisitions may be made for either cash or stock consideration , or a combination of both . in summary , our cash flows for each period were as follows : replace_table_token_13_th operating activities net cash provided by operating activities is due to net income , adjusted for non-cash items , and fluctuations in operating assets and liabilities . operating cash flows for fiscal year 2020 were favorably impacted by $ 1.0 million of proceeds received from the hilight settlement and unfavorably impacted by a $ 9.3 million increase in net inventory . operating cash flows for fiscal year 2019 were favorably impacted by $ 8.0 million of proceeds received from the hilight settlement . investing activities net cash used in investing activities is primarily attributable to capital expenditures and purchases of investments , net of proceeds from sales of property , plant and equipment and proceeds from sales of investments .
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grounds slots , a slot facility in louisiana adjacent to fair grounds , which operates approximately 625 slot machines ; and video services , llc ( “ vsi ” ) , the owner and operator of approximately 725 video poker machines in louisiana . 3. online business , which includes : twinspires , an advance deposit wagering ( “ adw ” ) business that is licensed as a multi-jurisdictional simulcasting and interactive wagering hub in the state of oregon . 39 fair grounds account wagering ( “ faw ” ) , an adw business that is licensed in the state of louisiana ; velocity , a business that is licensed in the british dependency isle of man focusing on high wagering-volume international customers ; luckity , an adw business launched during october 2012 that offers over 20 unique online games with outcomes based on and determined by pari-mutuel wagers on live horseraces ; bloodstock research information services ( “ bris ” ) , a data service provider for the equine industry ; and our equity investment in hrtv , llc ( “ hrtv ” ) , a horseracing television channel . 4. other investments , which includes : united tote company and united tote canada ( collectively “ united tote ” ) , which manufactures and operates pari-mutuel wagering systems for racetracks , otbs and other pari-mutuel wagering businesses ; bluff media ( `` bluff `` ) , a multimedia poker content brand and publishing company , acquired by the company on february 10 , 2012 ; our equity investment in miami valley gaming & racing , llc ( `` mvg `` ) , a joint venture to develop a harness racetrack and video lottery terminal facility in ohio ; and our other minor investments . in order to evaluate the performance of these operating segments internally , we use ebitda ( defined as earnings before interest , taxes , depreciation and amortization ) as a key performance measure of the results of operations . we believe that the use of ebitda enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner . during the year ended december 31 , 2012 , total handle for the pari-mutuel industry , according to figures published by equibase , increased 1.0 % compared to the same period of 2011. twinspires handle increased $ 84.6 million , or 10.9 % , during the year ended december 31 , 2012 , as compared to the same period of 2011 , primarily from growth in new , organic customers and an increase in average daily wagering . pari-mutuel handle from our racing operations remained flat during the year ended december 31 , 2012 , compared to the same period of 2011. we believe that , despite uncertain economic conditions , we are in a strong financial position . as of december 31 , 2012 , there was $ 159 million of borrowing capacity available under our revolving credit facility . to date , we have not experienced any limitations in our ability to access this source of liquidity . recent developments miami valley gaming & racing joint venture during march 2012 , we announced an agreement to enter into a 50 % joint venture with delaware north companies gaming & entertainment inc. ( `` dnc `` ) to develop a new harness racetrack and video lottery terminal ( `` vlt `` ) gaming facility in monroe , ohio . on december 21 , 2012 , mvg completed the purchase of the harness racing licenses and certain assets held by lebanon trotting club inc. and miami valley trotting inc. for total consideration of $ 60.0 million , of which $ 10.0 million was funded at closing with the remainder to be funded through a $ 50.0 million note payable over a six year term effective upon the commencement of gaming operations . in addition , there is a potential contingent consideration payment of $ 10.0 million based on the financial performance of the facility during the seven year period after gaming operations commence . construction began in december 2012 on a new gaming and racing facility located in monroe , ohio . the new facility is expected to open in the first quarter of 2014 , and will include a 5/8-mile harness racing track and a 186,000-square-foot gaming facility , featuring up to 2,500 vlts on the 120-acre site . mvg will invest approximately $ 215 million in the new facility , including the $ 50 million license fee payable to the ohio lottery commission . during the year ended december 31 , 2012 , we funded $ 19.9 million in initial capital contributions to the joint venture . riverwalk casino hotel acquisition on october 23 , 2012 , we completed our acquisition of riverwalk in vicksburg , mississippi for cash consideration of approximately $ 145.6 million . the transaction includes the acquisition of a 25,000-square-foot casino , an 80-room hotel , a 5,600-square-foot event center and dining facilities on approximately 22 acres of land . the acquisition continues our diversification and growth strategies to invest in assets with an expected yield on investment to enhance shareholder value . we financed the acquisition with borrowings under our amended and restated credit facility . 40 illinois income taxes during october 2012 , we funded a $ 2.9 million income tax payment to the state of illinois related to a dispute over state income tax apportionment methodology which is recorded as an other asset that we believe will be recoverable in a future period . we filed our state income tax returns related to the years 2002 through 2005 following the methodology prescribed by illinois statute , however the state of illinois has taken a contrary tax position . story_separator_special_tag “ financial statements and supplementary data ” of this annual report on form 10-k. consolidated net revenues our net revenues and earnings are influenced by our racing calendar . therefore , revenues and operating results for any interim quarter are not generally indicative of the revenues and operating results for the year , and may not be comparable with results for the corresponding period of the previous year . we historically have had fewer live racing days during the first quarter of each year , and the majority of our live racing revenue occurs during the second quarter , with the running of the kentucky derby and kentucky oaks . information regarding racing dates at our facilities for 2013 and 2012 is included in subheading “ c . live racing ” in item 1 . “ business ” of this annual report on form 10-k. our consolidated statements of comprehensive income include net revenues and operating expenses associated with our racing operations , gaming , online business and other investments operating segments and are defined as follows : racing : net revenues and corresponding operating expenses associated with commissions earned on wagering at the company 's racetracks , otbs and simulcast fees earned from other wagering sites . in addition , amounts include ancillary revenues and expenses generated by the pari-mutuel facilities including admissions , sponsorships and licensing rights , food and beverage sales and fees for the alternative uses of its facilities . gaming : net revenues and corresponding operating expenses generated from slot machines , table games and video poker . in addition , it includes ancillary revenues and expenses generated by food and beverage sales , hotel operations revenue and miscellaneous other revenue . online : net revenues and corresponding operating expenses generated by the company 's adw business from wagering through the internet , telephone or other mobile devices on pari-mutuel events . in addition , it includes the company 's information business that provides data information and processing services to the equine industry . other : net revenues and corresponding operating expenses generated by united tote , the company 's provider of pari-mutuel wagering systems and bluff . during the year ended december 31 , 2012 , the company merged the operations of churchill downs simulcast productions ( `` cdsp `` ) , the company 's provider of television production services , which was previously included in our other investments operating segment , with its racing operations operating segment . net revenues and operating expenses of cdsp for the years ended december 31 , 2011 and 2010 , have been reclassified to conform to the current year presentation . there was no impact from these reclassifications on consolidated net revenues , operating income , results of continuing operations , or cash flows . pari-mutuel revenues are recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state 's racing regulatory body . gaming revenues represent net gaming wins , which is the difference between gaming wins and losses . other operating revenues such as admissions , programs and concession revenues are recognized once delivery of the product or service has occurred . our customer loyalty programs offer incentives to customers who wager at the company 's racetracks , through our advance deposit wagering platform , twinspires.com , or at our gaming facilities . the tsc elite program , which was introduced during the year ended december 31 , 2012 , to replace the previous program , twinspires club , is offered for pari-mutuel wagering at the company 's racetracks or through twinspires.com . the player 's club is offered at the company 's gaming facilities in louisiana , florida and mississippi . under the programs , customers are able to accumulate points over time that they may redeem for cash , free play , merchandise or food and beverage items at their discretion under the terms of the programs . as a result of the ability of the customer to accumulate points , we accrue the cost of points , after consideration of estimated forfeitures , as they are earned . under the tsc elite program , the estimated value of the cost to redeem points is recorded as the points are earned . to arrive at the estimated cost associated with points , estimates and assumptions are made regarding incremental costs of the benefits , rates and the mix of goods and services for which points will be redeemed . under the player 's club program , the retail value of the points-based cash awards or complimentary goods and services is netted against revenue as a promotional allowance . as of december 31 , 2012 and 2011 , the reward point liability was $ 2.1 million and $ 2.6 million , respectively . approximately 50 % of our annual revenues are generated by pari-mutuel wagering on live and simulcast racing content through otbs and adw providers . live racing handle includes patron wagers made on live races at our racetracks and also wagers made on imported simulcast signals by patrons at our racetracks during live meets . import simulcasting handle includes wagers on imported signals at our racetracks when the respective tracks are not conducting live racing meets , at our otbs and through our adw providers throughout the year . export handle includes all patron wagers made on live racing signals sent to other 44 tracks , otbs and adw providers . advance deposit wagering consists of patron wagers through an advance deposit account . we retain as revenue a pre-determined percentage or commission on the total amount wagered , and the balance is distributed to the winning patrons . the gross percentages earned approximated 10 % of handle for our racing operations and 20 % of handle for our online business.l . certain key operating statistics specific to the gaming industry are included in our discussion of performance of
| liquidity and capital resources the following table is a summary of our liquidity and cash flows ( in thousands ) : replace_table_token_17_th the decrease in cash provided by operating activities is primarily due to the recognition of proceeds from the hre trust fund during the year ended december 31 , 2011. in addition , income taxes decreased by $ 8.0 million during the year ended december 31 , 2012 primarily due to the receipt of an income tax refund of $ 10.4 million during 2011 from the overpayment of estimated 2010 federal income taxes . we anticipate that cash flows from operations over the next twelve months will be adequate to fund our business operations and capital expenditures . the increase in cash used in investing activities is primarily due to the acquisitions of riverwalk and bluff and our investment in mvg during the year ended december 31 , 2012. in addition , capital expenditures increased related to our renovation and improvement project at harlow 's and the relocation of our corporate offices . partially offsetting these uses of cash was the receipt of insurance proceeds of $ 10.5 million during the year ended december 31 , 2012 related to natural disasters which occurred during 2011 at harlow 's and during 2012 at churchill downs . the increase in cash provided by financing activities is primarily due to an increase in net borrowings under our revolving credit facilities of $ 82.2 million during the year ended december 31 , 2012 , which were incurred primarily to finance the acquisition of riverwalk and our investment in mvg , as compared to net repayments of $ 137.6 million during the prior year .
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the price of home heating oil is closely linked to the price refiners pay for crude oil , which is the principal cost component of home heating oil . the volatility in the wholesale cost of home heating oil , as measured by the new york mercantile exchange ( “ nymex ” ) , for the fiscal years ending september 30 , 2014 , through 2018 , on a quarterly basis , is illustrated in the following chart ( price per gallon ) : replace_table_token_9_th 31 on november 30 , 2018 , the nymex ultra low sulfur diesel contract closed at $ 1.85 per gallon or $ 0.20 per gallon lower than the average of $ 2.05 in fiscal 2018. income taxes new federal income tax legislation on december 22 , 2017 , the tax cuts and jobs act ( the “ tax reform act ” ) was enacted into law . the tax reform act contains several key tax provisions that will impact the company , including the reduction of the corporate federal income tax rate from 35 % to 21 % effective january 1 , 2018. in addition , between september 28 , 2017 and december 31 , 2022 , the tax reform act allows for the full depreciation , in the year acquired , for certain fixed assets purchased in that year ( also known as 100 % bonus depreciation ) . during fiscal 2018 , the company recorded an $ 11.1 million discrete income tax benefit for the re-measurement of deferred tax assets and liabilities due to the change in the federal corporate income tax rate on which the deferred taxes are based . excluding the $ 11.1 million benefit recorded to income tax expense , our combined federal , state , and local effective income tax rate was reduced from 43.1 % at september 30 , 2017 to 29.6 % for the twelve months ended september 30 , 2018. book versus tax deductions the amount of cash flow that we generate in any given year depends upon a variety of factors including the amount of cash income taxes that we are required to pay , which will increase as tax depreciation and amortization decreases . the amount of depreciation and amortization that we deduct for book ( i.e . , financial reporting ) purposes will differ from the amount that the company can deduct for federal tax purposes . the table below compares the estimated depreciation and amortization for book purposes to the amount that we expect to deduct for federal tax purposes based on currently owned assets . we file our tax returns based on a calendar year . the amounts below are based on our september 30 fiscal year , and the tax amounts include any 100 % bonus depreciation available for fixed assets purchased between october 1 , 2017 and september 30 , 2018. however , this table does not include any forecast of future annual capital purchases . given historical levels of annual capital purchases and the current law related to federal bonus depreciation , it is likely that federal tax depreciation and amortization will exceed book depreciation and amortization for most , if not all , of the periods presented in the table below . estimated depreciation and amortization expense replace_table_token_10_th weather hedge contracts weather conditions have a significant impact on the demand for home heating oil and propane because certain customers depend on these products principally for space heating purposes . actual weather conditions may vary substantially from year to year , significantly affecting our financial performance . to partially mitigate the adverse effect of warm weather on cash flow , we have used weather hedging contracts for a number of years with several providers . under these contracts , we are entitled to a payment if the total number of degree days within the hedge period is less than the ten year average . the “ payment thresholds , ” or strikes , are set at various levels . in addition , we will be obligated to make a payment capped at $ 5.0 million if degree days exceed the ten year average . the hedge period 32 runs from november 1 through march 31 , taken as a whole , for each respective fiscal year . in fiscal 2018 , the company recorded a charge of $ 1.9 million due to colder than average weather conditions . for fiscal 2019 , 2020 and 2021 the maximum that the company can receive is $ 12.5 million and the maximum that the company may be obligated to pay is $ 5.0 million . per gallon gross profit margins we believe home heating oil and propane margins should be evaluated on a cents per gallon basis ( before the effects of increases or decreases in the fair value of derivative instruments ) , as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction . a significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing a ceiling price or fixed price for home heating oil over a fixed period of time , generally twelve to twenty-four months ( “ price-protected ” customers ) . when these price-protected customers agree to purchase home heating oil from us for the next heating season , we purchase option contracts , swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these customers . the amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer per month . in the event that the actual usage exceeds the amount of the hedged volume on a monthly basis , we may be required to obtain additional volume at unfavorable costs . story_separator_special_tag delivery and branch expenses for fiscal 2018 , delivery and branch expenses increased $ 51.1 million , or 16.7 % , to $ 357.6 million , compared to $ 306.5 million for fiscal 2017 , due to additional costs from acquisitions of $ 18.2 million , as well as a $ 31.0 million , or 10.1 % expense increase in the base business , and a $ 1.9 million charge related to an amount due under our weather hedge contract , as temperatures were slightly colder than the payment threshold . ( the weather hedge covered the period from november 1 , 2017 to march 31 , 2018 , taken as a whole . ) expenses in the base business rose by 10.1 % , exceeding the 5.7 % increase in home heating oil and propane volume sold . the extremely cold weather conditions experienced in late december 2017 and early january 2018 , as previously mentioned , not only increased the demand for service calls but also drove an increase in direct delivery expense as well as many other branch expenses . certain december and january deliveries were made at premium labor rates , and the unusual weather conditions necessitated increased staffing levels for delivery and office personnel to handle the tremendous influx of customer inquiries regarding the status of their delivery or service call . we estimate that the extremely cold weather conditions in january 2018 resulted in unanticipated expenses of $ 2.8 million and the increase in volume sold in the base business resulted in higher costs of $ 2.6 million . the company also saw an increase in credit card fees and bad debt expense of $ 5.7 million tied to the higher cost of product and greater use of credit cards . insurance expense rose by $ 4.5 million largely reflecting an increase in the number of insurance claims due in part to the extreme weather conditions . in addition , our fixed costs increased by $ 3.6 million as we strengthened our customer service , sales , operations , and information technology departments . in recognition of the opportunity to differentiate star and , thereby , to attract and retain customers through our service offerings , we have begun offering a concierge level service as a test program , which led to an increase in delivery and branch expenses of $ 3.4 million . we also experienced increases in rent , plant maintenance , higher vehicle fuel costs and increased customer concessions in the base business totaling $ 2.6 million , incurred rebranding expenses of $ 1.1 million , and we also took a charge for severance of $ 0.5 million during the fourth quarter of 2018 as 11 positions were eliminated which should save us over $ 2 million in fiscal 2019. in the prior year 's comparable period we provided disaster relief services and recorded a net benefit to delivery and branch of $ 0.5 million . finally , normal salary , benefit and other expense changes totaled $ 3.7 million , or 1.2 % of the increase . depreciation and amortization for fiscal 2018 , depreciation and amortization expense increased by $ 3.7 million , or 13.2 % , to $ 31.6 million , compared to $ 27.9 million for fiscal 2017 , as increases from acquisitions and accelerated amortization of certain 38 tradenames related to rebranding more than offset the impact of certain assets that became fully amortized . general and administrative expenses for fiscal 2018 , general and administrative expenses decreased $ 0.8 million , to $ 24.2 million , from $ 25.0 million for fiscal 2017 , primarily due to lower legal and professional expenses of $ 1.2 million . in fiscal 2017 the company incurred legal and professional fees related to its october 2017 conversion to a c corporation that did not reoccur in fiscal 2018. this reduction in legal and professional expenses plus lower profit sharing expense of $ 0.3 million and lower frozen pension expense of $ 0.3 million , was largely offset by the costs of increased human resource staffing and other normal salary and benefit changes totaling $ 1.0 million . the company accrues approximately 6 % of adjusted ebitda , as defined in the profit sharing plan , for distribution to its employees , and this amount is payable when the company achieves adjusted ebitda of at least 70 % of the amount budgeted . the dollar amount of the profit sharing pool is subject to increases and decreases in line with increases and decreases in adjusted ebitda . finance charge income for fiscal 2018 , finance charge income increased by $ 0.6 million , or 15.9 % , to $ 4.7 million compared to $ 4.1 million for fiscal 2017. the income primarily represents late customer payment charges . the increase in the wholesale cost of product and the increase in volume led to higher product sales and thus an increase in accounts receivable balances subject to a finance charge . interest expense , net for fiscal 2018 , interest expense increased $ 1.9 million , or 28.6 % , to $ 8.7 million compared to $ 6.8 million for fiscal 2017 primarily due to an increase in average borrowings of $ 53.1 million from $ 81.7 million in fiscal 2017 to $ 134.9 million in fiscal 2018 and an increase in the weighted average interest rate from 4.1 % in fiscal 2017 to 4.6 % in fiscal 2018. the increase in average borrowings of $ 53.1 million was used to fund higher working capital needs , acquisitions and an investment into our captive insurance company . funding of the captive reduced the need to secure our insurance liability with letters of credit . to hedge against rising interest rates , the company entered into an interest rate swap in july 2018 for $ 50.0 million , or 50 % , of our long term debt . amortization of debt issuance
| liquidity and capital resources the following table is a summary of our liquidity and cash flows ( in thousands ) : replace_table_token_17_th the decrease in cash provided by operating activities is primarily due to the recognition of proceeds from the hre trust fund during the year ended december 31 , 2011. in addition , income taxes decreased by $ 8.0 million during the year ended december 31 , 2012 primarily due to the receipt of an income tax refund of $ 10.4 million during 2011 from the overpayment of estimated 2010 federal income taxes . we anticipate that cash flows from operations over the next twelve months will be adequate to fund our business operations and capital expenditures . the increase in cash used in investing activities is primarily due to the acquisitions of riverwalk and bluff and our investment in mvg during the year ended december 31 , 2012. in addition , capital expenditures increased related to our renovation and improvement project at harlow 's and the relocation of our corporate offices . partially offsetting these uses of cash was the receipt of insurance proceeds of $ 10.5 million during the year ended december 31 , 2012 related to natural disasters which occurred during 2011 at harlow 's and during 2012 at churchill downs . the increase in cash provided by financing activities is primarily due to an increase in net borrowings under our revolving credit facilities of $ 82.2 million during the year ended december 31 , 2012 , which were incurred primarily to finance the acquisition of riverwalk and our investment in mvg , as compared to net repayments of $ 137.6 million during the prior year .
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the price of home heating oil is closely linked to the price refiners pay for crude oil , which is the principal cost component of home heating oil . the volatility in the wholesale cost of home heating oil , as measured by the new york mercantile exchange ( “ nymex ” ) , for the fiscal years ending september 30 , 2014 , through 2018 , on a quarterly basis , is illustrated in the following chart ( price per gallon ) : replace_table_token_9_th 31 on november 30 , 2018 , the nymex ultra low sulfur diesel contract closed at $ 1.85 per gallon or $ 0.20 per gallon lower than the average of $ 2.05 in fiscal 2018. income taxes new federal income tax legislation on december 22 , 2017 , the tax cuts and jobs act ( the “ tax reform act ” ) was enacted into law . the tax reform act contains several key tax provisions that will impact the company , including the reduction of the corporate federal income tax rate from 35 % to 21 % effective january 1 , 2018. in addition , between september 28 , 2017 and december 31 , 2022 , the tax reform act allows for the full depreciation , in the year acquired , for certain fixed assets purchased in that year ( also known as 100 % bonus depreciation ) . during fiscal 2018 , the company recorded an $ 11.1 million discrete income tax benefit for the re-measurement of deferred tax assets and liabilities due to the change in the federal corporate income tax rate on which the deferred taxes are based . excluding the $ 11.1 million benefit recorded to income tax expense , our combined federal , state , and local effective income tax rate was reduced from 43.1 % at september 30 , 2017 to 29.6 % for the twelve months ended september 30 , 2018. book versus tax deductions the amount of cash flow that we generate in any given year depends upon a variety of factors including the amount of cash income taxes that we are required to pay , which will increase as tax depreciation and amortization decreases . the amount of depreciation and amortization that we deduct for book ( i.e . , financial reporting ) purposes will differ from the amount that the company can deduct for federal tax purposes . the table below compares the estimated depreciation and amortization for book purposes to the amount that we expect to deduct for federal tax purposes based on currently owned assets . we file our tax returns based on a calendar year . the amounts below are based on our september 30 fiscal year , and the tax amounts include any 100 % bonus depreciation available for fixed assets purchased between october 1 , 2017 and september 30 , 2018. however , this table does not include any forecast of future annual capital purchases . given historical levels of annual capital purchases and the current law related to federal bonus depreciation , it is likely that federal tax depreciation and amortization will exceed book depreciation and amortization for most , if not all , of the periods presented in the table below . estimated depreciation and amortization expense replace_table_token_10_th weather hedge contracts weather conditions have a significant impact on the demand for home heating oil and propane because certain customers depend on these products principally for space heating purposes . actual weather conditions may vary substantially from year to year , significantly affecting our financial performance . to partially mitigate the adverse effect of warm weather on cash flow , we have used weather hedging contracts for a number of years with several providers . under these contracts , we are entitled to a payment if the total number of degree days within the hedge period is less than the ten year average . the “ payment thresholds , ” or strikes , are set at various levels . in addition , we will be obligated to make a payment capped at $ 5.0 million if degree days exceed the ten year average . the hedge period 32 runs from november 1 through march 31 , taken as a whole , for each respective fiscal year . in fiscal 2018 , the company recorded a charge of $ 1.9 million due to colder than average weather conditions . for fiscal 2019 , 2020 and 2021 the maximum that the company can receive is $ 12.5 million and the maximum that the company may be obligated to pay is $ 5.0 million . per gallon gross profit margins we believe home heating oil and propane margins should be evaluated on a cents per gallon basis ( before the effects of increases or decreases in the fair value of derivative instruments ) , as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction . a significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing a ceiling price or fixed price for home heating oil over a fixed period of time , generally twelve to twenty-four months ( “ price-protected ” customers ) . when these price-protected customers agree to purchase home heating oil from us for the next heating season , we purchase option contracts , swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these customers . the amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer per month . in the event that the actual usage exceeds the amount of the hedged volume on a monthly basis , we may be required to obtain additional volume at unfavorable costs . story_separator_special_tag delivery and branch expenses for fiscal 2018 , delivery and branch expenses increased $ 51.1 million , or 16.7 % , to $ 357.6 million , compared to $ 306.5 million for fiscal 2017 , due to additional costs from acquisitions of $ 18.2 million , as well as a $ 31.0 million , or 10.1 % expense increase in the base business , and a $ 1.9 million charge related to an amount due under our weather hedge contract , as temperatures were slightly colder than the payment threshold . ( the weather hedge covered the period from november 1 , 2017 to march 31 , 2018 , taken as a whole . ) expenses in the base business rose by 10.1 % , exceeding the 5.7 % increase in home heating oil and propane volume sold . the extremely cold weather conditions experienced in late december 2017 and early january 2018 , as previously mentioned , not only increased the demand for service calls but also drove an increase in direct delivery expense as well as many other branch expenses . certain december and january deliveries were made at premium labor rates , and the unusual weather conditions necessitated increased staffing levels for delivery and office personnel to handle the tremendous influx of customer inquiries regarding the status of their delivery or service call . we estimate that the extremely cold weather conditions in january 2018 resulted in unanticipated expenses of $ 2.8 million and the increase in volume sold in the base business resulted in higher costs of $ 2.6 million . the company also saw an increase in credit card fees and bad debt expense of $ 5.7 million tied to the higher cost of product and greater use of credit cards . insurance expense rose by $ 4.5 million largely reflecting an increase in the number of insurance claims due in part to the extreme weather conditions . in addition , our fixed costs increased by $ 3.6 million as we strengthened our customer service , sales , operations , and information technology departments . in recognition of the opportunity to differentiate star and , thereby , to attract and retain customers through our service offerings , we have begun offering a concierge level service as a test program , which led to an increase in delivery and branch expenses of $ 3.4 million . we also experienced increases in rent , plant maintenance , higher vehicle fuel costs and increased customer concessions in the base business totaling $ 2.6 million , incurred rebranding expenses of $ 1.1 million , and we also took a charge for severance of $ 0.5 million during the fourth quarter of 2018 as 11 positions were eliminated which should save us over $ 2 million in fiscal 2019. in the prior year 's comparable period we provided disaster relief services and recorded a net benefit to delivery and branch of $ 0.5 million . finally , normal salary , benefit and other expense changes totaled $ 3.7 million , or 1.2 % of the increase . depreciation and amortization for fiscal 2018 , depreciation and amortization expense increased by $ 3.7 million , or 13.2 % , to $ 31.6 million , compared to $ 27.9 million for fiscal 2017 , as increases from acquisitions and accelerated amortization of certain 38 tradenames related to rebranding more than offset the impact of certain assets that became fully amortized . general and administrative expenses for fiscal 2018 , general and administrative expenses decreased $ 0.8 million , to $ 24.2 million , from $ 25.0 million for fiscal 2017 , primarily due to lower legal and professional expenses of $ 1.2 million . in fiscal 2017 the company incurred legal and professional fees related to its october 2017 conversion to a c corporation that did not reoccur in fiscal 2018. this reduction in legal and professional expenses plus lower profit sharing expense of $ 0.3 million and lower frozen pension expense of $ 0.3 million , was largely offset by the costs of increased human resource staffing and other normal salary and benefit changes totaling $ 1.0 million . the company accrues approximately 6 % of adjusted ebitda , as defined in the profit sharing plan , for distribution to its employees , and this amount is payable when the company achieves adjusted ebitda of at least 70 % of the amount budgeted . the dollar amount of the profit sharing pool is subject to increases and decreases in line with increases and decreases in adjusted ebitda . finance charge income for fiscal 2018 , finance charge income increased by $ 0.6 million , or 15.9 % , to $ 4.7 million compared to $ 4.1 million for fiscal 2017. the income primarily represents late customer payment charges . the increase in the wholesale cost of product and the increase in volume led to higher product sales and thus an increase in accounts receivable balances subject to a finance charge . interest expense , net for fiscal 2018 , interest expense increased $ 1.9 million , or 28.6 % , to $ 8.7 million compared to $ 6.8 million for fiscal 2017 primarily due to an increase in average borrowings of $ 53.1 million from $ 81.7 million in fiscal 2017 to $ 134.9 million in fiscal 2018 and an increase in the weighted average interest rate from 4.1 % in fiscal 2017 to 4.6 % in fiscal 2018. the increase in average borrowings of $ 53.1 million was used to fund higher working capital needs , acquisitions and an investment into our captive insurance company . funding of the captive reduced the need to secure our insurance liability with letters of credit . to hedge against rising interest rates , the company entered into an interest rate swap in july 2018 for $ 50.0 million , or 50 % , of our long term debt . amortization of debt issuance
| in cash and $ 1.5 million of deferred liabilities . the gross purchase price was allocated $ 15 . 3 million to intangible assets , $ 7.5 million to fixed assets and $ 2.4 million to working capital . in october 2017 , we deposited $ 34.2 million of cash into an irrevocable trust to secure certain liabilities for our captive insurance company and , as a result , $ 36.6 million of letters of credit were cancelled that previously had secured these liabilities . subsequently , $ 1.0 million of earnings have been reinvested into the irrevocable trust . the cash deposited into the trust is shown on our balance sheet as investments and , correspondingly , reduced cash on our balance sheet . we believe that the investment into the irrevocable trust will lower our letter of credit fees , increase interest income on invested cash balances , and provide us with certain tax advantages attributable to a captive insurance company . our capital expenditures for fiscal 2017 totaled $ 12.2 million , as we invested in computer hardware and software ( $ 4.1 million ) , refurbished certain physical plants ( $ 2.5 million ) , expanded our propane operations ( $ 2.5 million ) and made additions to our fleet ( $ 2.9 million ) and other equipment ( $ 0.2 million ) . we also completed seven acquisitions for aggregate purchase price of approximately $ 44.8 million ; comprised of $ 43.3 million in cash and $ 1.5 million of deferred liabilities ( including $ 0.6 million of contingent consideration ) . the gross purchase price was allocated $ 37.5 million to intangible assets , $ 10.2 million to fixed assets and reduced by $ 2.9 million in working capital credits .
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” 28 we believe our reported revenue and the amount of revenue recognized in future periods will depend on , among other things , the : competitiveness of our technology ; and size , duration , timing , terms and type of : ◦ contract renewals with existing customers ; ◦ additional sales to existing customers ; and ◦ sales to new customers . revenue by year the following table shows our revenue for fiscal 2016 , 2015 and 2014 and the change in revenue between years : replace_table_token_6_th product and maintenance revenue increased during fiscal 2016 , as compared to fiscal 2015 , primarily because of an increase in revenue from our palladium z1 enterprise emulation system and our digital ic product offerings , offset by a reduction in revenue from our ip offerings . product and maintenance revenue increased during fiscal 2015 , as compared to fiscal 2014 , due to increased demand for our software , emulation and prototyping hardware and ip offerings . services revenue increased during fiscal 2016 , as compared to fiscal 2015 , primarily due to the timing of incremental revenue from certain customer agreements that was recognized at the completion of the contract when all specified deliverables were made available . services revenue increased during fiscal 2015 , as compared to fiscal 2014 , due to increased demand for our service and ip offerings . total revenue may fluctuate from period to period based on demand for , and our resources to fulfill , our services , emulation hardware and ip offerings . no one customer accounted for 10 % or more of total revenue during fiscal 2016 , 2015 or 2014 . revenue by product group the following table shows the percentage of product and related maintenance revenue contributed by each of our five product groups and services during fiscal 2016 , 2015 and 2014 : replace_table_token_7_th as described in note 2 in the notes to consolidated financial statements , certain of our licensing arrangements allow customers the ability to remix among software products . additionally , we have arrangements with customers that include a combination of our products , with the actual product selection and number of licensed users to be determined at a later date . for these arrangements , we estimate the allocation of the revenue to product groups based upon the expected usage of our products . the actual usage of our products by these customers may differ and , if that proves to be the case , the revenue allocation in the table above would differ . 29 revenue by geography replace_table_token_8_th for the primary factors contributing to the increase in revenue for the united states , other americas , asia , and europe , middle east and africa during fiscal 2016 , as compared to fiscal 2015 , see the general description under “ revenue by year ” above . revenue for japan decreased during fiscal 2016 , as compared to fiscal 2015 , primarily due to difficult business conditions facing our japanese customers . for the primary factors contributing to the increase in revenue for the united states , other americas and asia during fiscal 2015 , as compared to fiscal 2014 , see the general description under “ revenue by year ” above . revenue for europe , middle east and africa decreased during fiscal 2015 , as compared to fiscal 2014 , primarily due to a reduction of services revenue as we shifted our resources from design services to our ip offerings . revenue for japan decreased during fiscal 2015 , as compared to fiscal 2014 , primarily due to the continued depreciation of the japanese yen as well as difficult business conditions facing our japanese customers . most of our revenue is transacted in the united states dollar . however , certain revenue transactions are denominated in foreign currencies . for an additional description of how changes in foreign exchange rates affect our consolidated financial statements , see the discussion in item 7a , “ quantitative and qualitative disclosures about market risk – foreign currency risk . ” revenue by geography as a percent of total revenue replace_table_token_9_th 30 cost of revenue replace_table_token_10_th the following table shows cost of revenue as a percentage of related revenue for fiscal 2016 , 2015 and 2014 : replace_table_token_11_th cost of product and maintenance cost of product and maintenance includes costs associated with the sale and lease of our emulation and prototyping hardware and licensing of our software and ip products , certain employee salary and benefits and other employee-related costs , cost of our customer support services , amortization of technology-related and maintenance-related acquired intangibles , costs of technical documentation and royalties payable to third-party vendors . costs associated with our emulation and prototyping hardware products include materials , assembly , applicable reserves and overhead . these hardware manufacturing costs make our cost of emulation and prototyping hardware product higher , as a percentage of revenue , than our cost of software and ip products . a summary of cost of product and maintenance for fiscal 2016 , 2015 and 2014 is as follows : replace_table_token_12_th cost of product and maintenance depends primarily on our hardware product sales in any given period . cost of product and maintenance is also affected by employee salary and benefits and other employee-related costs , as well as the timing and extent to which we acquire intangible assets , acquire or license third-parties ' intellectual property or technology and sell our products that include such acquired or licensed intellectual property or technology . story_separator_special_tag if different conditions were to prevail such that accurate estimates could not be made , then the use of the completed contract method would be required and the recognition of all revenue and costs would be deferred until the project was completed . such a change could have a material impact on our results of operations . if a group of contracts is so closely related that they are , in effect , part of a single arrangement , such arrangements are deemed to be an mea . we exercise significant judgment to evaluate the relevant facts and circumstances in determining whether the separate contracts should be accounted for individually as distinct arrangements or whether the separate contracts are , in substance , an mea . our judgments about whether a group of contracts is an mea can affect the timing of revenue recognition under those contracts , which could have an effect on our results of operations for the periods involved . for example , a perpetual license agreement that would otherwise result in upfront revenue upon delivery may be deemed part of an mea when it is executed within close proximity , or in contemplation of , other license agreements that require recurring revenue recognition with the same customer , in which event all the revenue is recognized over the longest term of any component of the mea instead of up front . for an mea that includes software and nonsoftware elements , we allocate consideration to all software elements as a group and all nonsoftware elements based on their relative standalone selling prices . revenue allocated to each deliverable is then recognized when all four criteria are met . in these circumstances , there is a hierarchy to determine the standalone selling price to be used for allocating consideration to the deliverables as follows : vendor-specific objective evidence of fair value , or vsoe ; third-party evidence of selling price , or tpe ; and best estimate of the selling price , or besp . we calculate the besp of our hardware products based on our pricing practices , including the historical average prices charged for comparable hardware products , because vsoe or tpe can not be established . our process for determining besp for our software deliverables without vsoe or tpe takes into account multiple factors that vary depending upon the unique facts and circumstances related to each deliverable . key external and internal factors considered in developing the besps include prices charged by us for similar arrangements , historical pricing practices and the nature of the product . in addition , when developing besps , we may consider other factors as appropriate , including the pricing of competitive alternatives if they exist , and product-specific business objectives . we exercise significant judgment to evaluate the relevant facts and circumstances in calculating the besp of the deliverables in our arrangements . 40 business combinations when we acquire businesses , we allocate the purchase price to the acquired tangible assets and assumed liabilities , including deferred revenue , liabilities associated with the fair value of contingent consideration and acquired identifiable intangible assets . any residual purchase price is recorded as goodwill . the allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities , especially with respect to intangible assets and goodwill . these estimates are based on information obtained from management of the acquired companies , our assessment of this information , and historical experience . these estimates can include , but are not limited to , the cash flows that an acquired business is expected to generate in the future , the cash flows that specific assets acquired with that business are expected to generate in the future , the appropriate weighted-average cost of capital , and the cost savings expected to be derived from acquiring an asset . these estimates are inherently uncertain and unpredictable , and if different estimates were used , the purchase price for the acquisition could be allocated to the acquired assets and assumed liabilities differently from the allocation that we have made to the acquired assets and assumed liabilities . in addition , unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates , and if such events occur , we may be required to adjust the value allocated to acquired assets or assumed liabilities . we also make significant judgments and estimates when we assign useful lives to the definite-lived intangible assets identified as part of our acquisitions . these estimates are inherently uncertain and if we used different estimates , the useful life over which we amortize intangible assets would be different . in addition , unanticipated events and circumstances may occur that may impact the useful life assigned to our intangible assets , which would impact our amortization of intangible assets expense and our results of operations . fair value of financial instruments on a quarterly basis , we measure at fair value certain financial assets and liabilities . inputs to valuation techniques are observable or unobservable . observable inputs reflect market data obtained from independent sources , while unobservable inputs reflect our market assumptions . while we believe the observable and unobservable inputs we use to measure the fair value are reasonable , different inputs or estimates may materially impact the resulting fair value measurements of these instruments and may also impact our results of operations . for an additional description of our fair value measurements , see note 16 in the notes to consolidated financial statements . new accounting standards revenue recognition in may 2014 , the fasb issued a new standard related to revenue recognition . under the new standard , revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those
| in cash and $ 1.5 million of deferred liabilities . the gross purchase price was allocated $ 15 . 3 million to intangible assets , $ 7.5 million to fixed assets and $ 2.4 million to working capital . in october 2017 , we deposited $ 34.2 million of cash into an irrevocable trust to secure certain liabilities for our captive insurance company and , as a result , $ 36.6 million of letters of credit were cancelled that previously had secured these liabilities . subsequently , $ 1.0 million of earnings have been reinvested into the irrevocable trust . the cash deposited into the trust is shown on our balance sheet as investments and , correspondingly , reduced cash on our balance sheet . we believe that the investment into the irrevocable trust will lower our letter of credit fees , increase interest income on invested cash balances , and provide us with certain tax advantages attributable to a captive insurance company . our capital expenditures for fiscal 2017 totaled $ 12.2 million , as we invested in computer hardware and software ( $ 4.1 million ) , refurbished certain physical plants ( $ 2.5 million ) , expanded our propane operations ( $ 2.5 million ) and made additions to our fleet ( $ 2.9 million ) and other equipment ( $ 0.2 million ) . we also completed seven acquisitions for aggregate purchase price of approximately $ 44.8 million ; comprised of $ 43.3 million in cash and $ 1.5 million of deferred liabilities ( including $ 0.6 million of contingent consideration ) . the gross purchase price was allocated $ 37.5 million to intangible assets , $ 10.2 million to fixed assets and reduced by $ 2.9 million in working capital credits .
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” 28 we believe our reported revenue and the amount of revenue recognized in future periods will depend on , among other things , the : competitiveness of our technology ; and size , duration , timing , terms and type of : ◦ contract renewals with existing customers ; ◦ additional sales to existing customers ; and ◦ sales to new customers . revenue by year the following table shows our revenue for fiscal 2016 , 2015 and 2014 and the change in revenue between years : replace_table_token_6_th product and maintenance revenue increased during fiscal 2016 , as compared to fiscal 2015 , primarily because of an increase in revenue from our palladium z1 enterprise emulation system and our digital ic product offerings , offset by a reduction in revenue from our ip offerings . product and maintenance revenue increased during fiscal 2015 , as compared to fiscal 2014 , due to increased demand for our software , emulation and prototyping hardware and ip offerings . services revenue increased during fiscal 2016 , as compared to fiscal 2015 , primarily due to the timing of incremental revenue from certain customer agreements that was recognized at the completion of the contract when all specified deliverables were made available . services revenue increased during fiscal 2015 , as compared to fiscal 2014 , due to increased demand for our service and ip offerings . total revenue may fluctuate from period to period based on demand for , and our resources to fulfill , our services , emulation hardware and ip offerings . no one customer accounted for 10 % or more of total revenue during fiscal 2016 , 2015 or 2014 . revenue by product group the following table shows the percentage of product and related maintenance revenue contributed by each of our five product groups and services during fiscal 2016 , 2015 and 2014 : replace_table_token_7_th as described in note 2 in the notes to consolidated financial statements , certain of our licensing arrangements allow customers the ability to remix among software products . additionally , we have arrangements with customers that include a combination of our products , with the actual product selection and number of licensed users to be determined at a later date . for these arrangements , we estimate the allocation of the revenue to product groups based upon the expected usage of our products . the actual usage of our products by these customers may differ and , if that proves to be the case , the revenue allocation in the table above would differ . 29 revenue by geography replace_table_token_8_th for the primary factors contributing to the increase in revenue for the united states , other americas , asia , and europe , middle east and africa during fiscal 2016 , as compared to fiscal 2015 , see the general description under “ revenue by year ” above . revenue for japan decreased during fiscal 2016 , as compared to fiscal 2015 , primarily due to difficult business conditions facing our japanese customers . for the primary factors contributing to the increase in revenue for the united states , other americas and asia during fiscal 2015 , as compared to fiscal 2014 , see the general description under “ revenue by year ” above . revenue for europe , middle east and africa decreased during fiscal 2015 , as compared to fiscal 2014 , primarily due to a reduction of services revenue as we shifted our resources from design services to our ip offerings . revenue for japan decreased during fiscal 2015 , as compared to fiscal 2014 , primarily due to the continued depreciation of the japanese yen as well as difficult business conditions facing our japanese customers . most of our revenue is transacted in the united states dollar . however , certain revenue transactions are denominated in foreign currencies . for an additional description of how changes in foreign exchange rates affect our consolidated financial statements , see the discussion in item 7a , “ quantitative and qualitative disclosures about market risk – foreign currency risk . ” revenue by geography as a percent of total revenue replace_table_token_9_th 30 cost of revenue replace_table_token_10_th the following table shows cost of revenue as a percentage of related revenue for fiscal 2016 , 2015 and 2014 : replace_table_token_11_th cost of product and maintenance cost of product and maintenance includes costs associated with the sale and lease of our emulation and prototyping hardware and licensing of our software and ip products , certain employee salary and benefits and other employee-related costs , cost of our customer support services , amortization of technology-related and maintenance-related acquired intangibles , costs of technical documentation and royalties payable to third-party vendors . costs associated with our emulation and prototyping hardware products include materials , assembly , applicable reserves and overhead . these hardware manufacturing costs make our cost of emulation and prototyping hardware product higher , as a percentage of revenue , than our cost of software and ip products . a summary of cost of product and maintenance for fiscal 2016 , 2015 and 2014 is as follows : replace_table_token_12_th cost of product and maintenance depends primarily on our hardware product sales in any given period . cost of product and maintenance is also affected by employee salary and benefits and other employee-related costs , as well as the timing and extent to which we acquire intangible assets , acquire or license third-parties ' intellectual property or technology and sell our products that include such acquired or licensed intellectual property or technology . story_separator_special_tag if different conditions were to prevail such that accurate estimates could not be made , then the use of the completed contract method would be required and the recognition of all revenue and costs would be deferred until the project was completed . such a change could have a material impact on our results of operations . if a group of contracts is so closely related that they are , in effect , part of a single arrangement , such arrangements are deemed to be an mea . we exercise significant judgment to evaluate the relevant facts and circumstances in determining whether the separate contracts should be accounted for individually as distinct arrangements or whether the separate contracts are , in substance , an mea . our judgments about whether a group of contracts is an mea can affect the timing of revenue recognition under those contracts , which could have an effect on our results of operations for the periods involved . for example , a perpetual license agreement that would otherwise result in upfront revenue upon delivery may be deemed part of an mea when it is executed within close proximity , or in contemplation of , other license agreements that require recurring revenue recognition with the same customer , in which event all the revenue is recognized over the longest term of any component of the mea instead of up front . for an mea that includes software and nonsoftware elements , we allocate consideration to all software elements as a group and all nonsoftware elements based on their relative standalone selling prices . revenue allocated to each deliverable is then recognized when all four criteria are met . in these circumstances , there is a hierarchy to determine the standalone selling price to be used for allocating consideration to the deliverables as follows : vendor-specific objective evidence of fair value , or vsoe ; third-party evidence of selling price , or tpe ; and best estimate of the selling price , or besp . we calculate the besp of our hardware products based on our pricing practices , including the historical average prices charged for comparable hardware products , because vsoe or tpe can not be established . our process for determining besp for our software deliverables without vsoe or tpe takes into account multiple factors that vary depending upon the unique facts and circumstances related to each deliverable . key external and internal factors considered in developing the besps include prices charged by us for similar arrangements , historical pricing practices and the nature of the product . in addition , when developing besps , we may consider other factors as appropriate , including the pricing of competitive alternatives if they exist , and product-specific business objectives . we exercise significant judgment to evaluate the relevant facts and circumstances in calculating the besp of the deliverables in our arrangements . 40 business combinations when we acquire businesses , we allocate the purchase price to the acquired tangible assets and assumed liabilities , including deferred revenue , liabilities associated with the fair value of contingent consideration and acquired identifiable intangible assets . any residual purchase price is recorded as goodwill . the allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities , especially with respect to intangible assets and goodwill . these estimates are based on information obtained from management of the acquired companies , our assessment of this information , and historical experience . these estimates can include , but are not limited to , the cash flows that an acquired business is expected to generate in the future , the cash flows that specific assets acquired with that business are expected to generate in the future , the appropriate weighted-average cost of capital , and the cost savings expected to be derived from acquiring an asset . these estimates are inherently uncertain and unpredictable , and if different estimates were used , the purchase price for the acquisition could be allocated to the acquired assets and assumed liabilities differently from the allocation that we have made to the acquired assets and assumed liabilities . in addition , unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates , and if such events occur , we may be required to adjust the value allocated to acquired assets or assumed liabilities . we also make significant judgments and estimates when we assign useful lives to the definite-lived intangible assets identified as part of our acquisitions . these estimates are inherently uncertain and if we used different estimates , the useful life over which we amortize intangible assets would be different . in addition , unanticipated events and circumstances may occur that may impact the useful life assigned to our intangible assets , which would impact our amortization of intangible assets expense and our results of operations . fair value of financial instruments on a quarterly basis , we measure at fair value certain financial assets and liabilities . inputs to valuation techniques are observable or unobservable . observable inputs reflect market data obtained from independent sources , while unobservable inputs reflect our market assumptions . while we believe the observable and unobservable inputs we use to measure the fair value are reasonable , different inputs or estimates may materially impact the resulting fair value measurements of these instruments and may also impact our results of operations . for an additional description of our fair value measurements , see note 16 in the notes to consolidated financial statements . new accounting standards revenue recognition in may 2014 , the fasb issued a new standard related to revenue recognition . under the new standard , revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those
| cash flows from financing activities cash flows provided by ( used for ) financing activities during fiscal 2016 , 2015 and 2014 were as follows : replace_table_token_27_th the decrease in cash used for financing activities during fiscal 2016 , as compared to fiscal 2015 , was primarily due to proceeds from the 2019 term loan and our revolving credit facility and a decrease in payments made to settle outstanding borrowings , offset by an increase in payments made to repurchase shares of our common stock . the increase in cash used for financing activities during fiscal 2015 , as compared to fiscal 2014 , was primarily due to payments made to settle the principal value of the 2015 notes and an increase in payments made to repurchase shares of our common stock . on january 28 , 2016 , we entered into a $ 300.0 million three -year senior unsecured non-amortizing term loan facility due on january 28 , 2019 , or the 2019 term loan , with a group of lenders led by jpmorgan chase bank , n.a. , as administrative agent . the 2019 term loan is unsecured . for additional information relating to the 2019 term loan , see note 3 in the notes to consolidated financial statements . 37 our revolving credit facility with a group of lenders led by bank of america , n.a. , as administrative agent , provided for borrowings up to $ 250.0 million , with the right to request increased capacity up to an additional $ 150.0 million upon the receipt of lender commitments , for total maximum borrowings of $ 400.0 million . as of december 31 , 2016 , outstanding borrowings under the revolving credit facility were $ 50.0 million . this revolving credit facility was replaced by a new revolving credit facility on january 30 , 2017 , as described below .
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we will continue to employ a disciplined approach when assessing , acquiring or managing portfolios of risk . we manage claims in a professional and disciplined manner , drawing on our global team of in-house claims management experts as we aim to proactively manage risks and claims efficiently . we employ an opportunistic commutation strategy in which we negotiate with policyholders and claimants with a goal of commuting or settling existing insurance and reinsurance liabilities at a discount to the ultimate liability and also to avoid unnecessary legal and other associated run-off fees and expense . as a result of the number of transactions we have completed over the years , we have a complex organizational structure consisting of licensed entities across many jurisdictions . in managing our group , we continue to look for opportunities to simplify our legal structure by way of company amalgamations and mergers , reinsurance , or other transactions to improve capital efficiency and decrease ongoing compliance and operational costs over time . in addition , we seek to pool risk in areas where we maintain the expertise to manage such risk to achieve operational efficiencies , which will allow us to most efficiently manage our assets and to achieve capital diversification benefits . underwriting our underwriting results can be affected by changes in premium rates , significant losses , development of prior year loss reserves and current year underwriting margins . in general , our expectation for 2018 is that underwriting margins will be slightly higher than in 2017 , with premium rates expected to be impacted by both market and general economic conditions . we continue to see overcapacity in many markets which can impact premium rates and or terms and conditions . if general economic conditions worsen , a decrease in the level of economic activity may impact insurable risks and our ability to write premium that is acceptable to us . we may adjust our level of reinsurance to maintain an amount of net exposure that is aligned with our risk tolerance . for the year ended december 31 , 2017 compared to 2016 , total gross premiums written were relatively consistent in our atrium segment and marginally higher in our starstone segment as we selectively grew in certain lines , which included the development of additional underwriting capabilities . starstone 's net earned premium , net incurred losses and acquisition costs decreased significantly as a result of the 35 % quota share reinsurance agreement with our equity method investee kaylare holdings ltd. ( `` kaylare `` ) , which covers the 2016 and subsequent underwriting years . the insurance and reinsurance industry was significantly impacted by large losses in the second half of 2017 , notably hurricanes harvey , irma and maria , as well as the mexico earthquake and the wildfires in california . given the nature and complexity of these events it may take some time before the full extent of the losses is known , and the initial reported losses may develop favorably or adversely in the future . additionally , the losses may have an impact on capacity and pricing . however at this time we can not estimate with any certainty whether any such impacts would be significant . our industry continues to experience challenging underwriting market conditions , and o ur strategy is to maintain our disciplined underwriting approach and strong risk management practices , which may result in us writing less premium in certain lines of business than we wrote in 2017. however , we will seek to mitigate these challenging conditions through our diversified book of business , established distribution channels and geographic reach . we will continue to seek growth in certain areas where we have identified opportunities for expansion and the opportunity for increases in premium rates . in addition , our underwriting operations are well-positioned to capture profitable active business from our run-off transactions , where such business is in attractive specialty lines . in both our atrium and starstone segments we will maintain our focus on underwriting for profitability . 46 investments markets are inherently uncertain and investment performance may be impacted with changes in market volatility . we expect to maintain our investment strategy , which is to seek superior risk adjusted returns while preserving liquidity and capital and maintaining a prudent diversification of assets . we are implementing strategies to more closely align the duration in certain investment portfolios to the duration of our reserves . we will continue allocating a portion of our portfolio to non-investment grade securities or alternative investments , in accordance with our investment guidelines , which carry significant diversification and return benefits . net investment income is a significant component of our earnings and we see fully priced asset valuations across many asset classes compared to historical averages . if investment conditions or general economic conditions change during 2018 , we may experience further pressure on our investment yields and realized or unrealized losses on investments could materialize . for further discussion of our investments , see `` investable assets `` below . u.s. taxation reform on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( the “ tax act ” ) , as described in `` item 1a . risk factors - risk relating to taxation . `` the tax act makes broad changes to the u.s. tax code , some of which were applicable in 2017 and others effective for tax years ending after december 31 , 2017. the impact of the tax act to enstar in 2017 is described in `` consolidated results of operations - consolidated overview `` below . in response to the introduction of the tax act , as of january 1 , 2018 we non-renewed certain of our active underwriting affiliate reinsurance transactions ceded from our u.s. operating entities to our non-u.s. affiliates . story_separator_special_tag `` 53 net premiums earned : the following table shows the gross and net premiums written and earned for the non-life run-off segment for the years ended december 31 , 2017 , 2016 and 2015 : replace_table_token_9_th because business in this segment is in run-off , our general expectation is for premiums associated with legacy business to decline in future periods . however , the actual amount in any particular year will be impacted by new acquisitions during the year , and the run-off of premiums from acquisitions completed in recent years . 2017 versus 2016 : premiums written and earned in 2017 and 2016 related primarily to sussex 's run-off business . 2016 versus 2015 : premiums written and earned in 2016 and 2015 related primarily to sussex 's run-off business . net incurred losses and lae : the following table shows the components of net incurred losses and lae for the non-life run-off segment for the years ended december 31 , 2017 , 2016 and 2015 : replace_table_token_10_th ( 1 ) net change in case and lae reserves comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys , less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims . ( 2 ) net change in ibnr represents the gross change in our actuarial estimates of ibnr , less amounts recoverable . 54 2017 versus 2016 : the net reduction in incurred losses and lae for the year ended december 31 , 2017 of $ 190.7 million included net incurred losses a nd lae of $ 5.9 million related to current period net earned premium , primarily for the portion of the run-off business acquired with sussex . excluding current period net incurred losses and lae of $ 5.9 million , net incurred losses and lae liabilities relating to prior periods were reduced by $ 196.5 million , which was attributable to a reduction in estimates of net ultimate losses of $ 181.3 million , a reduction in provisions for bad debt of $ 1.5 million and a reduction in provisions for unallocated lae of $ 54.1 million , relating to 2017 run-off activity , partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $ 10.1 million and a change in fair value of $ 30.3 million related to our assumed retroactive reinsurance agreements with rsa and qbe completed in 2017 and for which we have elected the fair value option . the reduction of estimates in net ultimate losses for the year ended december 31 , 2017 was reduced by amortization of the deferred charge of $ 14.4 million . overall , the reduction in net incurred losses and lae was lower by $ 95.2 million in 2017 compared with 2016 , primarily due to experiencing approximately $ 82.0 million of adverse net loss reserve development on certain asbestos reserves relating to increases in our estimates of ultimate losses as well as certain claims judgments . the reduction in estimates of net ultimate losses relating to prior periods of $ 181.3 million comprised reductions in ibnr reserves of $ 393.1 million partially offset by net incurred loss development of $ 211.8 million , which includes amortization of deferred charges of $ 14.4 million . the decrease in the estimate of net ibnr reserves of $ 393.1 million ( compared to $ 349.7 million during the year ended december 31 , 2016 ) , comprised a decrease of $ 70.0 million relating to asbestos liabilities ( compared to an increase of $ 39.4 million in 2016 ) , an decrease of $ 7.5 million relating to environmental liabilities ( compared to an increase $ 35.5 million in 2016 ) , a decrease of $ 7.2 million relating to general casualty liabilities ( compared to $ 0.8 million in 2016 ) , a decrease of $ 156.2 million relating to workers ' compensation liabilities ( compared to $ 333.2 million in 2016 ) and a decrease of $ 152.2 million relating to all other remaining liabilities ( compared to $ 90.6 million in 2016 ) . the reduction in net ibnr reserves of $ 393.1 million relating to prior periods was a result of the application , on a basis consistent with the assumptions applied in the prior period , of our actuarial methodologies to revised historical loss development data , following 59 commutations and policy buy-backs , to estimate loss reserves required to cover liabilities for unpaid losses and lae relating to non-commuted exposures . the prior period estimate of net ibnr reserves was reduced as a result of the combined impact on all classes of business of loss development activity during 2017 , including commutations and the favorable trend of loss development related to non-commuted policies compared to prior forecasts . the net incurred loss development resulting from settlement of net advised case and lae reserves of $ 381.5 million for net paid losses of $ 578.9 million related to the settlement of non-commuted losses in the year and 59 commutations and policy buy-backs of assumed and ceded exposures . net advised case and lae reserves settled by way of commutation and policy buyback during the year ended december 31 , 2017 amounted to $ 7.4 million ( comprising $ 23.2 million of assumed case reserves and lae reserves , partially offset by $ 15.8 million of ceded incurred reinsurance recoverable case reserves ) . the reduction in provisions for bad debt of $ 1.5 million was a result of the favorable resolution of contractual disputes with reinsurers , the reduction in bad debt provisions for insolvent reinsurers as a result of distributions received and the reduction of specific provisions held for potential disputes with reinsurers . 2016 versus 2015 : the net reduction in incurred losses
| cash flows from financing activities cash flows provided by ( used for ) financing activities during fiscal 2016 , 2015 and 2014 were as follows : replace_table_token_27_th the decrease in cash used for financing activities during fiscal 2016 , as compared to fiscal 2015 , was primarily due to proceeds from the 2019 term loan and our revolving credit facility and a decrease in payments made to settle outstanding borrowings , offset by an increase in payments made to repurchase shares of our common stock . the increase in cash used for financing activities during fiscal 2015 , as compared to fiscal 2014 , was primarily due to payments made to settle the principal value of the 2015 notes and an increase in payments made to repurchase shares of our common stock . on january 28 , 2016 , we entered into a $ 300.0 million three -year senior unsecured non-amortizing term loan facility due on january 28 , 2019 , or the 2019 term loan , with a group of lenders led by jpmorgan chase bank , n.a. , as administrative agent . the 2019 term loan is unsecured . for additional information relating to the 2019 term loan , see note 3 in the notes to consolidated financial statements . 37 our revolving credit facility with a group of lenders led by bank of america , n.a. , as administrative agent , provided for borrowings up to $ 250.0 million , with the right to request increased capacity up to an additional $ 150.0 million upon the receipt of lender commitments , for total maximum borrowings of $ 400.0 million . as of december 31 , 2016 , outstanding borrowings under the revolving credit facility were $ 50.0 million . this revolving credit facility was replaced by a new revolving credit facility on january 30 , 2017 , as described below .
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we will continue to employ a disciplined approach when assessing , acquiring or managing portfolios of risk . we manage claims in a professional and disciplined manner , drawing on our global team of in-house claims management experts as we aim to proactively manage risks and claims efficiently . we employ an opportunistic commutation strategy in which we negotiate with policyholders and claimants with a goal of commuting or settling existing insurance and reinsurance liabilities at a discount to the ultimate liability and also to avoid unnecessary legal and other associated run-off fees and expense . as a result of the number of transactions we have completed over the years , we have a complex organizational structure consisting of licensed entities across many jurisdictions . in managing our group , we continue to look for opportunities to simplify our legal structure by way of company amalgamations and mergers , reinsurance , or other transactions to improve capital efficiency and decrease ongoing compliance and operational costs over time . in addition , we seek to pool risk in areas where we maintain the expertise to manage such risk to achieve operational efficiencies , which will allow us to most efficiently manage our assets and to achieve capital diversification benefits . underwriting our underwriting results can be affected by changes in premium rates , significant losses , development of prior year loss reserves and current year underwriting margins . in general , our expectation for 2018 is that underwriting margins will be slightly higher than in 2017 , with premium rates expected to be impacted by both market and general economic conditions . we continue to see overcapacity in many markets which can impact premium rates and or terms and conditions . if general economic conditions worsen , a decrease in the level of economic activity may impact insurable risks and our ability to write premium that is acceptable to us . we may adjust our level of reinsurance to maintain an amount of net exposure that is aligned with our risk tolerance . for the year ended december 31 , 2017 compared to 2016 , total gross premiums written were relatively consistent in our atrium segment and marginally higher in our starstone segment as we selectively grew in certain lines , which included the development of additional underwriting capabilities . starstone 's net earned premium , net incurred losses and acquisition costs decreased significantly as a result of the 35 % quota share reinsurance agreement with our equity method investee kaylare holdings ltd. ( `` kaylare `` ) , which covers the 2016 and subsequent underwriting years . the insurance and reinsurance industry was significantly impacted by large losses in the second half of 2017 , notably hurricanes harvey , irma and maria , as well as the mexico earthquake and the wildfires in california . given the nature and complexity of these events it may take some time before the full extent of the losses is known , and the initial reported losses may develop favorably or adversely in the future . additionally , the losses may have an impact on capacity and pricing . however at this time we can not estimate with any certainty whether any such impacts would be significant . our industry continues to experience challenging underwriting market conditions , and o ur strategy is to maintain our disciplined underwriting approach and strong risk management practices , which may result in us writing less premium in certain lines of business than we wrote in 2017. however , we will seek to mitigate these challenging conditions through our diversified book of business , established distribution channels and geographic reach . we will continue to seek growth in certain areas where we have identified opportunities for expansion and the opportunity for increases in premium rates . in addition , our underwriting operations are well-positioned to capture profitable active business from our run-off transactions , where such business is in attractive specialty lines . in both our atrium and starstone segments we will maintain our focus on underwriting for profitability . 46 investments markets are inherently uncertain and investment performance may be impacted with changes in market volatility . we expect to maintain our investment strategy , which is to seek superior risk adjusted returns while preserving liquidity and capital and maintaining a prudent diversification of assets . we are implementing strategies to more closely align the duration in certain investment portfolios to the duration of our reserves . we will continue allocating a portion of our portfolio to non-investment grade securities or alternative investments , in accordance with our investment guidelines , which carry significant diversification and return benefits . net investment income is a significant component of our earnings and we see fully priced asset valuations across many asset classes compared to historical averages . if investment conditions or general economic conditions change during 2018 , we may experience further pressure on our investment yields and realized or unrealized losses on investments could materialize . for further discussion of our investments , see `` investable assets `` below . u.s. taxation reform on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the tax cuts and jobs act ( the “ tax act ” ) , as described in `` item 1a . risk factors - risk relating to taxation . `` the tax act makes broad changes to the u.s. tax code , some of which were applicable in 2017 and others effective for tax years ending after december 31 , 2017. the impact of the tax act to enstar in 2017 is described in `` consolidated results of operations - consolidated overview `` below . in response to the introduction of the tax act , as of january 1 , 2018 we non-renewed certain of our active underwriting affiliate reinsurance transactions ceded from our u.s. operating entities to our non-u.s. affiliates . story_separator_special_tag `` 53 net premiums earned : the following table shows the gross and net premiums written and earned for the non-life run-off segment for the years ended december 31 , 2017 , 2016 and 2015 : replace_table_token_9_th because business in this segment is in run-off , our general expectation is for premiums associated with legacy business to decline in future periods . however , the actual amount in any particular year will be impacted by new acquisitions during the year , and the run-off of premiums from acquisitions completed in recent years . 2017 versus 2016 : premiums written and earned in 2017 and 2016 related primarily to sussex 's run-off business . 2016 versus 2015 : premiums written and earned in 2016 and 2015 related primarily to sussex 's run-off business . net incurred losses and lae : the following table shows the components of net incurred losses and lae for the non-life run-off segment for the years ended december 31 , 2017 , 2016 and 2015 : replace_table_token_10_th ( 1 ) net change in case and lae reserves comprises the movement during the year in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys , less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims . ( 2 ) net change in ibnr represents the gross change in our actuarial estimates of ibnr , less amounts recoverable . 54 2017 versus 2016 : the net reduction in incurred losses and lae for the year ended december 31 , 2017 of $ 190.7 million included net incurred losses a nd lae of $ 5.9 million related to current period net earned premium , primarily for the portion of the run-off business acquired with sussex . excluding current period net incurred losses and lae of $ 5.9 million , net incurred losses and lae liabilities relating to prior periods were reduced by $ 196.5 million , which was attributable to a reduction in estimates of net ultimate losses of $ 181.3 million , a reduction in provisions for bad debt of $ 1.5 million and a reduction in provisions for unallocated lae of $ 54.1 million , relating to 2017 run-off activity , partially offset by amortization of fair value adjustments over the estimated payout period relating to companies acquired amounting to $ 10.1 million and a change in fair value of $ 30.3 million related to our assumed retroactive reinsurance agreements with rsa and qbe completed in 2017 and for which we have elected the fair value option . the reduction of estimates in net ultimate losses for the year ended december 31 , 2017 was reduced by amortization of the deferred charge of $ 14.4 million . overall , the reduction in net incurred losses and lae was lower by $ 95.2 million in 2017 compared with 2016 , primarily due to experiencing approximately $ 82.0 million of adverse net loss reserve development on certain asbestos reserves relating to increases in our estimates of ultimate losses as well as certain claims judgments . the reduction in estimates of net ultimate losses relating to prior periods of $ 181.3 million comprised reductions in ibnr reserves of $ 393.1 million partially offset by net incurred loss development of $ 211.8 million , which includes amortization of deferred charges of $ 14.4 million . the decrease in the estimate of net ibnr reserves of $ 393.1 million ( compared to $ 349.7 million during the year ended december 31 , 2016 ) , comprised a decrease of $ 70.0 million relating to asbestos liabilities ( compared to an increase of $ 39.4 million in 2016 ) , an decrease of $ 7.5 million relating to environmental liabilities ( compared to an increase $ 35.5 million in 2016 ) , a decrease of $ 7.2 million relating to general casualty liabilities ( compared to $ 0.8 million in 2016 ) , a decrease of $ 156.2 million relating to workers ' compensation liabilities ( compared to $ 333.2 million in 2016 ) and a decrease of $ 152.2 million relating to all other remaining liabilities ( compared to $ 90.6 million in 2016 ) . the reduction in net ibnr reserves of $ 393.1 million relating to prior periods was a result of the application , on a basis consistent with the assumptions applied in the prior period , of our actuarial methodologies to revised historical loss development data , following 59 commutations and policy buy-backs , to estimate loss reserves required to cover liabilities for unpaid losses and lae relating to non-commuted exposures . the prior period estimate of net ibnr reserves was reduced as a result of the combined impact on all classes of business of loss development activity during 2017 , including commutations and the favorable trend of loss development related to non-commuted policies compared to prior forecasts . the net incurred loss development resulting from settlement of net advised case and lae reserves of $ 381.5 million for net paid losses of $ 578.9 million related to the settlement of non-commuted losses in the year and 59 commutations and policy buy-backs of assumed and ceded exposures . net advised case and lae reserves settled by way of commutation and policy buyback during the year ended december 31 , 2017 amounted to $ 7.4 million ( comprising $ 23.2 million of assumed case reserves and lae reserves , partially offset by $ 15.8 million of ceded incurred reinsurance recoverable case reserves ) . the reduction in provisions for bad debt of $ 1.5 million was a result of the favorable resolution of contractual disputes with reinsurers , the reduction in bad debt provisions for insolvent reinsurers as a result of distributions received and the reduction of specific provisions held for potential disputes with reinsurers . 2016 versus 2015 : the net reduction in incurred losses
| cash provided by investing activities for 2017 primarily related to net cash provided by sale of subsidiaries of $ 122.4 million , compared to net cash used in acquisitions of $ 18.5 million 2016 . in addition , net redemptions of other investments and net sales of available for sale securities provided cash of $ 122.9 million and $ 71.5 million , compared to $ 154.0 million and $ 29.0 million , in 2017 and 2016 , respectively . cash used in financing activities for 2017 primarily related to net outflows of $ 38.0 million from our credit facilities , consisting of the repayment of the sussex facility in full , the repayment of a portion of the egl revolving credit facility , partially offset by the issuance of our $ 350.0 million senior notes . in addition we paid $ 27.5 million in dividends to noncontrolling interests . during 2016 , we had net inflows of $ 77.8 million from our credit facilities primarily utilized to finance acquisitions and significant new business . 2016 versus 2015 : cash used in operating activities was $ 202.7 million and $ 265.2 million for the years ended december 31 , 2016 and 2015 , respectively . the negative operating cash flow was predominantly driven by : ( i ) net paid losses in our non-life run-off segment for the years ended december 31 , 2016 and 2015 of $ 533.8 million and $ 517.3 million , respectively , partially offset by ( ii ) cash and restricted cash acquired in non-life run-off reinsurance transactions for the years ended december 31 , 2016 and 2015 of $ 174.5 million and $ 468.3 million , respectively . cash provided by investing activities for 2016 primarily related to net redemptions of other investments of $ 154.0 million . cas h provided by investing activities for 2015 primarily related to net purchases of other investments of $ 149.9 million and purchases of available for sale securities of $ 102.2 million , offset by acquisitions net of cash acquired of $ 130.7 million and sales and maturities of available for sale securities of $ 142.8 million .
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2012. the remaining reason for the increase is due to the non-cash change in the fair value of the interest rate derivatives ; which was a loss of $ 2.1 million in 2011 versus a loss of approximately $ 945,000 in 2012 , respectively . other securities . during 2013 and 2012 , the company invested in other types of securities . in accordance with the terms of the partnership agreement , these securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency , must generate income which is exempt from inclusion for federal income taxation purposes at the time of acquisition , and may not represent more than 25 % of the partnership 's assets at the time of acquisition . 28 public housing capital fund trusts ' certificates ( `` phc certificates `` ) . the phc certificates , acquired during july 2012 , consist of custodial receipts evidencing loans made to a number of public housing authorities . principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by united states department of housing and urban development ( “ hud ” ) under it 's capital fund program . at december 31 , 2013 and 2012 , the company owned phc certificates with an aggregate outstanding principal amount of $ 65.3 million . the phc certificates segment reported revenue of approximately $ 3.3 million , interest expense of approximately $ 1.3 million , and income from continuing operations of $ 1.9 million for the year ended december 31 , 2013. the phc certificates segment reported revenue of approximately $ 1.6 million , interest expense of approximately $ 542,000 , and income from continuing operations of $ 1 million for the year ended december 31 , 2012. the increase in revenue , interest expense , and income from continuing operations can be attributed to only a partial year of investment ownership in 2012. mortgage-backed securities ( `` mbs `` ) . the third class of security owned by the company is mbs . as of december 31 , 2013 , the company owned fourteen state-issued mbs with an aggregate outstanding principal amount of approximately $ 42.8 million . the mbs were acquired during the fourth quarter of 2012 and first six months of 2013 and are backed by residential mortgage loans . the mbs segment reported revenue of approximately $ 1.6 million , interest expense of approximately $ 464,000 , and income from continuing operations of approximately $ 1.1 million for the year ended december 31 , 2013 . as of december 31 , 2012 , the company owned ten state-issued mbs with an aggregate outstanding principal amount of approximately $ 31.6 million.the mbs segment reported revenue of approximately $ 194,000 , interest expense of approximately $ 39,000 , and income from continuing operations of $ 149,000 for the year ended december 31 , 2012. the increase in revenue , interest expense , and income from continuing operations can be attributed to only a partial year of investment ownership in 2012. mf properties . to facilitate its investment strategy of acquiring additional mortgage revenue bonds secured by multifamily apartment properties , the partnership may acquire ownership positions in mf properties , in order to ultimately restructure the property ownership through a sale of the mf properties . the partnership expects each of these mf properties to eventually be sold to a not-for-profit entity or in connection with a syndication of lihtcs under section 42 of the internal revenue code of 1986 , as amended ( the “ internal revenue code ” ) . the partnership expects to acquire mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured . the partnership expects to provide the mortgage revenue bonds to the new property owners as part of the restructuring . at december 31 , 2013 , the partnership 's wholly-owned subsidiaries held interests in three entities that own mf properties containing a total of 504 rental units . in addition , the partnership 's subsidiaries own five mf properties , arboretum , decordova , eagle village , weatherford , and woodland park containing a total of 1,078 rental units , plus the 50/50 student housing at the university of nebraska-lincoln mixed-use project in lincoln , nebraska that is currently under construction ( see note 8 to the consolidated financial statements ) . the mf properties ' operating goal is similar to that of the properties underlying the partnership 's mortgage revenue bonds . as of december 31 , 2012 , the partnership 's wholly-owned subsidiaries held interests in three entities that own mf properties containing a total of 504 rental units and the partnership 's subsidiaries owned four mf properties , arboretum , decordova , eagle village and weatherford containing a total of 842 rental units . the mf properties segment reported revenue of approximately $ 11.4 million and $ 7.8 million and a loss from continuing operations of approximately $ 1.8 million and $ 1.1 million for the years ended december 31 , 2013 and 2012 , respectively . the mf properties segment reported revenue of approximately $ 5.1 million and a loss from continuing operations of approximately $ 783,000 for the year ended december 31 , 2011. the increase in revenue and loss from continuing operations for the year ended december 31 , 2013 compared to the prior year can be attributed to the foreclosure of woodland park mortgage revenue bond during 2013 and the acquisition of maples on 97th properties which was owned an entire year in 2013. the increase in revenue for the year ended 2012 as compared to 2011 is due to having a full year 's worth of revenue from the arboretum and eagle village properties which were acquired during 2011 and the maples on 97th property story_separator_special_tag the bonds were purchased in february 2013. avistar on the boulevard 's operations resulted in net operating income of approximately $ 1.00 million before payment of bond debt service on net revenue of approximately $ 1.90 million in 2013. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . avistar on the hills - avistar on the hills is located in san antonio , texas and contains 129 units . the mortgage revenue bond owned by the partnership was sponsored by the 501 ( c ) 3 not-for-profit owner of avistar on the hills . the series a bond has an outstanding principal amount of $ 3.1 million and has a base interest rate of 6.00 % per annum . the series b bond has an outstanding principal amount of $ 2.3 million and has a base interest rate of 9.00 % per annum . this bond does not provide for contingent interest . the bonds were purchased in june 2013. avistar on the hills ' operations resulted in net operating income of approximately $ 155,000 before payment of bond debt service on net revenue of approximately $ 409,000 in 2013. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . bella vista - bella vista apartments is located in gainesville , texas and contains 144 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 6.5 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . bella vista 's operations resulted in net operating income of $ 549,000 and $ 639,000 before payment of debt service on net revenue of approximately $ 1.11 million and $ 1.17 million in 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary , leasing and utility expenses . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . bridle ridge - bridle ridge apartments is located in greer , south carolina and contains 152 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 7.7 million and a base interest rate of 6.0 % per annum . the bond does not provide for contingent interest . bridle ridge 's operations resulted in net operating income of approximately $ 694,000 and $ 717,000 before payment of bond debt service on net revenue of approximately $ 1.14 million in both 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary expense and property insurance . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . brookstone - brookstone apartments is located in waukegan , illinois and contains 168 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 9.3 million and a base interest rate of 5.45 % per annum . the bond does not provide for contingent interest . these bonds were purchased in october 2009 at a discount from par for approximately $ 7.3 million providing an approximate yield to maturity of 7.5 % . brookstone 's operations resulted in net operating income of $ 863,000 and $ 895,000 before payment of bond debt service on net revenue of approximately $ 1.29 million and $ 1.35 million in 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in utility and salary expenses . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . 33 cross creek - cross creek apartments is located in beaufort , south carolina and contains 144 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 8.5 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . these bonds were purchased in april 2009 at a discount from par for approximately $ 5.9 million providing an approximate yield to maturity of 7.4 % . cross creek 's operations resulted in net operating income of $ 435,000 and $ 453,000 before payment of bond debt service on net revenue of approximately $ 1.16 million and $ 1.12 million in 2013 and 2012 , respectively . the property is current on the payment of principal and base interest on the partnership 's bond as of december 31 , 2013. greens of pine glen - greens of pine glen apartments is located in durham , north carolina and contain 168 units and was acquired in february 2009. the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the series a bond has an outstanding principal amount of $ 8.4 million and has a base interest rate of 6.5 % per annum . the series b bond has an outstanding principal amount of $ 1.0 million and has a base interest rate of 12.0 % per annum . the bond does not provide for contingent interest . the greens of pine glen apartment 's operations resulted in
| cash provided by investing activities for 2017 primarily related to net cash provided by sale of subsidiaries of $ 122.4 million , compared to net cash used in acquisitions of $ 18.5 million 2016 . in addition , net redemptions of other investments and net sales of available for sale securities provided cash of $ 122.9 million and $ 71.5 million , compared to $ 154.0 million and $ 29.0 million , in 2017 and 2016 , respectively . cash used in financing activities for 2017 primarily related to net outflows of $ 38.0 million from our credit facilities , consisting of the repayment of the sussex facility in full , the repayment of a portion of the egl revolving credit facility , partially offset by the issuance of our $ 350.0 million senior notes . in addition we paid $ 27.5 million in dividends to noncontrolling interests . during 2016 , we had net inflows of $ 77.8 million from our credit facilities primarily utilized to finance acquisitions and significant new business . 2016 versus 2015 : cash used in operating activities was $ 202.7 million and $ 265.2 million for the years ended december 31 , 2016 and 2015 , respectively . the negative operating cash flow was predominantly driven by : ( i ) net paid losses in our non-life run-off segment for the years ended december 31 , 2016 and 2015 of $ 533.8 million and $ 517.3 million , respectively , partially offset by ( ii ) cash and restricted cash acquired in non-life run-off reinsurance transactions for the years ended december 31 , 2016 and 2015 of $ 174.5 million and $ 468.3 million , respectively . cash provided by investing activities for 2016 primarily related to net redemptions of other investments of $ 154.0 million . cas h provided by investing activities for 2015 primarily related to net purchases of other investments of $ 149.9 million and purchases of available for sale securities of $ 102.2 million , offset by acquisitions net of cash acquired of $ 130.7 million and sales and maturities of available for sale securities of $ 142.8 million .
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2012. the remaining reason for the increase is due to the non-cash change in the fair value of the interest rate derivatives ; which was a loss of $ 2.1 million in 2011 versus a loss of approximately $ 945,000 in 2012 , respectively . other securities . during 2013 and 2012 , the company invested in other types of securities . in accordance with the terms of the partnership agreement , these securities must be rated in one of the four highest rating categories by at least one nationally recognized securities rating agency , must generate income which is exempt from inclusion for federal income taxation purposes at the time of acquisition , and may not represent more than 25 % of the partnership 's assets at the time of acquisition . 28 public housing capital fund trusts ' certificates ( `` phc certificates `` ) . the phc certificates , acquired during july 2012 , consist of custodial receipts evidencing loans made to a number of public housing authorities . principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by united states department of housing and urban development ( “ hud ” ) under it 's capital fund program . at december 31 , 2013 and 2012 , the company owned phc certificates with an aggregate outstanding principal amount of $ 65.3 million . the phc certificates segment reported revenue of approximately $ 3.3 million , interest expense of approximately $ 1.3 million , and income from continuing operations of $ 1.9 million for the year ended december 31 , 2013. the phc certificates segment reported revenue of approximately $ 1.6 million , interest expense of approximately $ 542,000 , and income from continuing operations of $ 1 million for the year ended december 31 , 2012. the increase in revenue , interest expense , and income from continuing operations can be attributed to only a partial year of investment ownership in 2012. mortgage-backed securities ( `` mbs `` ) . the third class of security owned by the company is mbs . as of december 31 , 2013 , the company owned fourteen state-issued mbs with an aggregate outstanding principal amount of approximately $ 42.8 million . the mbs were acquired during the fourth quarter of 2012 and first six months of 2013 and are backed by residential mortgage loans . the mbs segment reported revenue of approximately $ 1.6 million , interest expense of approximately $ 464,000 , and income from continuing operations of approximately $ 1.1 million for the year ended december 31 , 2013 . as of december 31 , 2012 , the company owned ten state-issued mbs with an aggregate outstanding principal amount of approximately $ 31.6 million.the mbs segment reported revenue of approximately $ 194,000 , interest expense of approximately $ 39,000 , and income from continuing operations of $ 149,000 for the year ended december 31 , 2012. the increase in revenue , interest expense , and income from continuing operations can be attributed to only a partial year of investment ownership in 2012. mf properties . to facilitate its investment strategy of acquiring additional mortgage revenue bonds secured by multifamily apartment properties , the partnership may acquire ownership positions in mf properties , in order to ultimately restructure the property ownership through a sale of the mf properties . the partnership expects each of these mf properties to eventually be sold to a not-for-profit entity or in connection with a syndication of lihtcs under section 42 of the internal revenue code of 1986 , as amended ( the “ internal revenue code ” ) . the partnership expects to acquire mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured . the partnership expects to provide the mortgage revenue bonds to the new property owners as part of the restructuring . at december 31 , 2013 , the partnership 's wholly-owned subsidiaries held interests in three entities that own mf properties containing a total of 504 rental units . in addition , the partnership 's subsidiaries own five mf properties , arboretum , decordova , eagle village , weatherford , and woodland park containing a total of 1,078 rental units , plus the 50/50 student housing at the university of nebraska-lincoln mixed-use project in lincoln , nebraska that is currently under construction ( see note 8 to the consolidated financial statements ) . the mf properties ' operating goal is similar to that of the properties underlying the partnership 's mortgage revenue bonds . as of december 31 , 2012 , the partnership 's wholly-owned subsidiaries held interests in three entities that own mf properties containing a total of 504 rental units and the partnership 's subsidiaries owned four mf properties , arboretum , decordova , eagle village and weatherford containing a total of 842 rental units . the mf properties segment reported revenue of approximately $ 11.4 million and $ 7.8 million and a loss from continuing operations of approximately $ 1.8 million and $ 1.1 million for the years ended december 31 , 2013 and 2012 , respectively . the mf properties segment reported revenue of approximately $ 5.1 million and a loss from continuing operations of approximately $ 783,000 for the year ended december 31 , 2011. the increase in revenue and loss from continuing operations for the year ended december 31 , 2013 compared to the prior year can be attributed to the foreclosure of woodland park mortgage revenue bond during 2013 and the acquisition of maples on 97th properties which was owned an entire year in 2013. the increase in revenue for the year ended 2012 as compared to 2011 is due to having a full year 's worth of revenue from the arboretum and eagle village properties which were acquired during 2011 and the maples on 97th property story_separator_special_tag the bonds were purchased in february 2013. avistar on the boulevard 's operations resulted in net operating income of approximately $ 1.00 million before payment of bond debt service on net revenue of approximately $ 1.90 million in 2013. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . avistar on the hills - avistar on the hills is located in san antonio , texas and contains 129 units . the mortgage revenue bond owned by the partnership was sponsored by the 501 ( c ) 3 not-for-profit owner of avistar on the hills . the series a bond has an outstanding principal amount of $ 3.1 million and has a base interest rate of 6.00 % per annum . the series b bond has an outstanding principal amount of $ 2.3 million and has a base interest rate of 9.00 % per annum . this bond does not provide for contingent interest . the bonds were purchased in june 2013. avistar on the hills ' operations resulted in net operating income of approximately $ 155,000 before payment of bond debt service on net revenue of approximately $ 409,000 in 2013. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . bella vista - bella vista apartments is located in gainesville , texas and contains 144 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 6.5 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . bella vista 's operations resulted in net operating income of $ 549,000 and $ 639,000 before payment of debt service on net revenue of approximately $ 1.11 million and $ 1.17 million in 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary , leasing and utility expenses . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . bridle ridge - bridle ridge apartments is located in greer , south carolina and contains 152 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 7.7 million and a base interest rate of 6.0 % per annum . the bond does not provide for contingent interest . bridle ridge 's operations resulted in net operating income of approximately $ 694,000 and $ 717,000 before payment of bond debt service on net revenue of approximately $ 1.14 million in both 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in salary expense and property insurance . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . brookstone - brookstone apartments is located in waukegan , illinois and contains 168 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 9.3 million and a base interest rate of 5.45 % per annum . the bond does not provide for contingent interest . these bonds were purchased in october 2009 at a discount from par for approximately $ 7.3 million providing an approximate yield to maturity of 7.5 % . brookstone 's operations resulted in net operating income of $ 863,000 and $ 895,000 before payment of bond debt service on net revenue of approximately $ 1.29 million and $ 1.35 million in 2013 and 2012 , respectively . the decrease in net operating income is due to a decrease in economic occupancy along with an increase in utility and salary expenses . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2013 . 33 cross creek - cross creek apartments is located in beaufort , south carolina and contains 144 units . the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 8.5 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . these bonds were purchased in april 2009 at a discount from par for approximately $ 5.9 million providing an approximate yield to maturity of 7.4 % . cross creek 's operations resulted in net operating income of $ 435,000 and $ 453,000 before payment of bond debt service on net revenue of approximately $ 1.16 million and $ 1.12 million in 2013 and 2012 , respectively . the property is current on the payment of principal and base interest on the partnership 's bond as of december 31 , 2013. greens of pine glen - greens of pine glen apartments is located in durham , north carolina and contain 168 units and was acquired in february 2009. the mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the series a bond has an outstanding principal amount of $ 8.4 million and has a base interest rate of 6.5 % per annum . the series b bond has an outstanding principal amount of $ 1.0 million and has a base interest rate of 12.0 % per annum . the bond does not provide for contingent interest . the greens of pine glen apartment 's operations resulted in
| cash flow . on a consolidated basis , cash provided by operating activities for the year ended december 31 , 2013 increased approximately $ 6.8 million compared to the same period a year earlier mainly due to changes in working capital components . cash used for investing activities increased approximately $ 61.1 million for 2013 as compared to 2012. during 2013 , the company used approximately $ 164.2 million for the purchase of the mortgage revenue bonds and related taxable mortgage bonds , and mbs compared to $ 132.2 million in 2012 to purchase the phc certificates , mbs , the arbors at hickory ridge and the vantage at judson mortgage revenue bonds , the company spent approximately $ 13.0 million and $ 8.0 million on the construction of the mf properties in 2013 and 2012. during 2012 , the company purchased the maples on 97th property for approximately $ 5.5 million but did not have any cash outflows for the purchase of mf properties in 2013. offsetting the use of cash from investing activities , the company received approximately $ 4.0 million in net cash related to the realization of the ohio properties sale , approximately $ 21.9 million from the iona lakes mortgage revenue bond redemption , and approximately $ 2.8 million from principal repayments related to investments . during 2012 , the company received cash from the sale of the gmf-madison tower and gmf-warren/tulane mortgage revenue bonds , the restructuring of the arbors at hickory ridge mortgage revenue bond , the sale of a mortgage-backed security , the sale of the churchland and the eagle ridge properties , and the net release of restricted cash which totaled approximately $ 47.5 million . financing cash flows in 2013 included approximately $ 48.2 million of cash from the sale of bucs , approximately $ 81.5 million of cash from new tob trust financing facilities , $ 20.7 million of cash from borrowing on maples on 97th , woodland park and the the 50/50 student housing at unl mixed-use project , offset by the use of cash to pay distributions and principal payments on debt .
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we recorded a gain of $ 12.7 million from the sale of dfsc in our results of operations during 2019. we sold the northwest common stock that we received as part of the consideration during 2019. this transaction represented the culmination of a banking strategy that began with the formation of dfsc in 2000. effective december 1 , 2019 , our insurance subsidiaries le mars insurance company ( “ le mars ” ) and sheboygan falls insurance company ( “ sheboygan falls ” ) merged with and into atlantic states ( the “ mergers ” ) . as a result of the mergers , the separate corporate existences of le mars and sheboygan falls ceased and atlantic states continued as the surviving insurance company . atlantic states placed the business of le mars and sheboygan falls , as their policies renewed subsequent to the effective date of the mergers , into the underwriting pool . at december 31 , 2020 , donegal mutual held approximately 42 % of our outstanding class a common stock and approximately 84 % of our outstanding class b common stock . this ownership provides donegal mutual with approximately 71 % of the combined voting power of our outstanding shares of class a common stock and our outstanding shares of class b common stock . -48- donegal mutual and atlantic states have participated in a proportional reinsurance agreement , or pooling agreement , since 1986. under the pooling agreement , donegal mutual and atlantic states contribute substantially all of their respective premiums , losses and loss expenses to the underwriting pool , and the underwriting pool , acting through donegal mutual , then allocates 80 % of the pooled business to atlantic states . thus , donegal mutual and atlantic states share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool . the operations of our insurance subsidiaries and donegal mutual are interrelated due to the pooling agreement and other factors . while maintaining the separate corporate existence of each company , our insurance subsidiaries conduct business together with donegal mutual and its insurance subsidiaries as the donegal insurance group . the donegal insurance group is not a legal entity , is not an insurance company and does not issue or administer insurance policies . rather , it is a trade name that refers to the group of insurance companies that are affiliated with donegal mutual . see “ business - history and organizational structure ” for more information regarding the pooling agreement and other transactions with our affiliates . in july 2013 , our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 additional shares of our class a common stock at prices prevailing from time to time in the open market subject to the provisions of the sec rule 10b-18 and in privately negotiated transactions . we did not purchase any shares of our class a common stock under this program during 2020 or 2019. we have purchased a total of 57,658 shares of our class a common stock under this program from its inception through december 31 , 2020. critical accounting policies and estimates we combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with gaap . our insurance subsidiaries make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our financial statements . the most significant estimates relate to the reserves of our insurance subsidiaries for property and casualty insurance unpaid losses and loss expenses . while we believe our estimates and the estimates of our insurance subsidiaries are appropriate , the ultimate amounts may differ from the estimates we provided . we regularly review our methods for making these estimates , and we reflect any adjustment we consider necessary in our results of operations for the period in which we make an adjustment . liability for losses and loss expenses liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer knows at that point in time . for example , legislative , judicial and regulatory actions may expand coverage definitions , retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover . at the time of establishing its estimates , an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates . our insurance subsidiaries base their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends , expected claims severity , judicial theories of liability and other factors . however , during the loss adjustment period , our insurance subsidiaries may learn additional facts regarding individual claims , and , consequently , it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities . we reflect any adjustments to the liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates . our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims . our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses , including investigation and litigation costs . our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved , knowledge of the circumstances -49- surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred . story_separator_special_tag the calculation of our statutory combined ratio differs from the calculation of our gaap combined ratio . in calculating our gaap combined ratio , we do not deduct installment payment fees from incurred expenses , and we base the expense ratio on net premiums earned instead of net premiums written . differences between our gaap loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our gaap loss ratio but not for our statutory loss ratio . the following table presents comparative details with respect to our gaap and statutory combined ratios for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_19_th -56- results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 net premiums earned our insurance subsidiaries ' net premiums earned decreased to $ 742.0 million for 2020 , a decrease of $ 14.1 million , or 1.9 % , compared to 2019 , primarily reflecting decreases in personal lines premiums written during 2019 and 2020. our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue . such terms are generally one year or less in duration . therefore , increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier . net premiums written our insurance subsidiaries ' 2020 net premiums written decreased 1.4 % to $ 742.1 million , compared to $ 752.6 million for 2019. we attribute the decrease primarily to net attrition in our personal lines segment that resulted from increased pricing on renewal policies and underwriting measures our insurance subsidiaries implemented to slow new policy growth and improve profitability , offset somewhat by the impact of premium rate increases and an increase in the writing of new accounts in commercial lines of business . commercial lines net premiums written increased $ 21.1 million , or 5.2 % , for 2020 compared to 2019. personal lines net premiums written decreased $ 31.6 million , or 9.1 % , for 2020 compared to 2019. investment income for 2020 , our net investment income was unchanged at $ 29.5 million , as an increase in average invested assets offset a modest decrease in the average investment yield . net investment gains our net investment gains for 2020 and 2019 were $ 2.8 million and $ 22.0 million , respectively . the net investment gains for 2020 were primarily related to an increase in unrealized gains within our equity securities portfolio . the net investment gains for 2019 included $ 12.7 million from the sale of dfsc and $ 8.9 million related to unrealized gains within our equity securities portfolio . we did not recognize any impairment losses during 2020 or 2019. losses and loss expenses our insurance subsidiaries ' loss ratio , which is the ratio of incurred losses and loss expenses to premiums earned , was 62.0 % for 2020 , compared to 67.0 % for 2019. our insurance subsidiaries ' commercial lines loss ratio increased to 63.9 % for 2020 , compared to 63.0 % for 2019. this increase resulted primarily from the workers ' compensation loss ratio increasing to 51.1 % for 2020 , compared to 44.6 % for 2019 , and the commercial multi-peril loss ratio increasing to 65.9 % for 2020 , compared to 63.1 % for 2019. the personal lines loss ratio decreased to 59.5 % for 2020 , compared to 71.1 % for 2019. the personal automobile loss ratio decreased to 60.1 % for 2020 , compared to 76.1 % for 2019 , primarily as a result of lower claim frequency due to reduced driving activity and traffic density and various underwriting adjustments our insurance subsidiaries -57- implemented in recent years . the homeowners loss ratio decreased to 61.8 % for 2020 , compared to 67.1 % for 2019 , primarily as a result of decreased weather-related losses that we attribute to our exit from several weather-prone markets in 2019. our insurance subsidiaries experienced favorable loss reserve development of approximately $ 12.9 million , or 1.7 percentage points of the loss ratio , during 2020 in their reserves for prior accident years , compared to favorable loss reserve development of approximately $ 12.9 million , or 1.7 percentage points of the loss ratio , during 2019. the favorable loss reserve development in 2020 resulted primarily from lower-than-expected severity in the workers ' compensation and personal automobile lines of business , partially offset by higher-than-expected severity in the commercial automobile and commercial multi-peril lines of business , for accident years prior to 2020. weather-related losses of $ 51.4 million , or 6.9 percentage points of the loss ratio , for 2020 increased from $ 46.1 million , or 6.1 percentage points of the loss ratio , for 2019 , with the increase primarily impacting the commercial multi-peril line of business . underwriting expenses our insurance subsidiaries ' expense ratio , which is the ratio of policy acquisition and other underwriting expenses to premiums earned , was 33.0 % for 2020 , compared to 31.3 % for 2019. we attribute the modest increase to higher commercial growth incentive costs for our agents , higher underwriting-based incentive compensation for our agents and employees and higher technology-related expenses for 2020 compared to 2019. the increase in technology systems-related expenses for 2020 was primarily due to an increased allocation of costs from donegal mutual to our insurance subsidiaries following the successful implementation of the first phase of our ongoing systems modernization project in february 2020. policyholder dividends our insurance subsidiaries pay policyholder dividends primarily on workers ' compensation policies on a sliding scale based on the profitability of a given policy . we attribute the decrease in dividends incurred for 2020 compared to 2019 to a modest decline in the profitability of the workers ' compensation line of business over the respective
| cash flow . on a consolidated basis , cash provided by operating activities for the year ended december 31 , 2013 increased approximately $ 6.8 million compared to the same period a year earlier mainly due to changes in working capital components . cash used for investing activities increased approximately $ 61.1 million for 2013 as compared to 2012. during 2013 , the company used approximately $ 164.2 million for the purchase of the mortgage revenue bonds and related taxable mortgage bonds , and mbs compared to $ 132.2 million in 2012 to purchase the phc certificates , mbs , the arbors at hickory ridge and the vantage at judson mortgage revenue bonds , the company spent approximately $ 13.0 million and $ 8.0 million on the construction of the mf properties in 2013 and 2012. during 2012 , the company purchased the maples on 97th property for approximately $ 5.5 million but did not have any cash outflows for the purchase of mf properties in 2013. offsetting the use of cash from investing activities , the company received approximately $ 4.0 million in net cash related to the realization of the ohio properties sale , approximately $ 21.9 million from the iona lakes mortgage revenue bond redemption , and approximately $ 2.8 million from principal repayments related to investments . during 2012 , the company received cash from the sale of the gmf-madison tower and gmf-warren/tulane mortgage revenue bonds , the restructuring of the arbors at hickory ridge mortgage revenue bond , the sale of a mortgage-backed security , the sale of the churchland and the eagle ridge properties , and the net release of restricted cash which totaled approximately $ 47.5 million . financing cash flows in 2013 included approximately $ 48.2 million of cash from the sale of bucs , approximately $ 81.5 million of cash from new tob trust financing facilities , $ 20.7 million of cash from borrowing on maples on 97th , woodland park and the the 50/50 student housing at unl mixed-use project , offset by the use of cash to pay distributions and principal payments on debt .
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we recorded a gain of $ 12.7 million from the sale of dfsc in our results of operations during 2019. we sold the northwest common stock that we received as part of the consideration during 2019. this transaction represented the culmination of a banking strategy that began with the formation of dfsc in 2000. effective december 1 , 2019 , our insurance subsidiaries le mars insurance company ( “ le mars ” ) and sheboygan falls insurance company ( “ sheboygan falls ” ) merged with and into atlantic states ( the “ mergers ” ) . as a result of the mergers , the separate corporate existences of le mars and sheboygan falls ceased and atlantic states continued as the surviving insurance company . atlantic states placed the business of le mars and sheboygan falls , as their policies renewed subsequent to the effective date of the mergers , into the underwriting pool . at december 31 , 2020 , donegal mutual held approximately 42 % of our outstanding class a common stock and approximately 84 % of our outstanding class b common stock . this ownership provides donegal mutual with approximately 71 % of the combined voting power of our outstanding shares of class a common stock and our outstanding shares of class b common stock . -48- donegal mutual and atlantic states have participated in a proportional reinsurance agreement , or pooling agreement , since 1986. under the pooling agreement , donegal mutual and atlantic states contribute substantially all of their respective premiums , losses and loss expenses to the underwriting pool , and the underwriting pool , acting through donegal mutual , then allocates 80 % of the pooled business to atlantic states . thus , donegal mutual and atlantic states share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool . the operations of our insurance subsidiaries and donegal mutual are interrelated due to the pooling agreement and other factors . while maintaining the separate corporate existence of each company , our insurance subsidiaries conduct business together with donegal mutual and its insurance subsidiaries as the donegal insurance group . the donegal insurance group is not a legal entity , is not an insurance company and does not issue or administer insurance policies . rather , it is a trade name that refers to the group of insurance companies that are affiliated with donegal mutual . see “ business - history and organizational structure ” for more information regarding the pooling agreement and other transactions with our affiliates . in july 2013 , our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 additional shares of our class a common stock at prices prevailing from time to time in the open market subject to the provisions of the sec rule 10b-18 and in privately negotiated transactions . we did not purchase any shares of our class a common stock under this program during 2020 or 2019. we have purchased a total of 57,658 shares of our class a common stock under this program from its inception through december 31 , 2020. critical accounting policies and estimates we combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with gaap . our insurance subsidiaries make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our financial statements . the most significant estimates relate to the reserves of our insurance subsidiaries for property and casualty insurance unpaid losses and loss expenses . while we believe our estimates and the estimates of our insurance subsidiaries are appropriate , the ultimate amounts may differ from the estimates we provided . we regularly review our methods for making these estimates , and we reflect any adjustment we consider necessary in our results of operations for the period in which we make an adjustment . liability for losses and loss expenses liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer knows at that point in time . for example , legislative , judicial and regulatory actions may expand coverage definitions , retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover . at the time of establishing its estimates , an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates . our insurance subsidiaries base their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends , expected claims severity , judicial theories of liability and other factors . however , during the loss adjustment period , our insurance subsidiaries may learn additional facts regarding individual claims , and , consequently , it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities . we reflect any adjustments to the liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates . our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims . our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses , including investigation and litigation costs . our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved , knowledge of the circumstances -49- surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred . story_separator_special_tag the calculation of our statutory combined ratio differs from the calculation of our gaap combined ratio . in calculating our gaap combined ratio , we do not deduct installment payment fees from incurred expenses , and we base the expense ratio on net premiums earned instead of net premiums written . differences between our gaap loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our gaap loss ratio but not for our statutory loss ratio . the following table presents comparative details with respect to our gaap and statutory combined ratios for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_19_th -56- results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 net premiums earned our insurance subsidiaries ' net premiums earned decreased to $ 742.0 million for 2020 , a decrease of $ 14.1 million , or 1.9 % , compared to 2019 , primarily reflecting decreases in personal lines premiums written during 2019 and 2020. our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue . such terms are generally one year or less in duration . therefore , increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier . net premiums written our insurance subsidiaries ' 2020 net premiums written decreased 1.4 % to $ 742.1 million , compared to $ 752.6 million for 2019. we attribute the decrease primarily to net attrition in our personal lines segment that resulted from increased pricing on renewal policies and underwriting measures our insurance subsidiaries implemented to slow new policy growth and improve profitability , offset somewhat by the impact of premium rate increases and an increase in the writing of new accounts in commercial lines of business . commercial lines net premiums written increased $ 21.1 million , or 5.2 % , for 2020 compared to 2019. personal lines net premiums written decreased $ 31.6 million , or 9.1 % , for 2020 compared to 2019. investment income for 2020 , our net investment income was unchanged at $ 29.5 million , as an increase in average invested assets offset a modest decrease in the average investment yield . net investment gains our net investment gains for 2020 and 2019 were $ 2.8 million and $ 22.0 million , respectively . the net investment gains for 2020 were primarily related to an increase in unrealized gains within our equity securities portfolio . the net investment gains for 2019 included $ 12.7 million from the sale of dfsc and $ 8.9 million related to unrealized gains within our equity securities portfolio . we did not recognize any impairment losses during 2020 or 2019. losses and loss expenses our insurance subsidiaries ' loss ratio , which is the ratio of incurred losses and loss expenses to premiums earned , was 62.0 % for 2020 , compared to 67.0 % for 2019. our insurance subsidiaries ' commercial lines loss ratio increased to 63.9 % for 2020 , compared to 63.0 % for 2019. this increase resulted primarily from the workers ' compensation loss ratio increasing to 51.1 % for 2020 , compared to 44.6 % for 2019 , and the commercial multi-peril loss ratio increasing to 65.9 % for 2020 , compared to 63.1 % for 2019. the personal lines loss ratio decreased to 59.5 % for 2020 , compared to 71.1 % for 2019. the personal automobile loss ratio decreased to 60.1 % for 2020 , compared to 76.1 % for 2019 , primarily as a result of lower claim frequency due to reduced driving activity and traffic density and various underwriting adjustments our insurance subsidiaries -57- implemented in recent years . the homeowners loss ratio decreased to 61.8 % for 2020 , compared to 67.1 % for 2019 , primarily as a result of decreased weather-related losses that we attribute to our exit from several weather-prone markets in 2019. our insurance subsidiaries experienced favorable loss reserve development of approximately $ 12.9 million , or 1.7 percentage points of the loss ratio , during 2020 in their reserves for prior accident years , compared to favorable loss reserve development of approximately $ 12.9 million , or 1.7 percentage points of the loss ratio , during 2019. the favorable loss reserve development in 2020 resulted primarily from lower-than-expected severity in the workers ' compensation and personal automobile lines of business , partially offset by higher-than-expected severity in the commercial automobile and commercial multi-peril lines of business , for accident years prior to 2020. weather-related losses of $ 51.4 million , or 6.9 percentage points of the loss ratio , for 2020 increased from $ 46.1 million , or 6.1 percentage points of the loss ratio , for 2019 , with the increase primarily impacting the commercial multi-peril line of business . underwriting expenses our insurance subsidiaries ' expense ratio , which is the ratio of policy acquisition and other underwriting expenses to premiums earned , was 33.0 % for 2020 , compared to 31.3 % for 2019. we attribute the modest increase to higher commercial growth incentive costs for our agents , higher underwriting-based incentive compensation for our agents and employees and higher technology-related expenses for 2020 compared to 2019. the increase in technology systems-related expenses for 2020 was primarily due to an increased allocation of costs from donegal mutual to our insurance subsidiaries following the successful implementation of the first phase of our ongoing systems modernization project in february 2020. policyholder dividends our insurance subsidiaries pay policyholder dividends primarily on workers ' compensation policies on a sliding scale based on the profitability of a given policy . we attribute the decrease in dividends incurred for 2020 compared to 2019 to a modest decline in the profitability of the workers ' compensation line of business over the respective
| liquidity and capital resources liquidity is a measure of an entity 's ability to secure enough cash to meet its contractual obligations and operating needs as they arise . our major sources of funds from operations are the net cash flows generated from our insurance subsidiaries ' underwriting results , investment income and maturing investments . we have historically generated sufficient net positive cash flow from our operations to fund our commitments and build our investment portfolio , thereby increasing future investment returns . the pooling agreement with donegal mutual historically has been cash flow positive because of the profitability of the underwriting pool . because we settle the pool monthly , our cash flows are substantially similar to the cash flows that would result from the underwriting of direct business . we maintain a high degree of liquidity in our investment portfolio in the form of marketable fixed maturities , equity securities and short-term investments . we structure our fixed-maturity investment portfolio following a “ laddering ” approach so that projected cash flows from investment income and principal maturities are evenly distributed from a timing perspective . this laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future . net cash flows provided by operating activities in 2020 , 2019 and 2018 were $ 101.1 million , $ 76.4 million and $ 63.8 million , respectively . in august 2020 , we entered into a new credit agreement with manufacturers and traders trust company ( “ m & t ” ) that related to a $ 20.0 million unsecured demand line of credit . the line of credit has no expiration date , no annual fees and no covenants . at december 31 , 2020 , we had no outstanding borrowings from m & t and had the ability to borrow up to $ 20.0 million at interest rates equal to the then-current libor rate plus 2.00 % .
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41 business results and highlights in 2012 , activision blizzard 's consolidated net revenues were $ 4.9 billion and consolidated net income was $ 1.1 billion , resulting in diluted earnings per common share of $ 1.01. the company grew net revenues , operating income , and earnings per share as compared to 2011. we also generated $ 1.3 billion in cash from operating activities in 2012. also , according to the npd group with respect to north america , gfk chart-track with respect to europe , and activision blizzard internal estimates , during 2012 : in north america and europe combined , including toys and accessories , activision publishing was the # 1 console and handheld publisher for the calendar year with the # 1 and # 3 best-selling franchisescall of duty® and skylanders . activision blizzard reported record digital revenues for the calendar year and was the # 1 third-party interactive entertainment western digital publisher . for the calendar year , in aggregate across all platforms in the u.s. and europe , activision publishing 's call of duty : black ops ii was the # 1 best-selling title in dollars and call of duty : modern warfare® 3 was the # 9 best-selling title in dollars . in both north america and europe , including toys and accessories , skylanders giants was the # 1 best-selling kids ' title in dollars for the fourth quarter . additionally , for the calendar year , in north america and europe combined , including toys and accessories , skylanders giants was the # 5 best-selling game in dollars , and skylanders spyro 's adventure® was the # 4 best-selling game in dollars . for the calendar year , blizzard entertainment had two top-10 pc games in north america and europe . diablo iii was the # 1 best-selling pc game at retail , breaking pc-game sales records with more than 12 million copies sold worldwide through december 31 , 2012 , and world of warcraft : mists of pandaria® was the # 3 best-selling pc game at retail . product release highlights the following games and content packs , among other titles , were released during the year ended december 31 , 2012 : 007 legends family guy : back to the multiverse angry birds trilogy ice age continental drift arctic games battleship® men in black : alien crisis cabela's® dangerous hunts 2013 prototype® 2 cabela 's hunting expeditions skylanders giants call of duty : black ops ii the amazing spider-man call of duty modern warfare 3 content collection # 1 transformers : fall of cybertron call of duty : modern warfare 3 content collection # 2 transformers prime call of duty : modern warfare 3 content collection # 3 wipeout 3 call of duty : modern warfare 3 content collection # 4 world of warcraft : mists of pandaria diablo iii on january 29 , 2013 , activision released revolution , the first downloadable map pack for call of duty : black ops ii , ( `` revolution `` ) on the xbox 360. revolution is expected to be available on other platforms during the first quarter of 2013 . 42 starcraft ii : heart of the swarm , the first expansion to blizzard 's real-time strategy game starcraft ii : wings of liberty® , is expected to be available in stores and online beginning march 12 , 2013. international operations international sales are a fundamental part of our business . net revenues from international sales accounted for approximately 50 % , 50 % , and 46 % of our total consolidated net revenues for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we maintain significant operations in the united states ( `` u.s. `` ) , canada , the united kingdom ( `` u.k. `` ) , france , germany , ireland , italy , sweden , spain , the netherlands , australia , south korea and china . an important element of our international strategy is to develop content that is specifically directed toward local cultures and customs . our international business is subject to risks typical of an international business , including , but not limited to , foreign currency exchange rate volatility and changes in local economies . accordingly , our future results could be materially and adversely affected by changes in foreign currency exchange rates and changes in local economies . management 's overview of business trends online content and digital downloads we provide our products through both retail channels and digital online delivery methods . many of our video games that are available through retailers as physical `` boxed `` software products , such as dvds , are also available by direct digital download over the internet ( both from websites that we own and from others owned by third parties ) . in addition , we offer players downloadable content as add-ons to our products ( e.g . , new multi-player content packs ) , generally for a one-time fee . we also offer subscription-based services for world of warcraft , which are digitally delivered and hosted by blizzard 's proprietary online-game related service , battle.net . in 2011 , activision launched call of duty elite , a digital service that provides both free and paid subscription-based content and features for call of duty : modern warfare 3 . in conjunction with the release of call of duty : black ops ii , all of the call of duty elite service features for that game were made available for free . this free service does not include downloadable map packs , which are sold separately , either a la carte as individual map packs or as part of a discounted season pass bundle . story_separator_special_tag activision 's operating income increased in 2011 as compared to 2010 , primarily due to a more focused release of products that delivered higher operating margins ; increased digital sales of call of duty 's digital content , resulting in high operating margins ; and reduction of operating expenses resulting from the 2011 restructuring . these positive impacts on operating income were partially offset by an increase in sales and marketing expenses to support the launch of skylanders spyro 's adventure , call of duty : modern warfare 3 and call of duty elite and additional litigation activities and settlement of lawsuits . blizzard blizzard 's operating income increased in 2012 as compared to 2011 , primarily due to higher revenues as described above . the increase was partially offset by higher cost of sales as a result of higher net revenues , higher sales and marketing costs to support the launch of diablo iii and world of warcraft : mists of pandaria , and higher general and administrative costs from additional accrued bonuses reflecting our strong 2012 financial performance . blizzard 's operating income decreased in 2011 as compared to 2010 , primarily due to lower revenues as discussed above . these negative impacts on operating income were partially offset by a decrease in sales and marketing expenses , as higher sales and marketing expenses were incurred in 2010 to support the release of starcraft ii : wings of liberty in the third quarter and world of warcraft : cataclysm in the fourth quarter ; and lower customer support costs incurred . non-gaap financial measures the analysis of revenues by distribution channel is presented both on a gaap ( including the impact from change in deferred revenues ) and non-gaap ( excluding the impact from change in deferred revenues ) basis . we use this non-gaap measure internally when evaluating our operating performance , when planning , forecasting and analyzing future periods , and when assessing the performance of our management team . we believe this is appropriate because this non-gaap measure enables an analysis of performance based on the timing of actual transactions with our customers , 49 which is consistent with the way the company is measured by investment analysts and industry data sources , and facilitates comparison of operating performance between periods . in addition , excluding the impact from change in deferred net revenue provides a much more timely indication of trends in our sales and other operating results . while we believe that this non-gaap measure is useful in evaluating our business , this information should be considered as supplemental in nature and is not meant to be considered in isolation from , as a substitute for , or as more important than , the related financial information prepared in accordance with gaap . in addition , this non-gaap financial measure may not be the same as any non-gaap measure presented by another company . this non-gaap financial measure has limitations in that it does not reflect all of the items associated with our gaap revenues . we compensate for the limitations resulting from the exclusion of the change in deferred revenues by considering the impact of that item separately and by considering our gaap , as well as non-gaap , revenues . results of operationsyears ended december 31 , 2012 , 2011 , and 2010 non-gaap financial measures the following table provides reconciliation between gaap and non-gaap net revenues by distribution channel for the years ended december 31 , 2012 , 2011 , and 2010 ( amounts in millions ) : replace_table_token_8_th ( 1 ) we currently define revenues from digital online channels as revenues from subscriptions and memberships , licensing royalties , value-added services , downloadable content , and digitally distributed products . ( 2 ) we have determined that some of our game 's online functionality represents an essential component of gameplay and as a result a more-than-inconsequential separate deliverable . as such , we are required to recognize the revenues of these game titles over the estimated service periods , which may range from a minimum of five months to a maximum of less than a year . in the table above , we present the amount of net revenues for each period as a result of this accounting treatment . ( 3 ) total non-gaap net revenues presented also represents our total operating segment net revenues . 50 the increase in gaap net revenues from retail channels for 2012 as compared to 2011 was the result of sales from the skylanders franchise ( both from the launch of skylanders giants in the fourth quarter of 2012 and the full-year revenues from skylanders spyro 's adventure , which was launched in the fourth quarter of 2011 ) and revenues from diablo iii and world of warcraft : mists of pandaria . the increase was partially offset by lower catalog sales of call of duty and other titles , and lower catalog revenues generated from world of warcraft : cataclysm and starcraft ii : wings of liberty , which were released in 2010. the increase in gaap net revenues from retail channels for 2011 as compared to 2010 was the result of the strong performance of the call of duty franchise , recognition of deferred revenues from the 2010 launches of starcraft ii : wings of liberty and world of warcraft : cataclysm , and revenues generated from the launch of skylanders spyro 's adventure , partially offset by the release of fewer key titles . the decrease in gaap net revenues from digital online channels for 2012 as compared to 2011 was primarily due to lower revenues from world of warcraft subscriptions and lower net revenues from call of duty downloadable content packs released in 2012 for call of duty : modern warfare 3 , in comparison to downloadable content packs released in 2011 for call of duty® : black ops . the decrease was partially offset by the full
| liquidity and capital resources liquidity is a measure of an entity 's ability to secure enough cash to meet its contractual obligations and operating needs as they arise . our major sources of funds from operations are the net cash flows generated from our insurance subsidiaries ' underwriting results , investment income and maturing investments . we have historically generated sufficient net positive cash flow from our operations to fund our commitments and build our investment portfolio , thereby increasing future investment returns . the pooling agreement with donegal mutual historically has been cash flow positive because of the profitability of the underwriting pool . because we settle the pool monthly , our cash flows are substantially similar to the cash flows that would result from the underwriting of direct business . we maintain a high degree of liquidity in our investment portfolio in the form of marketable fixed maturities , equity securities and short-term investments . we structure our fixed-maturity investment portfolio following a “ laddering ” approach so that projected cash flows from investment income and principal maturities are evenly distributed from a timing perspective . this laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future . net cash flows provided by operating activities in 2020 , 2019 and 2018 were $ 101.1 million , $ 76.4 million and $ 63.8 million , respectively . in august 2020 , we entered into a new credit agreement with manufacturers and traders trust company ( “ m & t ” ) that related to a $ 20.0 million unsecured demand line of credit . the line of credit has no expiration date , no annual fees and no covenants . at december 31 , 2020 , we had no outstanding borrowings from m & t and had the ability to borrow up to $ 20.0 million at interest rates equal to the then-current libor rate plus 2.00 % .
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41 business results and highlights in 2012 , activision blizzard 's consolidated net revenues were $ 4.9 billion and consolidated net income was $ 1.1 billion , resulting in diluted earnings per common share of $ 1.01. the company grew net revenues , operating income , and earnings per share as compared to 2011. we also generated $ 1.3 billion in cash from operating activities in 2012. also , according to the npd group with respect to north america , gfk chart-track with respect to europe , and activision blizzard internal estimates , during 2012 : in north america and europe combined , including toys and accessories , activision publishing was the # 1 console and handheld publisher for the calendar year with the # 1 and # 3 best-selling franchisescall of duty® and skylanders . activision blizzard reported record digital revenues for the calendar year and was the # 1 third-party interactive entertainment western digital publisher . for the calendar year , in aggregate across all platforms in the u.s. and europe , activision publishing 's call of duty : black ops ii was the # 1 best-selling title in dollars and call of duty : modern warfare® 3 was the # 9 best-selling title in dollars . in both north america and europe , including toys and accessories , skylanders giants was the # 1 best-selling kids ' title in dollars for the fourth quarter . additionally , for the calendar year , in north america and europe combined , including toys and accessories , skylanders giants was the # 5 best-selling game in dollars , and skylanders spyro 's adventure® was the # 4 best-selling game in dollars . for the calendar year , blizzard entertainment had two top-10 pc games in north america and europe . diablo iii was the # 1 best-selling pc game at retail , breaking pc-game sales records with more than 12 million copies sold worldwide through december 31 , 2012 , and world of warcraft : mists of pandaria® was the # 3 best-selling pc game at retail . product release highlights the following games and content packs , among other titles , were released during the year ended december 31 , 2012 : 007 legends family guy : back to the multiverse angry birds trilogy ice age continental drift arctic games battleship® men in black : alien crisis cabela's® dangerous hunts 2013 prototype® 2 cabela 's hunting expeditions skylanders giants call of duty : black ops ii the amazing spider-man call of duty modern warfare 3 content collection # 1 transformers : fall of cybertron call of duty : modern warfare 3 content collection # 2 transformers prime call of duty : modern warfare 3 content collection # 3 wipeout 3 call of duty : modern warfare 3 content collection # 4 world of warcraft : mists of pandaria diablo iii on january 29 , 2013 , activision released revolution , the first downloadable map pack for call of duty : black ops ii , ( `` revolution `` ) on the xbox 360. revolution is expected to be available on other platforms during the first quarter of 2013 . 42 starcraft ii : heart of the swarm , the first expansion to blizzard 's real-time strategy game starcraft ii : wings of liberty® , is expected to be available in stores and online beginning march 12 , 2013. international operations international sales are a fundamental part of our business . net revenues from international sales accounted for approximately 50 % , 50 % , and 46 % of our total consolidated net revenues for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we maintain significant operations in the united states ( `` u.s. `` ) , canada , the united kingdom ( `` u.k. `` ) , france , germany , ireland , italy , sweden , spain , the netherlands , australia , south korea and china . an important element of our international strategy is to develop content that is specifically directed toward local cultures and customs . our international business is subject to risks typical of an international business , including , but not limited to , foreign currency exchange rate volatility and changes in local economies . accordingly , our future results could be materially and adversely affected by changes in foreign currency exchange rates and changes in local economies . management 's overview of business trends online content and digital downloads we provide our products through both retail channels and digital online delivery methods . many of our video games that are available through retailers as physical `` boxed `` software products , such as dvds , are also available by direct digital download over the internet ( both from websites that we own and from others owned by third parties ) . in addition , we offer players downloadable content as add-ons to our products ( e.g . , new multi-player content packs ) , generally for a one-time fee . we also offer subscription-based services for world of warcraft , which are digitally delivered and hosted by blizzard 's proprietary online-game related service , battle.net . in 2011 , activision launched call of duty elite , a digital service that provides both free and paid subscription-based content and features for call of duty : modern warfare 3 . in conjunction with the release of call of duty : black ops ii , all of the call of duty elite service features for that game were made available for free . this free service does not include downloadable map packs , which are sold separately , either a la carte as individual map packs or as part of a discounted season pass bundle . story_separator_special_tag activision 's operating income increased in 2011 as compared to 2010 , primarily due to a more focused release of products that delivered higher operating margins ; increased digital sales of call of duty 's digital content , resulting in high operating margins ; and reduction of operating expenses resulting from the 2011 restructuring . these positive impacts on operating income were partially offset by an increase in sales and marketing expenses to support the launch of skylanders spyro 's adventure , call of duty : modern warfare 3 and call of duty elite and additional litigation activities and settlement of lawsuits . blizzard blizzard 's operating income increased in 2012 as compared to 2011 , primarily due to higher revenues as described above . the increase was partially offset by higher cost of sales as a result of higher net revenues , higher sales and marketing costs to support the launch of diablo iii and world of warcraft : mists of pandaria , and higher general and administrative costs from additional accrued bonuses reflecting our strong 2012 financial performance . blizzard 's operating income decreased in 2011 as compared to 2010 , primarily due to lower revenues as discussed above . these negative impacts on operating income were partially offset by a decrease in sales and marketing expenses , as higher sales and marketing expenses were incurred in 2010 to support the release of starcraft ii : wings of liberty in the third quarter and world of warcraft : cataclysm in the fourth quarter ; and lower customer support costs incurred . non-gaap financial measures the analysis of revenues by distribution channel is presented both on a gaap ( including the impact from change in deferred revenues ) and non-gaap ( excluding the impact from change in deferred revenues ) basis . we use this non-gaap measure internally when evaluating our operating performance , when planning , forecasting and analyzing future periods , and when assessing the performance of our management team . we believe this is appropriate because this non-gaap measure enables an analysis of performance based on the timing of actual transactions with our customers , 49 which is consistent with the way the company is measured by investment analysts and industry data sources , and facilitates comparison of operating performance between periods . in addition , excluding the impact from change in deferred net revenue provides a much more timely indication of trends in our sales and other operating results . while we believe that this non-gaap measure is useful in evaluating our business , this information should be considered as supplemental in nature and is not meant to be considered in isolation from , as a substitute for , or as more important than , the related financial information prepared in accordance with gaap . in addition , this non-gaap financial measure may not be the same as any non-gaap measure presented by another company . this non-gaap financial measure has limitations in that it does not reflect all of the items associated with our gaap revenues . we compensate for the limitations resulting from the exclusion of the change in deferred revenues by considering the impact of that item separately and by considering our gaap , as well as non-gaap , revenues . results of operationsyears ended december 31 , 2012 , 2011 , and 2010 non-gaap financial measures the following table provides reconciliation between gaap and non-gaap net revenues by distribution channel for the years ended december 31 , 2012 , 2011 , and 2010 ( amounts in millions ) : replace_table_token_8_th ( 1 ) we currently define revenues from digital online channels as revenues from subscriptions and memberships , licensing royalties , value-added services , downloadable content , and digitally distributed products . ( 2 ) we have determined that some of our game 's online functionality represents an essential component of gameplay and as a result a more-than-inconsequential separate deliverable . as such , we are required to recognize the revenues of these game titles over the estimated service periods , which may range from a minimum of five months to a maximum of less than a year . in the table above , we present the amount of net revenues for each period as a result of this accounting treatment . ( 3 ) total non-gaap net revenues presented also represents our total operating segment net revenues . 50 the increase in gaap net revenues from retail channels for 2012 as compared to 2011 was the result of sales from the skylanders franchise ( both from the launch of skylanders giants in the fourth quarter of 2012 and the full-year revenues from skylanders spyro 's adventure , which was launched in the fourth quarter of 2011 ) and revenues from diablo iii and world of warcraft : mists of pandaria . the increase was partially offset by lower catalog sales of call of duty and other titles , and lower catalog revenues generated from world of warcraft : cataclysm and starcraft ii : wings of liberty , which were released in 2010. the increase in gaap net revenues from retail channels for 2011 as compared to 2010 was the result of the strong performance of the call of duty franchise , recognition of deferred revenues from the 2010 launches of starcraft ii : wings of liberty and world of warcraft : cataclysm , and revenues generated from the launch of skylanders spyro 's adventure , partially offset by the release of fewer key titles . the decrease in gaap net revenues from digital online channels for 2012 as compared to 2011 was primarily due to lower revenues from world of warcraft subscriptions and lower net revenues from call of duty downloadable content packs released in 2012 for call of duty : modern warfare 3 , in comparison to downloadable content packs released in 2011 for call of duty® : black ops . the decrease was partially offset by the full
| liquidity and capital resources sources of liquidity ( amounts in millions ) replace_table_token_21_th replace_table_token_22_th cash flows provided by operating activities the primary drivers of cash flows provided by operating activities included the collection of customer receivables generated by the sale of our products and digital and subscription revenues , partially offset by payments to vendors for the manufacturing , distribution and marketing of our products , payments to third-party developers and intellectual property holders , tax liabilities , and payments to our workforce . a significant operating use of our cash relates to our continued focus on customer service for our subscribers and investment in software development and intellectual property licenses . cash flows provided by operating activities were higher for 2012 as compared to 2011 , and were lower for 2011 as compared to 2010. our source of cash inflow varies with our release schedule . for example , blizzard 's major releases of starcraft ii and world of warcraft : cataclysm during 2010 , and blizzard 's major releases of diablo iii and world of warcraft : mist of pandaria during 2012 contributed to the higher cash inflows for 2010 and 2012 as compared to 2011 , when there were no major releases from blizzard . additionally , the strong performance of activision 's skylanders franchise and call of duty : black ops ii contributed to strong operating cash flows in 2012. cash flows provided by ( used in ) investing activities the primary drivers of cash flows used in investing activities have typically included capital expenditures , acquisitions and the net effect of purchases and sales/maturities of short-term investments . cash flows provided by investing activities were lower for 2012 as compared to 2011 , primarily due to decreased proceeds from the maturity of investments , partially offset by higher purchases of short-term investments . in 2012 , proceeds from the maturity of investments were $ 444 million , the majority of which consisted of u.s. treasury and other government agency securities , while the purchase of short-term investments totaled $ 503 million . further , capital expenditures , primarily related to property and equipment , were $ 73 million .
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charges related to being a public company ; any statements of belief and any statements of assumptions underlying any of the foregoing ; carlyle 's ability to control our common shares ; other factors disclosed in this annual report on form 10-k ; and other factors beyond our control . these cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this annual report on form 10-k. we undertake no obligation to update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . basis of presentation axalta 's consolidated financial statements as of december 31 , 2014 and 2013 , and for the years ended december 31 , 2014 and 2013 and the period from august 24 , 2012 through december 31 , 2012 , included elsewhere in this annual report on form 10-k , represent those of the successor . the consolidated financial statements of axalta were prepared using the acquisition method of accounting . under the acquisition method of accounting , tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their respective fair market values as of the date of the acquisition , with any purchase price in excess of the net assets acquired recorded as goodwill . because axalta was formed on august 24 , 2012 for the purpose of consummating the acquisition , it has no financial statements as of or for periods ended prior to that date . prior to the acquisition , axalta generated no revenue and only incurred merger and acquisition related costs and debt financing costs in anticipation of the acquisition . the combined financial statements of dpc for the period from january 1 , 2013 through january 31 , 2013 and for the year ended december 31 , 2012 , included elsewhere in this annual report on form 10-k , represent those of the predecessor . as a result of the application of acquisition accounting as of the date of the acquisition , the financial statements for the successor periods and the predecessor periods are presented on a different basis and , therefore , may not be comparable . during the predecessor periods , dpc operated either as a reportable segment or part of a reportable segment within dupont , consequently , standalone financial statements were not historically prepared for dpc . the accompanying combined financial statements of dpc have been prepared from dupont 's historical accounting records and are presented on a standalone basis as if the operations had been conducted independently from dupont . in this context , prior to pre-acquisition structuring that occurred in 2012 , no direct ownership relationship existed among all of the various legal entities comprising dpc . accordingly , dupont and its subsidiaries ' net investment in these operations is shown in lieu of shareholders ' equity in the predecessor combined financial statements . the predecessor combined financial statements include the historical operations and assets and liabilities of the legal entities that are considered to comprise the dpc business . for more information on the financial statements for our successor period and predecessor period , see note 2 to the consolidated and combined financial statements included elsewhere in this annual report on form 10-k. in addition to the historical analysis of results of operations , we have prepared unaudited supplemental pro forma results of operations for the year ended december 31 , 2013 , derived from our audited financial statements for the year ended december 31 , 2013 and the audited financial statements for the dpc business for the period from january 1 , 2013 through january 31 , 2013 , each of which are included elsewhere in this annual report on form 10-k , as if the acquisition and related financing had occurred on january 1 , 2013. the pro forma analysis is prepared and presented to aid in explaining the results of operations . the pro forma discussion follows the historical analysis of results of operations . 36 overview we are a leading global manufacturer , marketer and distributor of high performance coatings systems . we have a nearly 150 -year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service . our diverse global footprint of 35 manufacturing facilities , 7 technology centers , 45 customer training centers and approximately 12,600 employees allows us to meet the needs of customers in over 130 countries . we serve our customer base through an extensive sales force and technical support organization , as well as through over 4,000 independent , locally based distributors . we operate our business in two segments , performance coatings and transportation coatings . our segments are based on the type and concentration of customers served , service requirements , methods of distribution and major product lines . through our performance coatings segment we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base . we are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems . the end-markets within this segment are refinish and industrial . through our transportation coatings segment we provide advanced coating technologies to oems of light and commercial vehicles . these increasingly global customers require a high level of technical support coupled with cost-effective , environmentally responsible coatings systems that can be applied with a high degree of precision , consistency and speed . the end-markets within this segment are light vehicle and commercial vehicle . on november 11 , 2014 , we priced our initial public offering ( the `` offering `` , or the `` ipo `` ) , in which certain selling shareholders affiliated with carlyle sold 57,500,000 common shares at a price of $ 19.50 per share . we received no proceeds from the offering . story_separator_special_tag upon the issuance of the senior notes and the entry into the senior secured credit facilities , the commitments under the bridge facility terminated . commitment fees related to the bridge facility of $ 21.0 million and associated fees of $ 4.0 million were expensed upon the termination of the bridge facility . in connection with the amendment to the senior secured credit facilities in february 2014 , we recognized $ 3.1 million of costs during the year ended december 31 , 2014. in addition to the credit facility amendment , we also incurred a $ 3.0 million loss on extinguishment of debt recognized during the successor year ended december 31 , 2014 , which resulted directly from the pro-rata write off of unamortized deferred financing costs and original issue discounts associated with the pay-down of $ 100.0 million of principal on the new dollar term loan ( discussed further at note 22 to the consolidated and combined financial statements included elsewhere in this annual report on form 10-k ) . ( d ) eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies , including a $ 19.4 million loss related to the acquisition date settlement of a foreign currency contract used to hedge the variability of euro-based financing . ( e ) for the successor periods ended december 31 , 2014 and 2013 , eliminates the non-service cost components of employee benefit costs . additionally , we deducted a pension curtailment gain of $ 7.3 million recorded during the successor year ended december 31 , 2014. for the predecessor period january 1 , 2013 through january 31 , 2013 and the predecessor year ended december 31 , 2012 , eliminates ( 1 ) all u.s. pension and other long-term employee benefit costs that were not assumed as part of the acquisition and ( 2 ) the non-service cost component of the pension and other long-term employee benefit costs . ( f ) represents expenses primarily related to employee termination benefits , including our initiative to improve the overall cost structure within the european region , and other employee-related costs . termination benefits include the costs associated with our headcount initiatives for establishment of new roles and elimination of old roles and other costs associated with cost saving opportunities that were related to our transition to a standalone entity . ( g ) represents fees paid to consultants , advisors , and other third-party professional organizations for professional services rendered in conjunction with the transition from dupont to a standalone entity . ( h ) represents charges associated with the transition from dupont to a standalone entity , including branding and marketing , information technology related costs , and facility transition costs . ( i ) represents costs associated with the ipo , including a $ 13.4 million pre-tax charge associated with the termination of the management agreement with carlyle investment management , l.l.c . , an affiliate of carlyle , upon the completion of the ipo . see note ( l ) below . ( j ) represents costs for certain unusual or non-operational ( gains ) and losses and the non-cash impact of natural gas and currency hedge losses allocated to dpc by dupont , stock-based compensation , asset impairments , equity investee dividends , indemnity ( income ) losses associated with the acquisition , gains resulting from amendments to long-term benefit plans and loss ( gain ) on sale and disposal of property , plant and equipment . ( k ) represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned . ( l ) pursuant to axalta 's management agreement with carlyle investment management , l.l.c . , for management and financial advisory services and oversight provided to axalta and its subsidiaries , axalta was required to pay an annual management fee of $ 3.0 million and out-of-pocket expenses . this agreement terminated upon completion of the ipo . 42 results of operations the following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this annual report on form 10-k. our historical results of operations set forth below may not necessarily reflect what would have occurred if we had been a separate standalone entity prior to the acquisition or what will occur in the future . successor year ended december 31 , 2014 compared to successor year ended december 31 , 2013 , predecessor period january 1 , 2013 through january 31 , 2013 , and the pro forma year ended december 31 , 2013 the following table was derived from the successor 's consolidated statements of operations for the years ended december 31 , 2014 and 2013 and from the predecessor 's combined statement of operations for the period from january 1 , 2013 through january 31 , 2013 included elsewhere in this annual report on form 10-k. it should be noted that the results of operations for the successor year ended december 31 , 2013 only include the results of dpc from the date of the acquisition . prior to the acquisition , axalta generated no revenue and only incurred merger and acquisition related costs and debt financing costs in anticipation of the acquisition . we have also presented pro forma financial results for the year ended december 31 , 2013 as if the acquisition and the related financing had occurred on january 1 , 2013. we believe this information , and the related comparisons , provide a more meaningful comparison for the years presented . replace_table_token_5_th net sales historical : net sales were $ 4,361.7 million for the successor year ended december 31 , 2014 compared to net sales of $ 3,951.1 million for the successor year ended december 31 , 2013 and $ 326.2 million for the predecessor period january 1 , 2013 through january 31 , 2013. our net sales growth
| liquidity and capital resources sources of liquidity ( amounts in millions ) replace_table_token_21_th replace_table_token_22_th cash flows provided by operating activities the primary drivers of cash flows provided by operating activities included the collection of customer receivables generated by the sale of our products and digital and subscription revenues , partially offset by payments to vendors for the manufacturing , distribution and marketing of our products , payments to third-party developers and intellectual property holders , tax liabilities , and payments to our workforce . a significant operating use of our cash relates to our continued focus on customer service for our subscribers and investment in software development and intellectual property licenses . cash flows provided by operating activities were higher for 2012 as compared to 2011 , and were lower for 2011 as compared to 2010. our source of cash inflow varies with our release schedule . for example , blizzard 's major releases of starcraft ii and world of warcraft : cataclysm during 2010 , and blizzard 's major releases of diablo iii and world of warcraft : mist of pandaria during 2012 contributed to the higher cash inflows for 2010 and 2012 as compared to 2011 , when there were no major releases from blizzard . additionally , the strong performance of activision 's skylanders franchise and call of duty : black ops ii contributed to strong operating cash flows in 2012. cash flows provided by ( used in ) investing activities the primary drivers of cash flows used in investing activities have typically included capital expenditures , acquisitions and the net effect of purchases and sales/maturities of short-term investments . cash flows provided by investing activities were lower for 2012 as compared to 2011 , primarily due to decreased proceeds from the maturity of investments , partially offset by higher purchases of short-term investments . in 2012 , proceeds from the maturity of investments were $ 444 million , the majority of which consisted of u.s. treasury and other government agency securities , while the purchase of short-term investments totaled $ 503 million . further , capital expenditures , primarily related to property and equipment , were $ 73 million .
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charges related to being a public company ; any statements of belief and any statements of assumptions underlying any of the foregoing ; carlyle 's ability to control our common shares ; other factors disclosed in this annual report on form 10-k ; and other factors beyond our control . these cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this annual report on form 10-k. we undertake no obligation to update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . basis of presentation axalta 's consolidated financial statements as of december 31 , 2014 and 2013 , and for the years ended december 31 , 2014 and 2013 and the period from august 24 , 2012 through december 31 , 2012 , included elsewhere in this annual report on form 10-k , represent those of the successor . the consolidated financial statements of axalta were prepared using the acquisition method of accounting . under the acquisition method of accounting , tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their respective fair market values as of the date of the acquisition , with any purchase price in excess of the net assets acquired recorded as goodwill . because axalta was formed on august 24 , 2012 for the purpose of consummating the acquisition , it has no financial statements as of or for periods ended prior to that date . prior to the acquisition , axalta generated no revenue and only incurred merger and acquisition related costs and debt financing costs in anticipation of the acquisition . the combined financial statements of dpc for the period from january 1 , 2013 through january 31 , 2013 and for the year ended december 31 , 2012 , included elsewhere in this annual report on form 10-k , represent those of the predecessor . as a result of the application of acquisition accounting as of the date of the acquisition , the financial statements for the successor periods and the predecessor periods are presented on a different basis and , therefore , may not be comparable . during the predecessor periods , dpc operated either as a reportable segment or part of a reportable segment within dupont , consequently , standalone financial statements were not historically prepared for dpc . the accompanying combined financial statements of dpc have been prepared from dupont 's historical accounting records and are presented on a standalone basis as if the operations had been conducted independently from dupont . in this context , prior to pre-acquisition structuring that occurred in 2012 , no direct ownership relationship existed among all of the various legal entities comprising dpc . accordingly , dupont and its subsidiaries ' net investment in these operations is shown in lieu of shareholders ' equity in the predecessor combined financial statements . the predecessor combined financial statements include the historical operations and assets and liabilities of the legal entities that are considered to comprise the dpc business . for more information on the financial statements for our successor period and predecessor period , see note 2 to the consolidated and combined financial statements included elsewhere in this annual report on form 10-k. in addition to the historical analysis of results of operations , we have prepared unaudited supplemental pro forma results of operations for the year ended december 31 , 2013 , derived from our audited financial statements for the year ended december 31 , 2013 and the audited financial statements for the dpc business for the period from january 1 , 2013 through january 31 , 2013 , each of which are included elsewhere in this annual report on form 10-k , as if the acquisition and related financing had occurred on january 1 , 2013. the pro forma analysis is prepared and presented to aid in explaining the results of operations . the pro forma discussion follows the historical analysis of results of operations . 36 overview we are a leading global manufacturer , marketer and distributor of high performance coatings systems . we have a nearly 150 -year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service . our diverse global footprint of 35 manufacturing facilities , 7 technology centers , 45 customer training centers and approximately 12,600 employees allows us to meet the needs of customers in over 130 countries . we serve our customer base through an extensive sales force and technical support organization , as well as through over 4,000 independent , locally based distributors . we operate our business in two segments , performance coatings and transportation coatings . our segments are based on the type and concentration of customers served , service requirements , methods of distribution and major product lines . through our performance coatings segment we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base . we are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems . the end-markets within this segment are refinish and industrial . through our transportation coatings segment we provide advanced coating technologies to oems of light and commercial vehicles . these increasingly global customers require a high level of technical support coupled with cost-effective , environmentally responsible coatings systems that can be applied with a high degree of precision , consistency and speed . the end-markets within this segment are light vehicle and commercial vehicle . on november 11 , 2014 , we priced our initial public offering ( the `` offering `` , or the `` ipo `` ) , in which certain selling shareholders affiliated with carlyle sold 57,500,000 common shares at a price of $ 19.50 per share . we received no proceeds from the offering . story_separator_special_tag upon the issuance of the senior notes and the entry into the senior secured credit facilities , the commitments under the bridge facility terminated . commitment fees related to the bridge facility of $ 21.0 million and associated fees of $ 4.0 million were expensed upon the termination of the bridge facility . in connection with the amendment to the senior secured credit facilities in february 2014 , we recognized $ 3.1 million of costs during the year ended december 31 , 2014. in addition to the credit facility amendment , we also incurred a $ 3.0 million loss on extinguishment of debt recognized during the successor year ended december 31 , 2014 , which resulted directly from the pro-rata write off of unamortized deferred financing costs and original issue discounts associated with the pay-down of $ 100.0 million of principal on the new dollar term loan ( discussed further at note 22 to the consolidated and combined financial statements included elsewhere in this annual report on form 10-k ) . ( d ) eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies , including a $ 19.4 million loss related to the acquisition date settlement of a foreign currency contract used to hedge the variability of euro-based financing . ( e ) for the successor periods ended december 31 , 2014 and 2013 , eliminates the non-service cost components of employee benefit costs . additionally , we deducted a pension curtailment gain of $ 7.3 million recorded during the successor year ended december 31 , 2014. for the predecessor period january 1 , 2013 through january 31 , 2013 and the predecessor year ended december 31 , 2012 , eliminates ( 1 ) all u.s. pension and other long-term employee benefit costs that were not assumed as part of the acquisition and ( 2 ) the non-service cost component of the pension and other long-term employee benefit costs . ( f ) represents expenses primarily related to employee termination benefits , including our initiative to improve the overall cost structure within the european region , and other employee-related costs . termination benefits include the costs associated with our headcount initiatives for establishment of new roles and elimination of old roles and other costs associated with cost saving opportunities that were related to our transition to a standalone entity . ( g ) represents fees paid to consultants , advisors , and other third-party professional organizations for professional services rendered in conjunction with the transition from dupont to a standalone entity . ( h ) represents charges associated with the transition from dupont to a standalone entity , including branding and marketing , information technology related costs , and facility transition costs . ( i ) represents costs associated with the ipo , including a $ 13.4 million pre-tax charge associated with the termination of the management agreement with carlyle investment management , l.l.c . , an affiliate of carlyle , upon the completion of the ipo . see note ( l ) below . ( j ) represents costs for certain unusual or non-operational ( gains ) and losses and the non-cash impact of natural gas and currency hedge losses allocated to dpc by dupont , stock-based compensation , asset impairments , equity investee dividends , indemnity ( income ) losses associated with the acquisition , gains resulting from amendments to long-term benefit plans and loss ( gain ) on sale and disposal of property , plant and equipment . ( k ) represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned . ( l ) pursuant to axalta 's management agreement with carlyle investment management , l.l.c . , for management and financial advisory services and oversight provided to axalta and its subsidiaries , axalta was required to pay an annual management fee of $ 3.0 million and out-of-pocket expenses . this agreement terminated upon completion of the ipo . 42 results of operations the following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this annual report on form 10-k. our historical results of operations set forth below may not necessarily reflect what would have occurred if we had been a separate standalone entity prior to the acquisition or what will occur in the future . successor year ended december 31 , 2014 compared to successor year ended december 31 , 2013 , predecessor period january 1 , 2013 through january 31 , 2013 , and the pro forma year ended december 31 , 2013 the following table was derived from the successor 's consolidated statements of operations for the years ended december 31 , 2014 and 2013 and from the predecessor 's combined statement of operations for the period from january 1 , 2013 through january 31 , 2013 included elsewhere in this annual report on form 10-k. it should be noted that the results of operations for the successor year ended december 31 , 2013 only include the results of dpc from the date of the acquisition . prior to the acquisition , axalta generated no revenue and only incurred merger and acquisition related costs and debt financing costs in anticipation of the acquisition . we have also presented pro forma financial results for the year ended december 31 , 2013 as if the acquisition and the related financing had occurred on january 1 , 2013. we believe this information , and the related comparisons , provide a more meaningful comparison for the years presented . replace_table_token_5_th net sales historical : net sales were $ 4,361.7 million for the successor year ended december 31 , 2014 compared to net sales of $ 3,951.1 million for the successor year ended december 31 , 2013 and $ 326.2 million for the predecessor period january 1 , 2013 through january 31 , 2013. our net sales growth
| cash flows successor years ended december 31 , 2014 and 2013 as well as the successor period from august 24 through december 31 , 2012 and predecessor year ended december 31 , 2012 and predecessor period from january 1 through january 31 , 2013. replace_table_token_9_th year ended december 31 , 2014 ( successor ) net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2014 was $ 251.4 million . net income before deducting depreciation , amortization and other non-cash items generated cash of $ 390.1 million . t his was partially offset by net increases in working capital of $ 138.7 million . the most significant drivers in working capital were increases in receivables , inventory and other assets of $ 119.0 million due primarily to increased net sales and inventory builds to support ongoing operational demands compared to the year ended december 31 , 2013 , as well as , reductions of other accrued liabilities of $ 54.8 million primarily related to the payment of nonrecurring transition-related costs , including restructuring costs , partially offset by a $ 53.6 million increase in accounts payable . net cash used for investing activities net cash used for investing activities for the year ended december 31 , 2014 was $ 178.5 million . this use was driven primarily by purchases of property , plant and equipment of $ 188.4 million , the purchase of increased ownership in a majority owned joint venture of $ 6.5 million and an increase of $ 4.7 million in restricted cash , partially offset by $ 21.3 million of proceeds from sales of assets . purchases of property , plant and equipment includes approxima tely $ 74.8 million a ssociated with our transition-related capital projects including our information technology systems and finalization of our transition of our global office relocations . 56 net cash used for financing activities net cash used for financing activities for the year ended december 31 , 2014 was $ 123.2 million . th e change was primarily driven by repayments of term lo ans of $ 121.1 million .
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we use words such as “ anticipate , ” “ estimate , ” “ plan , ” “ project , ” “ continuing , ” “ ongoing , ” “ expect , ” “ believe , ” “ intend , ” “ may , ” “ will , ” “ should , ” “ could , ” and similar expressions to identify forward-looking statements . all forward-looking statements included in this report are based on information available to us on the date hereof and , except as required by law , we assume no obligation to update any such forward-looking statements . overview we are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products designed to harness the power of a patient 's own immune system to eradicate cancer cells . our lead program is an adoptive cell therapy utilizing tumor-infiltrating lymphocytes ( til ) , which are t cells derived from patients ' tumors , for the treatment of metastatic melanoma . we have an on-going phase 2 clinical trial of our lead product candidate , ln-144 , til for the treatment of metastatic melanoma . this single-arm study is enrolling patients with melanoma whose disease has progressed following treatment with at least one systemic therapy . the trial opened for enrollment during the second half of 2015 and is being conducted at eight sites . the purpose of the study is to evaluate the safety , and efficacy of our autologous til infusion ( ln-144 ) . the trial 's primary endpoints are characterized by the safety of ln-144 . secondary outcome measures efficacy of ln-144 which include objective response and complete response rates . additional secondary or exploratory endpoints may be considered as well . updates from this phase 2 trial is planned to be released in 2017. during 2015 , we received orphan drug designation for ln-144 in the united states to treat metastatic melanoma . this designation provides seven years of market exclusivity in the united states , subject to certain limited exceptions . in september 2016 , we entered into an exclusive and co-exclusive license agreement polybiocept ab for the exclusive right and license to polybiocept 's intellectual property to develop , manufacture , market and genetically engineer til produced by expansion , selection and enrichment using a cytokine cocktail . we paid polybiocept a total of $ 2.5 million as an up-front exclusive license payment and agreed to make milestone payments to polybiocept under the polybiocept license agreement if , and when , ( i ) certain product development milestones are achieved , ( ii ) certain regulatory approvals have been obtained from the fda and or the european medicines agency ( ema ) , and ( iii ) certain product sales targets are achieved . the milestone payments will be payable both in cash ( u.s. dollars ) and in shares of our common stock . if all of the foregoing product development , regulatory approval and sales milestone payments are met , we will have to pay polybiocept an additional $ 8.7 million and will have to issue to polybiocept a total 2,219,376 shares of unregistered common stock . in addition to these potential payments , we agreed to reimburse polybiocept for up to $ 0.2 million in expenses related to the transfer of know-how and to pay polybiocept $ 0.1 million as a clinical trials management fee . on november 23 , 2016 we entered into that a three-year manufacturing and services agreement with wuxi pursuant to which wuxi agreed to provide manufacturing and other services . under the agreement , we entered into two statements of work for two cgmp manufacturing suites to be established and operated by wuxi for us , one of which is expected to be capable of being used for the commercial manufacture of our products . the fee payable under the first statement of work for the use of one of the manufacturing suites during the first year of the agreement , including the fees for the necessary personnel , is $ 2.5 million . the second statement of work , under which wuxi agreed to establish and operate a second , dedicated facility for a late stage/commercial manufacturing cgmp suite requires us to pay approximately $ 5.85 million during the first year of the agreement . results of operations for the years ended december 31 , 2016 and 2015 revenues as a development stage company that is currently engaged in the development of novel cancer immunotherapy products , we have not yet generated any revenues from our biotechnology business or otherwise since our formation . we currently do not anticipate that we will generate any revenues during 2017 from the sale or licensing of our products . our ability to generate revenues in the future will depend on our ability to complete the development of our product candidates and to obtain regulatory approval for them . 40 costs and expenses research and development expense ( in thousands ) replace_table_token_5_th research and development expense for the year ended december 31 , 2016 increased by $ 12.6 million , or 81 % , compared to the year ended december 31 , 2015 , inclusive of stock-based compensation . the increase was primarily attributable to a $ 2.3 million increase in payroll and related expenses primarily due to an increase in headcount , a $ 3.2 million increase in drug manufacturing costs , a $ 0.9 million increase in costs related to our clinical trials , $ 1.0 million increase in stock-based compensation expense and expenses incurred under the polybiocept agreement in the amount of $ 2.7 million . story_separator_special_tag research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . we expect our research and development expenses to increase over the next several years as we continue to conduct our clinical trial for our products and as we increase our research and development efforts in other cancer indications . however , it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates . the duration , costs and timing of our clinical trials and development of our product candidates will depend on a number of factors that include , but are not limited to , the number of patients that enroll in the trial , per patient trial costs , number of sites included in the trial , discontinuation rates of patients , duration of patient follow-up , efficacy and safety profile of the product candidate , and the length of time required to enroll eligible patients . additionally , the probability of success for our product candidate will depend on a number of factors , including competition , manufacturing capability and cost efficiency , and commercial viability . general and administrative expense ( in thousands ) replace_table_token_6_th general and administrative expense for the year ended december 31 , 2016 increased by $ 13.2 million , or 107 % , compared to the year ended december 31 , 2015 , inclusive of stock-based compensation . the increase was primarily attributable to a $ 9.3 million increase in stock-based compensation expense primarily due to the accelerated vesting of equity awards upon the termination of employment of our former chief executive officer and our former chief financial officer , and the increase in the number of our employees . a $ 1.5 million increase in payroll and related expenses primarily due to the increase in headcount , a $ 0.9 million increase due to severance payments to our former chief executive officer and our former chief financial officer and a $ 1.3 million increase in consulting and legal related expenses . general and administrative expenses include personnel costs for our employees engaged in general and administrative activities , legal fees , audit and tax fees , consultants and professional services , and general corporate expenses . interest income ( in thousands ) replace_table_token_7_th interest income results from our interest-bearing cash and investment balances . interest income for the year ended december 31 , 2016 increased due to the higher cash balances in 2016 as a result of the proceeds received from our equity financings in 2015 and june 2016 . 41 results of operations for the years ended december 31 , 2015 and 2014 revenues as a development stage company that is currently engaged in the development of novel cancer immunotherapy products , we have not yet generated any revenues from our biotechnology business or otherwise since our formation . costs and expenses research and development expense ( in thousands ) replace_table_token_8_th during the year ended december 31 , 2015 , our research and development costs increased by $ 11.6 million when compared to the same period in 2014 , inclusive of stock-based compensation . the increase is mainly attributable to the expansion of our crada in 2015 , the general expansion of our research and development efforts , the establishment of our tampa , florida , research facility in the fourth quarter of 2014 and the initiation of our phase ii clinical trial in september 2015. general and administrative expense ( in thousands ) replace_table_token_9_th for the year ended december 31 , 2015 our general and administrative expenses increased by $ 4.2 million , or 51 % , and for the year ended december 31 , 2014 compared to the prior year comparable period , inclusive of stock-based compensation . the increase in our general and administrative expenses during the year ended december 31 , 2015 is primarily due to stock-based compensation , and increases in our overall corporate activities , including business development and increases in employment related expenses , insurance costs and legal fees . for the years ended december 31 , 2015 and 2014 , we incurred $ 6.3 million and $ 2.7 million , respectively , of non-cash stock-based compensation costs . share based compensation includes stock and options granted to our executive officers , our employees , our directors , and our consultants and advisors . interest income ( in thousands ) replace_table_token_10_th interest income results from our interest-bearing cash and investment balances . interest income for the year ended december 31 , 2015 increased over 2014 due to the higher cash balances in 2015 as a result of the proceeds received from our equity financings in late 2014 and early 2015. net loss we had a net loss of $ 52.9 million , $ 27.7 million , and $ 12.0 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . the increase in our net loss during 2016 is due to the continued expansion of our research and development activities , increased clinical trials and manufacturing activities , and the overall growth of our corporate infrastructure . our general and administrative expenses increased due to the increase in headcount and due to stock-based equity awards accelerated in 2016 related to the termination of certain executives . the increase in our net loss during 2015 is due to an increase in general and administrative expenses , along with the expansion of our research and development activities . we anticipate that we will continue to incur net losses in the future as we further invest in our research and development activities , including our clinical development . we do not expect to generate any revenues in the near term .
| cash flows successor years ended december 31 , 2014 and 2013 as well as the successor period from august 24 through december 31 , 2012 and predecessor year ended december 31 , 2012 and predecessor period from january 1 through january 31 , 2013. replace_table_token_9_th year ended december 31 , 2014 ( successor ) net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2014 was $ 251.4 million . net income before deducting depreciation , amortization and other non-cash items generated cash of $ 390.1 million . t his was partially offset by net increases in working capital of $ 138.7 million . the most significant drivers in working capital were increases in receivables , inventory and other assets of $ 119.0 million due primarily to increased net sales and inventory builds to support ongoing operational demands compared to the year ended december 31 , 2013 , as well as , reductions of other accrued liabilities of $ 54.8 million primarily related to the payment of nonrecurring transition-related costs , including restructuring costs , partially offset by a $ 53.6 million increase in accounts payable . net cash used for investing activities net cash used for investing activities for the year ended december 31 , 2014 was $ 178.5 million . this use was driven primarily by purchases of property , plant and equipment of $ 188.4 million , the purchase of increased ownership in a majority owned joint venture of $ 6.5 million and an increase of $ 4.7 million in restricted cash , partially offset by $ 21.3 million of proceeds from sales of assets . purchases of property , plant and equipment includes approxima tely $ 74.8 million a ssociated with our transition-related capital projects including our information technology systems and finalization of our transition of our global office relocations . 56 net cash used for financing activities net cash used for financing activities for the year ended december 31 , 2014 was $ 123.2 million . th e change was primarily driven by repayments of term lo ans of $ 121.1 million .
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we use words such as “ anticipate , ” “ estimate , ” “ plan , ” “ project , ” “ continuing , ” “ ongoing , ” “ expect , ” “ believe , ” “ intend , ” “ may , ” “ will , ” “ should , ” “ could , ” and similar expressions to identify forward-looking statements . all forward-looking statements included in this report are based on information available to us on the date hereof and , except as required by law , we assume no obligation to update any such forward-looking statements . overview we are a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products designed to harness the power of a patient 's own immune system to eradicate cancer cells . our lead program is an adoptive cell therapy utilizing tumor-infiltrating lymphocytes ( til ) , which are t cells derived from patients ' tumors , for the treatment of metastatic melanoma . we have an on-going phase 2 clinical trial of our lead product candidate , ln-144 , til for the treatment of metastatic melanoma . this single-arm study is enrolling patients with melanoma whose disease has progressed following treatment with at least one systemic therapy . the trial opened for enrollment during the second half of 2015 and is being conducted at eight sites . the purpose of the study is to evaluate the safety , and efficacy of our autologous til infusion ( ln-144 ) . the trial 's primary endpoints are characterized by the safety of ln-144 . secondary outcome measures efficacy of ln-144 which include objective response and complete response rates . additional secondary or exploratory endpoints may be considered as well . updates from this phase 2 trial is planned to be released in 2017. during 2015 , we received orphan drug designation for ln-144 in the united states to treat metastatic melanoma . this designation provides seven years of market exclusivity in the united states , subject to certain limited exceptions . in september 2016 , we entered into an exclusive and co-exclusive license agreement polybiocept ab for the exclusive right and license to polybiocept 's intellectual property to develop , manufacture , market and genetically engineer til produced by expansion , selection and enrichment using a cytokine cocktail . we paid polybiocept a total of $ 2.5 million as an up-front exclusive license payment and agreed to make milestone payments to polybiocept under the polybiocept license agreement if , and when , ( i ) certain product development milestones are achieved , ( ii ) certain regulatory approvals have been obtained from the fda and or the european medicines agency ( ema ) , and ( iii ) certain product sales targets are achieved . the milestone payments will be payable both in cash ( u.s. dollars ) and in shares of our common stock . if all of the foregoing product development , regulatory approval and sales milestone payments are met , we will have to pay polybiocept an additional $ 8.7 million and will have to issue to polybiocept a total 2,219,376 shares of unregistered common stock . in addition to these potential payments , we agreed to reimburse polybiocept for up to $ 0.2 million in expenses related to the transfer of know-how and to pay polybiocept $ 0.1 million as a clinical trials management fee . on november 23 , 2016 we entered into that a three-year manufacturing and services agreement with wuxi pursuant to which wuxi agreed to provide manufacturing and other services . under the agreement , we entered into two statements of work for two cgmp manufacturing suites to be established and operated by wuxi for us , one of which is expected to be capable of being used for the commercial manufacture of our products . the fee payable under the first statement of work for the use of one of the manufacturing suites during the first year of the agreement , including the fees for the necessary personnel , is $ 2.5 million . the second statement of work , under which wuxi agreed to establish and operate a second , dedicated facility for a late stage/commercial manufacturing cgmp suite requires us to pay approximately $ 5.85 million during the first year of the agreement . results of operations for the years ended december 31 , 2016 and 2015 revenues as a development stage company that is currently engaged in the development of novel cancer immunotherapy products , we have not yet generated any revenues from our biotechnology business or otherwise since our formation . we currently do not anticipate that we will generate any revenues during 2017 from the sale or licensing of our products . our ability to generate revenues in the future will depend on our ability to complete the development of our product candidates and to obtain regulatory approval for them . 40 costs and expenses research and development expense ( in thousands ) replace_table_token_5_th research and development expense for the year ended december 31 , 2016 increased by $ 12.6 million , or 81 % , compared to the year ended december 31 , 2015 , inclusive of stock-based compensation . the increase was primarily attributable to a $ 2.3 million increase in payroll and related expenses primarily due to an increase in headcount , a $ 3.2 million increase in drug manufacturing costs , a $ 0.9 million increase in costs related to our clinical trials , $ 1.0 million increase in stock-based compensation expense and expenses incurred under the polybiocept agreement in the amount of $ 2.7 million . story_separator_special_tag research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . we expect our research and development expenses to increase over the next several years as we continue to conduct our clinical trial for our products and as we increase our research and development efforts in other cancer indications . however , it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates . the duration , costs and timing of our clinical trials and development of our product candidates will depend on a number of factors that include , but are not limited to , the number of patients that enroll in the trial , per patient trial costs , number of sites included in the trial , discontinuation rates of patients , duration of patient follow-up , efficacy and safety profile of the product candidate , and the length of time required to enroll eligible patients . additionally , the probability of success for our product candidate will depend on a number of factors , including competition , manufacturing capability and cost efficiency , and commercial viability . general and administrative expense ( in thousands ) replace_table_token_6_th general and administrative expense for the year ended december 31 , 2016 increased by $ 13.2 million , or 107 % , compared to the year ended december 31 , 2015 , inclusive of stock-based compensation . the increase was primarily attributable to a $ 9.3 million increase in stock-based compensation expense primarily due to the accelerated vesting of equity awards upon the termination of employment of our former chief executive officer and our former chief financial officer , and the increase in the number of our employees . a $ 1.5 million increase in payroll and related expenses primarily due to the increase in headcount , a $ 0.9 million increase due to severance payments to our former chief executive officer and our former chief financial officer and a $ 1.3 million increase in consulting and legal related expenses . general and administrative expenses include personnel costs for our employees engaged in general and administrative activities , legal fees , audit and tax fees , consultants and professional services , and general corporate expenses . interest income ( in thousands ) replace_table_token_7_th interest income results from our interest-bearing cash and investment balances . interest income for the year ended december 31 , 2016 increased due to the higher cash balances in 2016 as a result of the proceeds received from our equity financings in 2015 and june 2016 . 41 results of operations for the years ended december 31 , 2015 and 2014 revenues as a development stage company that is currently engaged in the development of novel cancer immunotherapy products , we have not yet generated any revenues from our biotechnology business or otherwise since our formation . costs and expenses research and development expense ( in thousands ) replace_table_token_8_th during the year ended december 31 , 2015 , our research and development costs increased by $ 11.6 million when compared to the same period in 2014 , inclusive of stock-based compensation . the increase is mainly attributable to the expansion of our crada in 2015 , the general expansion of our research and development efforts , the establishment of our tampa , florida , research facility in the fourth quarter of 2014 and the initiation of our phase ii clinical trial in september 2015. general and administrative expense ( in thousands ) replace_table_token_9_th for the year ended december 31 , 2015 our general and administrative expenses increased by $ 4.2 million , or 51 % , and for the year ended december 31 , 2014 compared to the prior year comparable period , inclusive of stock-based compensation . the increase in our general and administrative expenses during the year ended december 31 , 2015 is primarily due to stock-based compensation , and increases in our overall corporate activities , including business development and increases in employment related expenses , insurance costs and legal fees . for the years ended december 31 , 2015 and 2014 , we incurred $ 6.3 million and $ 2.7 million , respectively , of non-cash stock-based compensation costs . share based compensation includes stock and options granted to our executive officers , our employees , our directors , and our consultants and advisors . interest income ( in thousands ) replace_table_token_10_th interest income results from our interest-bearing cash and investment balances . interest income for the year ended december 31 , 2015 increased over 2014 due to the higher cash balances in 2015 as a result of the proceeds received from our equity financings in late 2014 and early 2015. net loss we had a net loss of $ 52.9 million , $ 27.7 million , and $ 12.0 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . the increase in our net loss during 2016 is due to the continued expansion of our research and development activities , increased clinical trials and manufacturing activities , and the overall growth of our corporate infrastructure . our general and administrative expenses increased due to the increase in headcount and due to stock-based equity awards accelerated in 2016 related to the termination of certain executives . the increase in our net loss during 2015 is due to an increase in general and administrative expenses , along with the expansion of our research and development activities . we anticipate that we will continue to incur net losses in the future as we further invest in our research and development activities , including our clinical development . we do not expect to generate any revenues in the near term .
| liquidity and capital resources corporate capitalization . as of december 31 , 2016 , we had outstanding 62,248,074 shares of our $ 0.000041666 par value common stock , 1,694 shares of our $ 0.0001 par value series a convertible preferred stock , and 7,946,673 shares of our $ 0.0001 par value series b convertible preferred stock . the outstanding shares of series a convertible preferred stock are currently convertible into 847,000 shares of our common stock , and the outstanding shares of series b convertible preferred stock are currently convertible into 7,946,673 shares of our common stock . the shares of series a convertible preferred stock and series b convertible preferred stock do not have voting rights or accrue dividends . our major sources of funding have been proceeds from various public and private offerings of our common stock , option and warrant exercises , and interest income . we are currently engaged in the development of therapeutics to fight cancer . we do not have any commercial products and have not yet generated any revenues from our biopharmaceutical business . we currently do not anticipate that we will generate any revenues during 2017 from the sale or licensing of any products . as shown in the accompanying financial statements , we have incurred a net loss of $ 52.9 million for the year ended december 31 , 2016 and used $ 32.7 million of cash in our operating activities during the year ended december 31 , 2016. as of december 31 , 2016 , we had $ 166.5 million of cash and cash equivalents and short-term investments on hand , stockholders ' equity of $ 166.9 million and had working capital of $ 164.5 million . we expect to further increase our research and development activities , which will increase the amount of cash we will use during 2017. specifically , we expect increased spending on clinical trials , research and development activities , higher payroll expenses as we increase our professional and scientific staff and continued and expansion of manufacturing activities .
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a summary of the accounting policies used by management is disclosed in note a , “ summary of significant accounting policies ” , starting on page 65. supplemental reporting of non-gaap results of operations the company also provides supplemental reporting of its results on an “ operating , ” “ net adjusted ” or “ tangible ” basis , from which it excludes the after-tax effect of amortization of core deposit and other intangible assets ( and the related goodwill , core deposit intangible and other intangible asset balances , net of applicable deferred tax amounts ) , accretion on non-impaired purchased loans , acquisition expenses , the unrealized gain ( loss ) on equity securities , loss on debt extinguishment and the one-time benefit from the revaluation of net deferred tax liabilities . although “ adjusted net income ” as defined by the company is a non-gaap measure , the company 's management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results . reconciliations of gaap amounts with corresponding non-gaap amounts are presented in table 20. executive summary the company 's business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail , commercial and municipal customers . the company 's banking subsidiary is community bank , n.a . ( the “ bank ” or “ cbna ” ) . the company also provides employee benefit and trust related services via its benefit plans administrative services , inc. ( “ bpas ” ) subsidiary , and wealth management and insurance-related services . the company 's core operating objectives are : ( i ) grow the branch network , primarily through a disciplined acquisition strategy , and certain selective de novo expansions , ( ii ) build profitable loan and deposit volume using both organic and acquisition strategies , ( iii ) manage an investment securities portfolio to complement the company 's loan and deposit strategies and optimize interest rate risk , yield and liquidity , ( iv ) increase the noninterest component of total revenues through development of banking-related fee income , growth in existing financial services business units , and the acquisition of additional financial services and banking businesses , and ( v ) utilize technology to deliver customer-responsive products and services and improve efficiencies . 27 significant factors reviewed by management to evaluate achievement of the company 's operating objectives and its operating results and financial condition include , but are not limited to : net income and earnings per share ; return on assets and equity ; net interest margins ; noninterest revenues ; noninterest expenses ; asset quality ; loan and deposit growth ; capital management ; performance of individual banking and financial services units ; performance of specific product lines and customers ; liquidity and interest rate sensitivity ; enhancements to customer products and services and their underlying performance characteristics ; technology advancements ; market share ; peer comparisons ; and the performance of recently acquired businesses . on january 2 , 2018 , the company , through its subsidiary , onegroup ny , inc. ( “ onegroup ” ) , completed its acquisition of certain assets of penna & associates agency , inc. ( “ penna ” ) , an insurance agency headquartered in johnson city , new york . the company paid $ 0.8 million in cash to acquire the assets of penna , and recorded goodwill in the amount of $ 0.3 million and a customer list intangible asset of $ 0.3 million in conjunction with the acquisition . on january 2 , 2018 , the company , through its subsidiary , community investment services , inc. ( “ cisi ” ) , completed its acquisition of certain assets of styles bridges associates ( “ styles bridges ” ) , a financial services business headquartered in canton , new york . the company paid $ 0.7 million in cash to acquire a customer list from styles bridges , and recorded a $ 0.7 million customer list intangible asset in conjunction with the acquisition . on april 2 , 2018 , the company , through its subsidiary , benefit plans administrative services , inc. ( “ bpas ” ) , acquired certain assets of hr consultants ( sa ) , llc ( “ hr consultants ” ) , a provider of actuarial and benefit consulting services headquartered in puerto rico . the company paid $ 0.3 million in cash to acquire the assets of hr consultants and recorded intangible assets of $ 0.3 million in conjunction with the acquisition . the company reported net income and earnings per share for the year ended december 31 , 2018 that were 11.9 % and 6.9 % , respectively , above the prior year amounts . the increase in net income was due primarily to the earnings generated by a full year of expanded business activities from the merchants and nrs acquisitions . contributing to the increase in net income was an increase in net interest income , higher noninterest revenues and lower noninterest expenses . partially offsetting these items were an increase in weighted average diluted shares outstanding ; attributable to shares issued in the merchants and nrs transactions and shares issued in connection with the administration of the company 's 401 ( k ) plan and employee stock plan and higher income taxes . net income adjusted to exclude acquisition expenses , the one-time impact of the adjustment of net deferred tax liabilities associated with the enactment of the tax cuts and jobs act of 2017 ( “ tax cuts and jobs act ” ) , unrealized gain on equity securities , loss on debt extinguishment , amortization of intangibles , and acquired non-impaired loan accretion ( “ adjusted net income ” ) , increased $ 37.1 million , or 26.7 % , compared to the prior year . story_separator_special_tag investment interest income ( fte basis ) in 2018 was $ 3.6 million , or 4.3 % , lower than the prior year as a result of a 21 basis point decrease in the average investment yield from 2.79 % in 2017 to 2.58 % in 2018. this decrease in yield was partially offset by a $ 108.2 million , or 3.6 % , higher average book basis balance ( including cash equivalents ) for 2018 versus the prior year . the lower average investment yield in 2018 was reflective of cash flows from higher rate maturing instruments in the investment portfolio being reinvested at lower interest rates or held in interest-earning cash . total interest income in 2017 increased $ 43.7 million , or 14.8 % , from 2016 's level . as shown in table 4 , the higher average earning-asset balance created $ 44.4 million of incremental interest income , partially offset by a lower average yield on earning assets that had a negative impact of $ 0.7 million . average loans increased $ 936.5 million , or 19.2 % , in 2017 , primarily a result of acquired growth , with the merchants acquisition accounting for $ 899.8 million of the total increase . fte-basis loan interest income and fees increased $ 43.2 million , or 20.4 % , in 2017 as compared to 2016 , attributable to the higher average balances and a five basis point increase in the loan yield . on a fte basis , investment interest income , including interest on cash equivalents , totaled $ 83.6 million in 2017 , $ 0.5 million , or 0.6 % , higher than the prior year as a result of a $ 219.5 million , or 7.9 % , higher average book basis balance ( including cash equivalents ) for 2017 versus the prior year . this was partially offset by a 20 basis point decrease in the average investment yield from 2.99 % to 2.79 % . during most of 2017 , market interest rates continued to be low , and as a result , cash flows from higher rate maturing investments were reinvested at lower interest rates , including in interest earning cash , or were used to pay down overnight borrowings . 32 total interest expense increased by $ 3.9 million , or 28.3 % , to $ 17.7 million in 2018. as shown in table 4 , higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $ 3.5 million , while higher deposit balances resulted in a $ 0.4 million increase in interest expense . interest expense as a percentage of average earning assets for 2018 increased three basis points to 0.19 % . the rate on interest-bearing deposits of 0.17 % was four basis points higher than 2017 , primarily due to an increase in certain product rates in response to the increase in the federal funds rate during 2018. the rate on borrowings increased 21 basis points to 1.72 % in 2018 , primarily due to the increase in the variable rate paid on subordinated debt held by unconsolidated subsidiary trusts and overnight borrowings . total average funding balances ( deposits and borrowings ) in 2018 increased $ 433.4 million , or 5.1 % . average deposits increased $ 405.3 million , representing an increase of $ 428.6 million from the merchants acquisition offset by a decrease of $ 23.3 million in legacy deposits . average non-acquired , non-time ( “ core ” ) deposit balances increased $ 420.1 million to 91.1 % of total average deposits compared to 90.5 % in 2017 , while average time deposits increased by $ 14.9 million year-over-year , representing 8.9 % of total average deposits for 2018 compared to 9.5 % in 2017. average external borrowings increased $ 28.1 million in 2018 as compared to 2017 , as a year-over-year increase in average customer repurchase agreements of $ 88.9 million was offset by a decrease in average fhlb borrowings of $ 57.9 million and a decrease in average subordinated debt held by unconsolidated subsidiary trusts of $ 2.9 million . the increase in average customer repurchase agreements is primarily related to a full year of customer activity from the merchants acquisition , while the decrease in fhlb borrowings is due to cash flows from investment maturities being used to pay down overnight borrowings . the decrease in average subordinated debt held by unconsolidated subsidiary trusts is due to the redemption of trust preferred debt held by community statutory trust iii during the third quarter of 2018 for a total of $ 25.2 million , offset by a full year of subordinated debt acquired with the merchants transaction . total interest expense increased by $ 2.5 million to $ 13.8 million in 2017 as compared to 2016. as shown in table 4 , higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $ 1.2 million , while higher deposit balances resulted in a $ 1.3 million increase in interest expense . interest expense as a percentage of average earning assets for 2017 increased one basis point to 0.16 % . the rate on interest-bearing deposits of 0.13 % was consistent with prior years as rates have been held relatively steady in all interest-bearing categories throughout 2017 and 2016 , and deposit mix continued to shift towards a lower proportion of time deposit products . the rate on external borrowings increased five basis points to 1.51 % in 2017 , a result of lower-rate overnight fhlb borrowings becoming a smaller proportion of this funding component . total average funding balances ( deposits and borrowings ) in 2017 increased $ 1.14 billion , or 15.6 % . average deposits increased $ 1.03 billion , of which approximately $ 862.8 million was attributable to the merchants acquisition , with the remaining $ 166.8 million attributable to organic deposit growth . consistent with the company 's
| liquidity and capital resources corporate capitalization . as of december 31 , 2016 , we had outstanding 62,248,074 shares of our $ 0.000041666 par value common stock , 1,694 shares of our $ 0.0001 par value series a convertible preferred stock , and 7,946,673 shares of our $ 0.0001 par value series b convertible preferred stock . the outstanding shares of series a convertible preferred stock are currently convertible into 847,000 shares of our common stock , and the outstanding shares of series b convertible preferred stock are currently convertible into 7,946,673 shares of our common stock . the shares of series a convertible preferred stock and series b convertible preferred stock do not have voting rights or accrue dividends . our major sources of funding have been proceeds from various public and private offerings of our common stock , option and warrant exercises , and interest income . we are currently engaged in the development of therapeutics to fight cancer . we do not have any commercial products and have not yet generated any revenues from our biopharmaceutical business . we currently do not anticipate that we will generate any revenues during 2017 from the sale or licensing of any products . as shown in the accompanying financial statements , we have incurred a net loss of $ 52.9 million for the year ended december 31 , 2016 and used $ 32.7 million of cash in our operating activities during the year ended december 31 , 2016. as of december 31 , 2016 , we had $ 166.5 million of cash and cash equivalents and short-term investments on hand , stockholders ' equity of $ 166.9 million and had working capital of $ 164.5 million . we expect to further increase our research and development activities , which will increase the amount of cash we will use during 2017. specifically , we expect increased spending on clinical trials , research and development activities , higher payroll expenses as we increase our professional and scientific staff and continued and expansion of manufacturing activities .
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a summary of the accounting policies used by management is disclosed in note a , “ summary of significant accounting policies ” , starting on page 65. supplemental reporting of non-gaap results of operations the company also provides supplemental reporting of its results on an “ operating , ” “ net adjusted ” or “ tangible ” basis , from which it excludes the after-tax effect of amortization of core deposit and other intangible assets ( and the related goodwill , core deposit intangible and other intangible asset balances , net of applicable deferred tax amounts ) , accretion on non-impaired purchased loans , acquisition expenses , the unrealized gain ( loss ) on equity securities , loss on debt extinguishment and the one-time benefit from the revaluation of net deferred tax liabilities . although “ adjusted net income ” as defined by the company is a non-gaap measure , the company 's management believes this information helps investors understand the effect of acquisition and other non-recurring activity in its reported results . reconciliations of gaap amounts with corresponding non-gaap amounts are presented in table 20. executive summary the company 's business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail , commercial and municipal customers . the company 's banking subsidiary is community bank , n.a . ( the “ bank ” or “ cbna ” ) . the company also provides employee benefit and trust related services via its benefit plans administrative services , inc. ( “ bpas ” ) subsidiary , and wealth management and insurance-related services . the company 's core operating objectives are : ( i ) grow the branch network , primarily through a disciplined acquisition strategy , and certain selective de novo expansions , ( ii ) build profitable loan and deposit volume using both organic and acquisition strategies , ( iii ) manage an investment securities portfolio to complement the company 's loan and deposit strategies and optimize interest rate risk , yield and liquidity , ( iv ) increase the noninterest component of total revenues through development of banking-related fee income , growth in existing financial services business units , and the acquisition of additional financial services and banking businesses , and ( v ) utilize technology to deliver customer-responsive products and services and improve efficiencies . 27 significant factors reviewed by management to evaluate achievement of the company 's operating objectives and its operating results and financial condition include , but are not limited to : net income and earnings per share ; return on assets and equity ; net interest margins ; noninterest revenues ; noninterest expenses ; asset quality ; loan and deposit growth ; capital management ; performance of individual banking and financial services units ; performance of specific product lines and customers ; liquidity and interest rate sensitivity ; enhancements to customer products and services and their underlying performance characteristics ; technology advancements ; market share ; peer comparisons ; and the performance of recently acquired businesses . on january 2 , 2018 , the company , through its subsidiary , onegroup ny , inc. ( “ onegroup ” ) , completed its acquisition of certain assets of penna & associates agency , inc. ( “ penna ” ) , an insurance agency headquartered in johnson city , new york . the company paid $ 0.8 million in cash to acquire the assets of penna , and recorded goodwill in the amount of $ 0.3 million and a customer list intangible asset of $ 0.3 million in conjunction with the acquisition . on january 2 , 2018 , the company , through its subsidiary , community investment services , inc. ( “ cisi ” ) , completed its acquisition of certain assets of styles bridges associates ( “ styles bridges ” ) , a financial services business headquartered in canton , new york . the company paid $ 0.7 million in cash to acquire a customer list from styles bridges , and recorded a $ 0.7 million customer list intangible asset in conjunction with the acquisition . on april 2 , 2018 , the company , through its subsidiary , benefit plans administrative services , inc. ( “ bpas ” ) , acquired certain assets of hr consultants ( sa ) , llc ( “ hr consultants ” ) , a provider of actuarial and benefit consulting services headquartered in puerto rico . the company paid $ 0.3 million in cash to acquire the assets of hr consultants and recorded intangible assets of $ 0.3 million in conjunction with the acquisition . the company reported net income and earnings per share for the year ended december 31 , 2018 that were 11.9 % and 6.9 % , respectively , above the prior year amounts . the increase in net income was due primarily to the earnings generated by a full year of expanded business activities from the merchants and nrs acquisitions . contributing to the increase in net income was an increase in net interest income , higher noninterest revenues and lower noninterest expenses . partially offsetting these items were an increase in weighted average diluted shares outstanding ; attributable to shares issued in the merchants and nrs transactions and shares issued in connection with the administration of the company 's 401 ( k ) plan and employee stock plan and higher income taxes . net income adjusted to exclude acquisition expenses , the one-time impact of the adjustment of net deferred tax liabilities associated with the enactment of the tax cuts and jobs act of 2017 ( “ tax cuts and jobs act ” ) , unrealized gain on equity securities , loss on debt extinguishment , amortization of intangibles , and acquired non-impaired loan accretion ( “ adjusted net income ” ) , increased $ 37.1 million , or 26.7 % , compared to the prior year . story_separator_special_tag investment interest income ( fte basis ) in 2018 was $ 3.6 million , or 4.3 % , lower than the prior year as a result of a 21 basis point decrease in the average investment yield from 2.79 % in 2017 to 2.58 % in 2018. this decrease in yield was partially offset by a $ 108.2 million , or 3.6 % , higher average book basis balance ( including cash equivalents ) for 2018 versus the prior year . the lower average investment yield in 2018 was reflective of cash flows from higher rate maturing instruments in the investment portfolio being reinvested at lower interest rates or held in interest-earning cash . total interest income in 2017 increased $ 43.7 million , or 14.8 % , from 2016 's level . as shown in table 4 , the higher average earning-asset balance created $ 44.4 million of incremental interest income , partially offset by a lower average yield on earning assets that had a negative impact of $ 0.7 million . average loans increased $ 936.5 million , or 19.2 % , in 2017 , primarily a result of acquired growth , with the merchants acquisition accounting for $ 899.8 million of the total increase . fte-basis loan interest income and fees increased $ 43.2 million , or 20.4 % , in 2017 as compared to 2016 , attributable to the higher average balances and a five basis point increase in the loan yield . on a fte basis , investment interest income , including interest on cash equivalents , totaled $ 83.6 million in 2017 , $ 0.5 million , or 0.6 % , higher than the prior year as a result of a $ 219.5 million , or 7.9 % , higher average book basis balance ( including cash equivalents ) for 2017 versus the prior year . this was partially offset by a 20 basis point decrease in the average investment yield from 2.99 % to 2.79 % . during most of 2017 , market interest rates continued to be low , and as a result , cash flows from higher rate maturing investments were reinvested at lower interest rates , including in interest earning cash , or were used to pay down overnight borrowings . 32 total interest expense increased by $ 3.9 million , or 28.3 % , to $ 17.7 million in 2018. as shown in table 4 , higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $ 3.5 million , while higher deposit balances resulted in a $ 0.4 million increase in interest expense . interest expense as a percentage of average earning assets for 2018 increased three basis points to 0.19 % . the rate on interest-bearing deposits of 0.17 % was four basis points higher than 2017 , primarily due to an increase in certain product rates in response to the increase in the federal funds rate during 2018. the rate on borrowings increased 21 basis points to 1.72 % in 2018 , primarily due to the increase in the variable rate paid on subordinated debt held by unconsolidated subsidiary trusts and overnight borrowings . total average funding balances ( deposits and borrowings ) in 2018 increased $ 433.4 million , or 5.1 % . average deposits increased $ 405.3 million , representing an increase of $ 428.6 million from the merchants acquisition offset by a decrease of $ 23.3 million in legacy deposits . average non-acquired , non-time ( “ core ” ) deposit balances increased $ 420.1 million to 91.1 % of total average deposits compared to 90.5 % in 2017 , while average time deposits increased by $ 14.9 million year-over-year , representing 8.9 % of total average deposits for 2018 compared to 9.5 % in 2017. average external borrowings increased $ 28.1 million in 2018 as compared to 2017 , as a year-over-year increase in average customer repurchase agreements of $ 88.9 million was offset by a decrease in average fhlb borrowings of $ 57.9 million and a decrease in average subordinated debt held by unconsolidated subsidiary trusts of $ 2.9 million . the increase in average customer repurchase agreements is primarily related to a full year of customer activity from the merchants acquisition , while the decrease in fhlb borrowings is due to cash flows from investment maturities being used to pay down overnight borrowings . the decrease in average subordinated debt held by unconsolidated subsidiary trusts is due to the redemption of trust preferred debt held by community statutory trust iii during the third quarter of 2018 for a total of $ 25.2 million , offset by a full year of subordinated debt acquired with the merchants transaction . total interest expense increased by $ 2.5 million to $ 13.8 million in 2017 as compared to 2016. as shown in table 4 , higher interest rates on interest-bearing liabilities resulted in an increase in interest expense of $ 1.2 million , while higher deposit balances resulted in a $ 1.3 million increase in interest expense . interest expense as a percentage of average earning assets for 2017 increased one basis point to 0.16 % . the rate on interest-bearing deposits of 0.13 % was consistent with prior years as rates have been held relatively steady in all interest-bearing categories throughout 2017 and 2016 , and deposit mix continued to shift towards a lower proportion of time deposit products . the rate on external borrowings increased five basis points to 1.51 % in 2017 , a result of lower-rate overnight fhlb borrowings becoming a smaller proportion of this funding component . total average funding balances ( deposits and borrowings ) in 2017 increased $ 1.14 billion , or 15.6 % . average deposits increased $ 1.03 billion , of which approximately $ 862.8 million was attributable to the merchants acquisition , with the remaining $ 166.8 million attributable to organic deposit growth . consistent with the company 's
| liquidity liquidity risk is a measure of the company 's ability to raise cash when needed at a reasonable cost and minimize any loss . the bank maintains appropriate liquidity levels in both normal operating environments as well as stressed environments . the company must be capable of meeting all obligations to its customers at any time and , therefore , the active management of its liquidity position remains an important management objective . the bank has appointed the asset liability committee ( “ alco ” ) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk . the indicators are monitored using a scorecard with three risk level limits . these risk indicators measure core liquidity and funding needs , capital at risk and change in available funding sources . the risk indicators are monitored using such statistics as the core basic surplus ratio , unencumbered securities to average assets , free loan collateral to average assets , loans to deposits , deposits to total funding and borrowings to total funding ratios . given the uncertain nature of our customers ' demands as well as the company 's desire to take advantage of earnings enhancement opportunities , the company must have adequate sources of on and off-balance sheet funds available that can be utilized in time of need . accordingly , in addition to the liquidity provided by balance sheet cash flows , liquidity must be supplemented with additional sources such as credit lines from correspondent banks and borrowings from the fhlb and the federal reserve bank of new york ( “ federal reserve ” ) . other funding alternatives may also be appropriate from time to time , including wholesale and retail repurchase agreements , large certificates of deposit and the brokered cd market . the primary source of non-deposit funds is fhlb overnight advances , of which $ 54.4 million was outstanding at december 31 , 2018. the bank 's primary sources of liquidity are its liquid assets , as well as unencumbered loans and securities that can be used to collateralize additional funding .
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25 2018 financial and operational highlights revenues were $ 1,088.2 million for the year ended december 31 , 2018 , a 6.3 % increase compared to the year ended december 31 , 2017 . the increase in 2018 revenues compared to 2017 revenues was due to the net effects of : ( i ) higher sales volumes , which increased revenues by $ 25.8 million , or 2.5 % ; ( ii ) higher average selling prices as our product and channel mix continued to change , which increased revenues by $ 27.7 million , or 2.7 % ; and ( iii ) favorable changes in exchange rates , which increased revenues by $ 11.2 million , or 1.1 % . the following were significant developments affecting our businesses and capital structure during the year ended december 31 , 2018 : in 2018 , the impact of operating with a net of 64 fewer company-operated stores and certain business model changes reduced our revenues by approximately $ 60 million . we sold 59.8 million pairs of shoes worldwide , an increase of 3.4 % from 57.9 million pairs in 2017 . gross margin improved 100 basis points compared to 2017 to 51.5 % for the year ended december 31 , 2018 . we drove this improvement by continuing to prioritize high-margin molded products , increasing prices on select products , and conducting fewer promotions in combination with better inventory management . sg & a was $ 495.0 million , an increase of $ 0.4 million , or 0.1 % , compared to 2017 . as a percent of revenues , sg & a improved 280 basis points to 45.5 % of revenues . this included $ 21.1 million of non-recurring charges associated with our previously announced sg & a reduction plan , the completion of the closure of all company-operated manufacturing and related distribution facilities , and some charges related to the relocation of our corporate headquarters , which is planned for early 2020. income from operations was $ 62.9 million for the year ended december 31 , 2018 compared to income from operations of $ 17.3 million for the year ended december 31 , 2017 . income from operations as a percent of revenues rose to 5.8 % compared to 1.7 % in 2017. in december 2018 , we completed a transaction with blackstone to repurchase 100,000 shares of series a convertible preferred stock ( “ series a preferred ” ) for $ 183.7 million and to convert the remaining 100,000 shares of series a preferred into 6,896,548 shares of our common stock , which resulted in the elimination of $ 12 million in annual dividends and an overhang on our common stock . crocs also agreed to pay blackstone a $ 15 million inducement payment in connection with the transaction . net loss attributable to common stockholders was $ 69.2 million compared to a loss of $ 5.3 million in 2017 , including the accounting treatment for charges incurred related to the repurchase and conversion of our series a preferred . basic and diluted net loss per common share was $ 1.01 for the year ended december 31 , 2018 , compared to a basic and diluted net loss per common share of $ 0.07 for the year ended december 31 , 2017 . to continue improving the efficiency and profitability of our retail business we closed or transferred to distributors 68 stores in 2018 , 61.8 % of which were full-priced locations , for a net reduction of 64 company-operated retail stores . since we began our store reduction program early in 2017 , we have closed a net total of 175 stores and reduced our total company-operated store count to 383 from 558 at the end of 2016. the majority of these store closures occurred upon expiration of the leases . we have also placed greater priority on outlet stores , so that they now represent 50.9 % of our store base , up from 41.6 % at the end of 2016. we continued to focus on simplifying our product line and disciplined inventory management to allow investment in higher margin , faster-turning product . as a result , we reduced our inventory by $ 5.9 million , or 4.5 % , from $ 130.3 million to $ 124.5 million . during 2018 , we repurchased 3.6 million shares of common stock at an aggregate cost of $ 63.1 million and eliminated the overhang of 6.9 million shares ( on an as-converted basis ) associated with the repurchase of 100,000 shares of the series a preferred . 26 results of operations comparison of the years ended december 31 , 2018 , 2017 , and 2016 replace_table_token_4_th ( 1 ) changes for gross margin and operating margin are shown in basis points ( “ bp ” ) . revenues . revenues increase d $ 64.7 million , or 6.3 % , during the year ended december 31 , 2018 compared to the same period in 2017 . the increase in revenues was driven by 22.5 % growth in our e-commerce channel and 7.8 % growth in our wholesale 27 channel , which more than offset a reduction in our retail channel of 3.2 % . the decrease in retail revenues was driven by our targeted reduction in the number of company-operated retail stores , partially offset by same store sales growth in our remaining company-operated retail stores . higher unit sales volume , particularly in our clog and sandal silhouettes , increased revenues by $ 25.8 million , or 2.5 % , and an increase of $ 27.7 million , or 2.7 % , was attributable to higher average selling price ( “ asp ” ) as a result of changes in product mix , reduced promotional activities , and price increases . favorable exchange rate activity drove an increase of $ 11.2 million , or 1.1 % . revenues decreased $ 12.8 million , or 1.2 story_separator_special_tag as of december 31 , 2018 , we operated 64 fewer stores compared to december 31 , 2017 . unit sales volume decreased revenues by $ 25.3 million , or 7.5 % . favorable product mix and improved quality of revenues , the results of less promotional discounting and improved inventory composition , resulted in a higher asp impact of $ 12.8 million , or 3.8 % . an increase of $ 1.7 million , or 0.5 % , resulted from foreign currency translation . during the year ended december 31 , 2017 , revenues from our retail channel decreased $ 21.4 million , or 5.9 % , compared to the year ended december 31 , 2016. unit sales volume decreased revenues by approximately $ 12.8 million , or 3.6 % , primarily due to a net decrease of 111 company-operated retail stores as we optimized our store fleet and shifted our store mix from full-price retail to outlet . asp was lower by $ 10.3 million , or 2.9 % , as we shifted to higher margin , lower-priced molded product . these declines were partially offset by an increase of $ 1.7 million , or 0.6 % , from foreign currency translation . e-commerce channel revenues . revenues from our e-commerce channel , which includes our own e-commerce sites as well as our sales through third-party marketplaces , increased $ 33.6 million , or 22.5 % , during the year ended december 31 , 2018 compared to the year ended december 31 , 2017 as this channel continued to grow in each region . revenues increased by approximately $ 21.8 million , or 14.6 % , due to higher unit sales volume , and higher asp related to mix contributed an additional $ 9.4 million , or 6.3 % . favorable foreign currency translation resulted in an increase of $ 2.4 million , or 1.6 % during the year ended december 31 , 2017 , revenues from our e-commerce channel increased $ 18.5 million , or 14.2 % , compared to the year ended december 31 , 2016. we invested in marketing with an enhanced digital focus , and we continued to grow our e-commerce team and work toward global adoption of best practices . revenues increased by approximately $ 30.6 million , or 23.4 % , due to higher unit sales volume , partially offset by decreases of $ 11.8 million , or 9.0 % , due to lower asp and $ 0.3 million , or 0.2 % , due to the unfavorable impact of foreign currency translation . 31 reportable operating segments the following table sets forth information related to our reportable operating business segments for the years ended december 31 , 2018 , 2017 , and 2016 : replace_table_token_7_th ( 1 ) reflects year over year change as if the current period results were in “ constant currency , ” which is a non-gaap financial measure . see “ use of non-gaap financial measures ” for more information . ( 2 ) in the third quarter of 2018 , certain revenues and expenses previously reported within the ‘ asia pacific ' segment were shifted to the ‘ emea ' segment . the previously reported amounts for revenues and income from operations for the years ended december 31 , 2017 and 2016 have also been revised to conform to the current period presentation . see ‘ impact of segment composition change ' table below for more information . ( 3 ) in 2018 , certain global marketing expenses previously reported within the operating segments were managed and reported within ‘ unallocated corporate and other ' . the previously reported amounts for income from operations for the years ended december 31 , 2017 and 2016 have been revised to conform to the current year presentation . see ‘ impact of global marketing expense realignment ' table below for more information . ( 4 ) “ other businesses ” increases are primarily due to costs incurred in conjunction with the closure of company-operated manufacturing and distribution facilities , which ceased operations in 2018 , increased variable compensation associated with higher revenues , and other expenses as a result of outsourcing , and other supply chain cost changes . ( 5 ) “ unallocated corporate and other ” includes corporate support and administrative functions , costs associated with share-based compensation , research and development , brand marketing , legal , and depreciation and amortization of corporate and other assets not allocated to operating segments . 32 impact of segment composition change : replace_table_token_8_th impact of global marketing expense realignment : replace_table_token_9_th americas operating segment revenues . during the year ended december 31 , 2018 , revenues for our americas segment increased $ 40.0 million , or 8.3 % , compared to the year ended december 31 , 2017 . the growth was led by a 22.6 % increase in e-commerce revenues due to increased traffic and units per transaction . retail revenues increased by 8.7 % , despite operating 7 fewer retail stores compared to the same period last year , due to comparable sales growth of 14.0 % . higher unit sales volume resulted in an increase of approximately $ 22.0 million , or 4.6 % , while higher asp resulted in an increase of $ 22.3 million , or 4.6 % . the effect of foreign currency translation was a decrease of $ 4.3 million , or 0.9 % . during the year ended december 31 , 2017 , revenues for our americas segment increased $ 13.1 million , or 2.8 % , compared to the year ended december 31 , 2016. the increase was led by a 10.3 % increase in e-commerce revenues , while a modest increase in wholesale revenues was partially offset by a decrease in retail revenues , reflecting 15 fewer company-operated retail stores compared to last year . higher unit sales volume resulted in an increase of approximately $ 17.0 million ,
| liquidity liquidity risk is a measure of the company 's ability to raise cash when needed at a reasonable cost and minimize any loss . the bank maintains appropriate liquidity levels in both normal operating environments as well as stressed environments . the company must be capable of meeting all obligations to its customers at any time and , therefore , the active management of its liquidity position remains an important management objective . the bank has appointed the asset liability committee ( “ alco ” ) to manage liquidity risk using policy guidelines and limits on indicators of potential liquidity risk . the indicators are monitored using a scorecard with three risk level limits . these risk indicators measure core liquidity and funding needs , capital at risk and change in available funding sources . the risk indicators are monitored using such statistics as the core basic surplus ratio , unencumbered securities to average assets , free loan collateral to average assets , loans to deposits , deposits to total funding and borrowings to total funding ratios . given the uncertain nature of our customers ' demands as well as the company 's desire to take advantage of earnings enhancement opportunities , the company must have adequate sources of on and off-balance sheet funds available that can be utilized in time of need . accordingly , in addition to the liquidity provided by balance sheet cash flows , liquidity must be supplemented with additional sources such as credit lines from correspondent banks and borrowings from the fhlb and the federal reserve bank of new york ( “ federal reserve ” ) . other funding alternatives may also be appropriate from time to time , including wholesale and retail repurchase agreements , large certificates of deposit and the brokered cd market . the primary source of non-deposit funds is fhlb overnight advances , of which $ 54.4 million was outstanding at december 31 , 2018. the bank 's primary sources of liquidity are its liquid assets , as well as unencumbered loans and securities that can be used to collateralize additional funding .
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25 2018 financial and operational highlights revenues were $ 1,088.2 million for the year ended december 31 , 2018 , a 6.3 % increase compared to the year ended december 31 , 2017 . the increase in 2018 revenues compared to 2017 revenues was due to the net effects of : ( i ) higher sales volumes , which increased revenues by $ 25.8 million , or 2.5 % ; ( ii ) higher average selling prices as our product and channel mix continued to change , which increased revenues by $ 27.7 million , or 2.7 % ; and ( iii ) favorable changes in exchange rates , which increased revenues by $ 11.2 million , or 1.1 % . the following were significant developments affecting our businesses and capital structure during the year ended december 31 , 2018 : in 2018 , the impact of operating with a net of 64 fewer company-operated stores and certain business model changes reduced our revenues by approximately $ 60 million . we sold 59.8 million pairs of shoes worldwide , an increase of 3.4 % from 57.9 million pairs in 2017 . gross margin improved 100 basis points compared to 2017 to 51.5 % for the year ended december 31 , 2018 . we drove this improvement by continuing to prioritize high-margin molded products , increasing prices on select products , and conducting fewer promotions in combination with better inventory management . sg & a was $ 495.0 million , an increase of $ 0.4 million , or 0.1 % , compared to 2017 . as a percent of revenues , sg & a improved 280 basis points to 45.5 % of revenues . this included $ 21.1 million of non-recurring charges associated with our previously announced sg & a reduction plan , the completion of the closure of all company-operated manufacturing and related distribution facilities , and some charges related to the relocation of our corporate headquarters , which is planned for early 2020. income from operations was $ 62.9 million for the year ended december 31 , 2018 compared to income from operations of $ 17.3 million for the year ended december 31 , 2017 . income from operations as a percent of revenues rose to 5.8 % compared to 1.7 % in 2017. in december 2018 , we completed a transaction with blackstone to repurchase 100,000 shares of series a convertible preferred stock ( “ series a preferred ” ) for $ 183.7 million and to convert the remaining 100,000 shares of series a preferred into 6,896,548 shares of our common stock , which resulted in the elimination of $ 12 million in annual dividends and an overhang on our common stock . crocs also agreed to pay blackstone a $ 15 million inducement payment in connection with the transaction . net loss attributable to common stockholders was $ 69.2 million compared to a loss of $ 5.3 million in 2017 , including the accounting treatment for charges incurred related to the repurchase and conversion of our series a preferred . basic and diluted net loss per common share was $ 1.01 for the year ended december 31 , 2018 , compared to a basic and diluted net loss per common share of $ 0.07 for the year ended december 31 , 2017 . to continue improving the efficiency and profitability of our retail business we closed or transferred to distributors 68 stores in 2018 , 61.8 % of which were full-priced locations , for a net reduction of 64 company-operated retail stores . since we began our store reduction program early in 2017 , we have closed a net total of 175 stores and reduced our total company-operated store count to 383 from 558 at the end of 2016. the majority of these store closures occurred upon expiration of the leases . we have also placed greater priority on outlet stores , so that they now represent 50.9 % of our store base , up from 41.6 % at the end of 2016. we continued to focus on simplifying our product line and disciplined inventory management to allow investment in higher margin , faster-turning product . as a result , we reduced our inventory by $ 5.9 million , or 4.5 % , from $ 130.3 million to $ 124.5 million . during 2018 , we repurchased 3.6 million shares of common stock at an aggregate cost of $ 63.1 million and eliminated the overhang of 6.9 million shares ( on an as-converted basis ) associated with the repurchase of 100,000 shares of the series a preferred . 26 results of operations comparison of the years ended december 31 , 2018 , 2017 , and 2016 replace_table_token_4_th ( 1 ) changes for gross margin and operating margin are shown in basis points ( “ bp ” ) . revenues . revenues increase d $ 64.7 million , or 6.3 % , during the year ended december 31 , 2018 compared to the same period in 2017 . the increase in revenues was driven by 22.5 % growth in our e-commerce channel and 7.8 % growth in our wholesale 27 channel , which more than offset a reduction in our retail channel of 3.2 % . the decrease in retail revenues was driven by our targeted reduction in the number of company-operated retail stores , partially offset by same store sales growth in our remaining company-operated retail stores . higher unit sales volume , particularly in our clog and sandal silhouettes , increased revenues by $ 25.8 million , or 2.5 % , and an increase of $ 27.7 million , or 2.7 % , was attributable to higher average selling price ( “ asp ” ) as a result of changes in product mix , reduced promotional activities , and price increases . favorable exchange rate activity drove an increase of $ 11.2 million , or 1.1 % . revenues decreased $ 12.8 million , or 1.2 story_separator_special_tag as of december 31 , 2018 , we operated 64 fewer stores compared to december 31 , 2017 . unit sales volume decreased revenues by $ 25.3 million , or 7.5 % . favorable product mix and improved quality of revenues , the results of less promotional discounting and improved inventory composition , resulted in a higher asp impact of $ 12.8 million , or 3.8 % . an increase of $ 1.7 million , or 0.5 % , resulted from foreign currency translation . during the year ended december 31 , 2017 , revenues from our retail channel decreased $ 21.4 million , or 5.9 % , compared to the year ended december 31 , 2016. unit sales volume decreased revenues by approximately $ 12.8 million , or 3.6 % , primarily due to a net decrease of 111 company-operated retail stores as we optimized our store fleet and shifted our store mix from full-price retail to outlet . asp was lower by $ 10.3 million , or 2.9 % , as we shifted to higher margin , lower-priced molded product . these declines were partially offset by an increase of $ 1.7 million , or 0.6 % , from foreign currency translation . e-commerce channel revenues . revenues from our e-commerce channel , which includes our own e-commerce sites as well as our sales through third-party marketplaces , increased $ 33.6 million , or 22.5 % , during the year ended december 31 , 2018 compared to the year ended december 31 , 2017 as this channel continued to grow in each region . revenues increased by approximately $ 21.8 million , or 14.6 % , due to higher unit sales volume , and higher asp related to mix contributed an additional $ 9.4 million , or 6.3 % . favorable foreign currency translation resulted in an increase of $ 2.4 million , or 1.6 % during the year ended december 31 , 2017 , revenues from our e-commerce channel increased $ 18.5 million , or 14.2 % , compared to the year ended december 31 , 2016. we invested in marketing with an enhanced digital focus , and we continued to grow our e-commerce team and work toward global adoption of best practices . revenues increased by approximately $ 30.6 million , or 23.4 % , due to higher unit sales volume , partially offset by decreases of $ 11.8 million , or 9.0 % , due to lower asp and $ 0.3 million , or 0.2 % , due to the unfavorable impact of foreign currency translation . 31 reportable operating segments the following table sets forth information related to our reportable operating business segments for the years ended december 31 , 2018 , 2017 , and 2016 : replace_table_token_7_th ( 1 ) reflects year over year change as if the current period results were in “ constant currency , ” which is a non-gaap financial measure . see “ use of non-gaap financial measures ” for more information . ( 2 ) in the third quarter of 2018 , certain revenues and expenses previously reported within the ‘ asia pacific ' segment were shifted to the ‘ emea ' segment . the previously reported amounts for revenues and income from operations for the years ended december 31 , 2017 and 2016 have also been revised to conform to the current period presentation . see ‘ impact of segment composition change ' table below for more information . ( 3 ) in 2018 , certain global marketing expenses previously reported within the operating segments were managed and reported within ‘ unallocated corporate and other ' . the previously reported amounts for income from operations for the years ended december 31 , 2017 and 2016 have been revised to conform to the current year presentation . see ‘ impact of global marketing expense realignment ' table below for more information . ( 4 ) “ other businesses ” increases are primarily due to costs incurred in conjunction with the closure of company-operated manufacturing and distribution facilities , which ceased operations in 2018 , increased variable compensation associated with higher revenues , and other expenses as a result of outsourcing , and other supply chain cost changes . ( 5 ) “ unallocated corporate and other ” includes corporate support and administrative functions , costs associated with share-based compensation , research and development , brand marketing , legal , and depreciation and amortization of corporate and other assets not allocated to operating segments . 32 impact of segment composition change : replace_table_token_8_th impact of global marketing expense realignment : replace_table_token_9_th americas operating segment revenues . during the year ended december 31 , 2018 , revenues for our americas segment increased $ 40.0 million , or 8.3 % , compared to the year ended december 31 , 2017 . the growth was led by a 22.6 % increase in e-commerce revenues due to increased traffic and units per transaction . retail revenues increased by 8.7 % , despite operating 7 fewer retail stores compared to the same period last year , due to comparable sales growth of 14.0 % . higher unit sales volume resulted in an increase of approximately $ 22.0 million , or 4.6 % , while higher asp resulted in an increase of $ 22.3 million , or 4.6 % . the effect of foreign currency translation was a decrease of $ 4.3 million , or 0.9 % . during the year ended december 31 , 2017 , revenues for our americas segment increased $ 13.1 million , or 2.8 % , compared to the year ended december 31 , 2016. the increase was led by a 10.3 % increase in e-commerce revenues , while a modest increase in wholesale revenues was partially offset by a decrease in retail revenues , reflecting 15 fewer company-operated retail stores compared to last year . higher unit sales volume resulted in an increase of approximately $ 17.0 million ,
| liquidity and capital resources our liquidity position as of december 31 , 2018 was : december 31 , 2018 ( in thousands ) cash and cash equivalents $ 123,367 available borrowings 129,400 as of december 31 , 2018 , we had $ 123.4 million in cash and cash equivalents and up to $ 129.4 million in available borrowings under our revolving credit facilities . we believe that our cash flows from operations , our cash and cash equivalents on hand , and available borrowings under our senior revolving credit facility and other financing instruments will be sufficient to meet the ongoing liquidity needs and capital expenditure requirements for at least the next twelve months . additional future financing may be necessary to fund our operations and there can be no assurance that , if needed , we will be able to secure additional debt or equity financing on terms acceptable to us or at all . although we believe we have adequate sources of liquidity over the long term , the success of our operations , the global economic outlook , and the pace of sustainable growth in our markets , among other factors , could impact our business and liquidity . due to the seasonal nature of our footwear , which is more heavily focused on styles suitable for warm weather , cash flows from operating activities during our fourth quarter are typically lower than those in our first three quarters , as customer receivables and inventories rise in preparation for the spring/summer season . accordingly , results of operations and cash flows for any one quarter are not necessarily indicative of expected results for any other quarter or for any other year . repatriation of cash as a global business , we have cash balances in various countries and amounts are denominated in various currencies . fluctuations in foreign currency exchange rates impact our results of operations and cash positions . future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources .
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we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies , grouped by our activities , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : leasing related activities . revenue from leasing of aircraft equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements . where collection can not be reasonably assured , for example , upon a lessee bankruptcy , we do not recognize revenue until cash is received . we also estimate and charge to income a provision for bad debts based on our experience in the business and with each specific customer and the level of past due accounts . the financial condition of our customers may deteriorate and result in actual losses exceeding the estimated allowances . in addition , any deterioration in the financial condition of our customers may adversely affect future lease revenues . as of december 31 , 2012 , all but one of our leases are accounted for as operating leases . under an operating lease , we retain title to the leased equipment , thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment . 25 we generally depreciate engines on a straight-line basis over 15 years to a 55 % residual value . spare parts packages are generally depreciated on a straight-line basis over 15 years to a 25 % residual value . aircraft are generally depreciated on a straight-line basis over 13-20 years to a 15 % -17 % residual value . major overhauls paid for by us , which improve functionality or extend the original useful life , are capitalized and depreciated over the shorter of the estimated period to the next overhaul ( deferral method ) or the remaining useful life of the equipment . we do not accrue for planned major maintenance . for equipment which is unlikely to be repaired at the end of its current expected life , and is likely to be disassembled upon lease termination , we depreciate the equipment over its estimated life to a residual value based on an estimate of the wholesale value of the parts after disassembly . currently , 51 engines having a net book value of $ 118.5 million are depreciated using this policy . it is our policy to review estimates regularly to accurately expense the cost of equipment over the useful life of the engines . on july 1 , 2011 and again on july 1 , 2012 , we adjusted the depreciation for certain older engine types within the portfolio . the 2012 change in depreciation estimate resulted in a $ 2.0 million increase in depreciation in 2012 and on an annual basis will result in an increase in depreciation expense of $ 4.0 million per year assuming no change in our portfolio . the net effect of the 2012 change in depreciation estimate is a reduction in 2012 net income of $ 1.0 million or $ 0.12 in diluted earnings per share over what net income would have otherwise been had the change in depreciation estimate not been made . if useful lives or residual values are lower than those estimated by us , future write-downs may be recorded or a loss may be realized upon sale of the equipment . asset valuation . long-lived assets and certain identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable , and long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell . impairment is identified by comparison of undiscounted forecasted cash flows , including estimated sales proceeds , over the life of the asset with the asset 's book value . if the forecasted undiscounted cash flows are less than the book value , we write the asset down to its fair value . we determine fair value by reference to independent appraisals , quoted market prices ( e.g . , an offer to purchase ) and other factors . if the undiscounted forecasted cash flows and fair value of our long-lived assets decrease in the future we may incur impairment charges . accounting for maintenance expenditures and maintenance reserves . use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee . use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee or the lease terminates , at which time they are recognized in revenue as maintenance reserve revenue . our expenditures for maintenance are expensed as incurred . expenditures that meet the criteria for capitalization are recorded as an addition to equipment recorded on the balance sheet . year ended december 31 , 2012 compared to the year ended december 31 , 2011 revenue is summarized as follows : replace_table_token_6_th lease rent revenue . our lease rent revenue for the year ended december 31 , 2012 , decreased by 9.6 % over the comparable period in 2011. this decrease primarily reflects lower portfolio utilization in the current period and a decrease in the average size of the lease portfolio , which translated into a lower amount of equipment on lease . the aggregate of net book value of equipment held for lease at december 31 , 2012 and 2011 , was $ 961.5 million and $ 981.5 million , respectively , a decrease of 2.0 % . story_separator_special_tag interest income for the year ended december 31 , 2011 and 2010 , decreased by 21.2 % to $ 167,000 compared to the year ago period due to the drop in the rate of interest earned on deposit balances . income taxes . income taxes for the year ended december 31 , 2011 , increased to $ 9.4 million from $ 7.6 million for the comparable period in 2010 reflecting increased pre-tax income . the overall effective tax rate for the year ended december 31 , 2011was 39.1 % compared to 38.8 % for the prior year . our tax rate is subject to change based on changes in the mix of assets leased to domestic and foreign lessees , the proportions of revenue generated within and outside of california and numerous other factors , including changes in tax law . recent accounting pronouncements in june 2011 , the fasb issued accounting standards update ( asu ) no . 2011-05 , presentation of comprehensive income ( asu 2011-05 ) . this asu intends to enhance comparability and transparency of other comprehensive income components . the guidance provides an option to present total comprehensive income , the components of net income and the components of other comprehensive income in a single continuous statement or two separate but consecutive statements . this asu eliminates the option to present other comprehensive income components as part of the statement of shareholder 's equity and comprehensive income . the guidance provided in asu 2011-05 is effective for interim and annual period beginning on or after december 15 , 2011 and should be applied retrospectively . we do not expect the adoption of this asu to have a material impact on our consolidated financial statements . in november 2011 , the fasb issued accounting standards update ( asu ) no . 2011-11 , balance sheet disclosures about offsetting assets and liabilities ( asu 2011-11 ) . this asu requires companies to provide information about trading financial instruments and related derivatives in expanded disclosures . this asu is the result of a joint project conducted by the fasb and the iasb to enhance disclosures and provide converged disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement , irrespective of whether they are offset on the statement of financial position . the guidance provided in asu 2011-11 is effective for interim and annual periods beginning on or after january 1 , 2013 and 29 should be applied retrospectively . we do not expect the adoption of this asu to have a material impact on our consolidated financial statements . in december 2011 , the fasb issued accounting standards update ( asu ) no . 2011-12 , comprehensive income deferral of the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in accounting standards update no . 2011-05 ( asu 2011-12 ) . this asu defers only those changes in asu 2011-05 that relate to the presentation of reclassification adjustments . the amendments are being made to allow the board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented . all other requirements in asu 2011-05 are not affected by this asu , including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements . the guidance provided in asu 2011-12 is effective for interim and annual period beginning on or after december 15 , 2011 and should be applied retrospectively . the adoption of this asu did not have a material impact on our consolidated financial statements . in february 2013 , the fasb issued accounting standards update ( asu ) 2013-02 , comprehensive income ( topic 220 ) : reporting of amounts reclassified out of accumulated other comprehensive income. asu 2013-02 require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under u.s. generally accepted accounting principles ( gaap ) to be reclassified in its entirety to net income . for other amounts that are not required under u.s. gaap to be reclassified in their entirety to net income in the same reporting period , an entity is required to cross-reference other disclosures required under u.s. gaap that provide additional detail about those amounts . for public entities , the amendments are effective prospectively for reporting periods beginning after december 15 , 2012. early adoption is permitted . the company is currently evaluating the impact that these disclosures will have on its financial statements . story_separator_special_tag terminated . the company entered into a servicing agreement and administrative agency agreement with west ii to provide certain engine , lease management and reporting functions for west ii in return for fees based on a percentage of collected lease revenues and asset sales . because west ii is consolidated for financial statement reporting purposes , all fees eliminate upon consolidation . as a result of this transaction the company recorded a loss on extinguishment of debt and derivative instruments of $ 15.5 million in the year ended december 31 , 2012 as a result of the write-off of $ 5.3 million of unamortized debt issuance costs and unamortized note discount associated with the full repayment of west notes on september 17 , 2012 and the termination of interest rate swaps totaling $ 10.2 million . at december 31 , 2012 , $ 386.7 million of west ii term notes were outstanding . the assets of west ii are not available to satisfy our obligations or those of any of our affiliates other than the obligations specific to west ii . west ii is
| liquidity and capital resources our liquidity position as of december 31 , 2018 was : december 31 , 2018 ( in thousands ) cash and cash equivalents $ 123,367 available borrowings 129,400 as of december 31 , 2018 , we had $ 123.4 million in cash and cash equivalents and up to $ 129.4 million in available borrowings under our revolving credit facilities . we believe that our cash flows from operations , our cash and cash equivalents on hand , and available borrowings under our senior revolving credit facility and other financing instruments will be sufficient to meet the ongoing liquidity needs and capital expenditure requirements for at least the next twelve months . additional future financing may be necessary to fund our operations and there can be no assurance that , if needed , we will be able to secure additional debt or equity financing on terms acceptable to us or at all . although we believe we have adequate sources of liquidity over the long term , the success of our operations , the global economic outlook , and the pace of sustainable growth in our markets , among other factors , could impact our business and liquidity . due to the seasonal nature of our footwear , which is more heavily focused on styles suitable for warm weather , cash flows from operating activities during our fourth quarter are typically lower than those in our first three quarters , as customer receivables and inventories rise in preparation for the spring/summer season . accordingly , results of operations and cash flows for any one quarter are not necessarily indicative of expected results for any other quarter or for any other year . repatriation of cash as a global business , we have cash balances in various countries and amounts are denominated in various currencies . fluctuations in foreign currency exchange rates impact our results of operations and cash positions . future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources .
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we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies , grouped by our activities , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : leasing related activities . revenue from leasing of aircraft equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements . where collection can not be reasonably assured , for example , upon a lessee bankruptcy , we do not recognize revenue until cash is received . we also estimate and charge to income a provision for bad debts based on our experience in the business and with each specific customer and the level of past due accounts . the financial condition of our customers may deteriorate and result in actual losses exceeding the estimated allowances . in addition , any deterioration in the financial condition of our customers may adversely affect future lease revenues . as of december 31 , 2012 , all but one of our leases are accounted for as operating leases . under an operating lease , we retain title to the leased equipment , thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment . 25 we generally depreciate engines on a straight-line basis over 15 years to a 55 % residual value . spare parts packages are generally depreciated on a straight-line basis over 15 years to a 25 % residual value . aircraft are generally depreciated on a straight-line basis over 13-20 years to a 15 % -17 % residual value . major overhauls paid for by us , which improve functionality or extend the original useful life , are capitalized and depreciated over the shorter of the estimated period to the next overhaul ( deferral method ) or the remaining useful life of the equipment . we do not accrue for planned major maintenance . for equipment which is unlikely to be repaired at the end of its current expected life , and is likely to be disassembled upon lease termination , we depreciate the equipment over its estimated life to a residual value based on an estimate of the wholesale value of the parts after disassembly . currently , 51 engines having a net book value of $ 118.5 million are depreciated using this policy . it is our policy to review estimates regularly to accurately expense the cost of equipment over the useful life of the engines . on july 1 , 2011 and again on july 1 , 2012 , we adjusted the depreciation for certain older engine types within the portfolio . the 2012 change in depreciation estimate resulted in a $ 2.0 million increase in depreciation in 2012 and on an annual basis will result in an increase in depreciation expense of $ 4.0 million per year assuming no change in our portfolio . the net effect of the 2012 change in depreciation estimate is a reduction in 2012 net income of $ 1.0 million or $ 0.12 in diluted earnings per share over what net income would have otherwise been had the change in depreciation estimate not been made . if useful lives or residual values are lower than those estimated by us , future write-downs may be recorded or a loss may be realized upon sale of the equipment . asset valuation . long-lived assets and certain identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable , and long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell . impairment is identified by comparison of undiscounted forecasted cash flows , including estimated sales proceeds , over the life of the asset with the asset 's book value . if the forecasted undiscounted cash flows are less than the book value , we write the asset down to its fair value . we determine fair value by reference to independent appraisals , quoted market prices ( e.g . , an offer to purchase ) and other factors . if the undiscounted forecasted cash flows and fair value of our long-lived assets decrease in the future we may incur impairment charges . accounting for maintenance expenditures and maintenance reserves . use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee . use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee or the lease terminates , at which time they are recognized in revenue as maintenance reserve revenue . our expenditures for maintenance are expensed as incurred . expenditures that meet the criteria for capitalization are recorded as an addition to equipment recorded on the balance sheet . year ended december 31 , 2012 compared to the year ended december 31 , 2011 revenue is summarized as follows : replace_table_token_6_th lease rent revenue . our lease rent revenue for the year ended december 31 , 2012 , decreased by 9.6 % over the comparable period in 2011. this decrease primarily reflects lower portfolio utilization in the current period and a decrease in the average size of the lease portfolio , which translated into a lower amount of equipment on lease . the aggregate of net book value of equipment held for lease at december 31 , 2012 and 2011 , was $ 961.5 million and $ 981.5 million , respectively , a decrease of 2.0 % . story_separator_special_tag interest income for the year ended december 31 , 2011 and 2010 , decreased by 21.2 % to $ 167,000 compared to the year ago period due to the drop in the rate of interest earned on deposit balances . income taxes . income taxes for the year ended december 31 , 2011 , increased to $ 9.4 million from $ 7.6 million for the comparable period in 2010 reflecting increased pre-tax income . the overall effective tax rate for the year ended december 31 , 2011was 39.1 % compared to 38.8 % for the prior year . our tax rate is subject to change based on changes in the mix of assets leased to domestic and foreign lessees , the proportions of revenue generated within and outside of california and numerous other factors , including changes in tax law . recent accounting pronouncements in june 2011 , the fasb issued accounting standards update ( asu ) no . 2011-05 , presentation of comprehensive income ( asu 2011-05 ) . this asu intends to enhance comparability and transparency of other comprehensive income components . the guidance provides an option to present total comprehensive income , the components of net income and the components of other comprehensive income in a single continuous statement or two separate but consecutive statements . this asu eliminates the option to present other comprehensive income components as part of the statement of shareholder 's equity and comprehensive income . the guidance provided in asu 2011-05 is effective for interim and annual period beginning on or after december 15 , 2011 and should be applied retrospectively . we do not expect the adoption of this asu to have a material impact on our consolidated financial statements . in november 2011 , the fasb issued accounting standards update ( asu ) no . 2011-11 , balance sheet disclosures about offsetting assets and liabilities ( asu 2011-11 ) . this asu requires companies to provide information about trading financial instruments and related derivatives in expanded disclosures . this asu is the result of a joint project conducted by the fasb and the iasb to enhance disclosures and provide converged disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement , irrespective of whether they are offset on the statement of financial position . the guidance provided in asu 2011-11 is effective for interim and annual periods beginning on or after january 1 , 2013 and 29 should be applied retrospectively . we do not expect the adoption of this asu to have a material impact on our consolidated financial statements . in december 2011 , the fasb issued accounting standards update ( asu ) no . 2011-12 , comprehensive income deferral of the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in accounting standards update no . 2011-05 ( asu 2011-12 ) . this asu defers only those changes in asu 2011-05 that relate to the presentation of reclassification adjustments . the amendments are being made to allow the board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented . all other requirements in asu 2011-05 are not affected by this asu , including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements . the guidance provided in asu 2011-12 is effective for interim and annual period beginning on or after december 15 , 2011 and should be applied retrospectively . the adoption of this asu did not have a material impact on our consolidated financial statements . in february 2013 , the fasb issued accounting standards update ( asu ) 2013-02 , comprehensive income ( topic 220 ) : reporting of amounts reclassified out of accumulated other comprehensive income. asu 2013-02 require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under u.s. generally accepted accounting principles ( gaap ) to be reclassified in its entirety to net income . for other amounts that are not required under u.s. gaap to be reclassified in their entirety to net income in the same reporting period , an entity is required to cross-reference other disclosures required under u.s. gaap that provide additional detail about those amounts . for public entities , the amendments are effective prospectively for reporting periods beginning after december 15 , 2012. early adoption is permitted . the company is currently evaluating the impact that these disclosures will have on its financial statements . story_separator_special_tag terminated . the company entered into a servicing agreement and administrative agency agreement with west ii to provide certain engine , lease management and reporting functions for west ii in return for fees based on a percentage of collected lease revenues and asset sales . because west ii is consolidated for financial statement reporting purposes , all fees eliminate upon consolidation . as a result of this transaction the company recorded a loss on extinguishment of debt and derivative instruments of $ 15.5 million in the year ended december 31 , 2012 as a result of the write-off of $ 5.3 million of unamortized debt issuance costs and unamortized note discount associated with the full repayment of west notes on september 17 , 2012 and the termination of interest rate swaps totaling $ 10.2 million . at december 31 , 2012 , $ 386.7 million of west ii term notes were outstanding . the assets of west ii are not available to satisfy our obligations or those of any of our affiliates other than the obligations specific to west ii . west ii is
| liquidity and capital resources we finance our growth through borrowings secured by our equipment lease portfolio . cash of approximately $ 603.7 million , $ 132.4 million and $ 174.8 million , in the years ended december 31 , 2012 , 2011 and 2010 , respectively , was derived from this activity . in these same time periods $ 626.9 million , $ 146.4 million and $ 170.0 million , respectively , was used to pay down related debt . cash flow from operating activities generated $ 67.3 million , $ 76.7 million and $ 56.6 million in the years ended december 31 , 2012 , 2011 and 2010 , respectively . at december 31 , 2012 , $ 1.2 million in cash and cash equivalents and restricted cash were held in foreign subsidiaries . we do not intend to repatriate the funds held in foreign subsidiaries to the united states . in the event that we decide to repatriate these funds to the united states , we would be required to accrue and pay taxes upon the repatriation . our primary use of funds is for the purchase of equipment for lease . purchases of equipment ( including capitalized costs ) totaled $ 61.5 million , $ 144.3 million and $ 121.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . cash flows from operations are driven significantly by payments made under our lease agreements , which comprise lease revenue and maintenance reserves , and are offset by interest expense and general and administrative costs . cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements . the lease revenue stream , in the short-term , is at fixed rates while a portion of our debt is at variable rates . if interest rates increase , it is unlikely we could increase lease rates in the short term and this would cause a reduction in our earnings and operating cash flows . revenue and maintenance reserves are also affected by the amount of equipment off lease .
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loss from continuing operations was $ 697 million , or $ ( 2.84 ) per diluted common share in 2014 , compared to earnings of $ 933 million , or $ 3.45 per diluted common share in 2013 . cash used for operating activities was $ 685 million in 2014 , compared to cash provided by operating activities of $ 555 million in 2013 . we contributed $ 1.3 billion to our pension plans during 2014 , compared to $ 182 million in 2013 . we provided cash to shareholders through repurchases of $ 2.5 billion in shares and $ 318 million in cash dividends during 2014 . what were the financial results for our two segments in 2014 ? in the products segment , net sales were $ 3.8 billion in 2014 , a decrease of $ 302 million , or 7 % , compared to $ 4.1 billion in 2013 . on a geographic basis , net sales decreased in north america , latin america and asia pacific and middle east ( `` apme `` ) and increased in europe and africa ( `` ea `` ) compared to 2013. operating losses were $ 667 million in 2014 , compared to operating earnings of $ 639 million in 2013 . operating margin decreased in 2014 to ( 17.5 ) % from 15.6 % in 2013 . approximately $ 1.3 billion of pension settlement losses were allocated to the products segment in 2014. in the services segment , net sales were $ 2.1 billion in 2014 , a decrease of $ 44 million , or 2 % , compared to $ 2.1 billion in 2013 . on a geographic basis , net sales decreased in north america , latin america and apme and increased in ea , compared to 2013 . operating losses were $ 339 million in 2014 , compared to operating earnings of $ 308 million in 25 2013 . operating margin decreased in 2014 to ( 16.3 ) % from 14.5 % in 2013 . approximately $ 584 million of pension settlement losses were allocated to the services segment in 2014. what were our major accomplishments in 2014 ? 2014 was a transformational year both structurally and financially . in addition to selling our enterprise business for $ 3.5 billion , we restructured our operations and financial profile to become a more focused , streamlined business . we had pockets of growth in 2014 , most notably in ea , while the north america downturn during the first half of the year pressured overall top-line growth . north america ended 2014 with growth driven by record fourth quarter sales and backlog . finally , our overall financial profile improved with a lower structural cost base , growing backlog position , significantly lower share count and a material reduction in our pension obligations , reducing volatility . structural highlights sold our enterprise business for $ 3.5 billion , enabling us to focus on the core government and public safety mission-critical communications business and associated expansion opportunities ; de-risked our u.s. pension plan by significantly reducing the total liability of the plan and cutting the number of participants by approximately half , with the effect of reducing expected future contributions and volatility ; reduced operating expenses by more than $ 200 million as compared to 2013 , including reorganizing our r & d and sg & a functions . this reorganization both reduced costs and enabled efficiencies that shifted more investment into key areas such as services and public safety lte solutions ; and returned approximately $ 2.9 billion in capital to shareholders through share repurchases and dividends . business highlights ended 2014 with a record backlog position of $ 5.8 billion , up 6 % compared to 2013 ; services backlog up over $ 250 million versus 2013 , including : ◦ significant growth in multi-year software & hardware maintenance contracts ; ◦ significant growth in managed services orders and pipeline opportunities ; and ◦ won six public safety accounts for our smart public safety solutions . awarded largest public safety lte system in the world for $ 175 million ; north america ended 2014 with record fourth quarter sales and orders ; and ea grew sales 5 % year-over-year on a difficult comparison . looking forward entering 2015 , we believe we are well-positioned to compete in both our core markets and adjacent growth areas . we have a broad , compelling product and services portfolio specifically tailored for our mission-critical communications customer base that spans many layers of governments , public safety , and first responders , as well as commercial and industrial customers in a number of key verticals . as we add new products , features , and software upgrades , we ensure our solutions are interoperable and backward-compatible , enabling customers to confidently invest for their future needs while allowing them to utilize their prior investment in our technology . our backlog position has improved as compared to last year , and we believe the funding environment of our largest government customers and the economics surrounding our commercial customers appears to be relatively healthy , although we are experiencing some challenges relating to currency fluctuations , particularly in europe and asia . we expect our core business serving existing private network customers to continue to provide opportunity for growth into new systems , as there are thousands of old , analog systems still being used today that require upgrades for customers to experience full voice , data and video capabilities . these systems are typically converted from analog into new digital systems , and are upgraded for reasons that include : spectrum-efficiency mandates , capacity constraints , coverage expansion , or new feature upgrades . we will continue to offer devices and systems that meet our customers ' specific needs for private mission-critical communications around the world . story_separator_special_tag the net other income in 2012 was primarily comprised of : ( i ) $ 3 million of equity method investment earnings and ( ii ) $ 9 million of other non-operating gains , partially offset by : ( i ) $ 6 million loss from the extinguishment of debt and ( ii ) investment impairments of $ 4 million . effective tax rate we recorded $ 59 million of net tax benefit in 2013 , resulting in a negative effective tax rate of 7 % , compared to $ 211 million of net tax expense in 2012 , resulting in an effective tax rate of 24 % . our effective tax rate in 2013 was favorably impacted by : ( i ) $ 337 million of net tax benefit , or $ 1.25 of diluted earnings per share from continuing operations , associated with excess foreign tax credits , ( ii ) a $ 25 million reduction in our deferred tax liability for undistributed foreign earnings primarily due to our assertion that certain earnings are now permanently reinvested , and ( iii ) a $ 9 million tax benefit for prior year r & d tax credits . the tax benefit associated with the excess foreign tax credits relates to the earnings of certain non-u.s. subsidiaries reorganized under our holding company structure implemented during 2013. our effective tax rate in 2013 was unfavorably impacted by a $ 20 million tax charge associated with the liquidation of the sigma fund , as discussed within `` liquidity and capital resources . `` our effective tax rate in 2012 was lower than the u.s. statutory tax rate of 35 % primarily due to : ( i ) a $ 60 million tax benefit related to the reversal of a significant portion of the valuation allowance established on certain foreign deferred tax assets and ( ii ) a $ 13 million reduction in unrecognized tax benefits for facts that then indicated the extent to which certain tax positions were more-likely-than-not of being sustained . earnings from continuing operations attributable to motorola solutions , inc. we had net earnings from continuing operations attributable to motorola solutions , inc. of $ 933 million , or $ 3.45 per diluted share , in 2013 , compared to $ 670 million , or $ 2.25 per diluted share , in 2012. the increase in net earnings from continuing operations attributable to motorola solutions , inc. in 2013 , as compared to 2012 , was primarily driven by : ( i ) a lower effective tax rate due to the $ 337 million net tax benefit associated with foreign tax credits and ( ii ) decreased defined benefit expenses of over $ 100 million , partially offset by : ( i ) a $ 85 million decrease in gross margin , ( ii ) a $ 43 million increase in reorganization of business charges , and ( iii ) a $ 47 million increase in net interest expense . the increase in earnings per diluted share from continuing operations was driven by higher net earnings as well as the reduction in shares outstanding as a result of our share repurchase program . earnings from discontinued operations in 2013 , we had $ 166 million in earnings from discontinued operations , net of tax , or $ 0.61 per diluted share , compared to $ 211 million of earnings from discontinued operations , net of tax , or $ 0.71 per diluted share , in 2012. the earnings from discontinued operations in 2013 and 2012 were primarily from the enterprise business . the decrease from 2012 to 2013 is primarily related to an increase in amortization of intangible assets , as a result of the purchase of psion at the end of 2012. segment information the following commentary should be read in conjunction with the financial results of each operating business segment as detailed in note 12 , “ information by segment and geographic region , ” to our consolidated financial statements . net sales and operating results for our two segments for 2014 , 2013 , and 2012 are presented below . products segment in 2014 , the products segment 's net sales represented 65 % of our consolidated net sales , compared to 66 % in 2013 and 68 % in 2012 . replace_table_token_5_th segment results— 2014 compared to 2013 in 2014 , the segment 's net sales were $ 3.8 billion , a 7 % decrease compared to 2013 reflecting a decrease in : ( i ) devices sales in north america , latin america , and apme , partially offset by an increase in devices sales within ea and ( ii ) system sales in north america , apme and ea , partially offset by an increase in system sales in latin america . on a geographic basis , net sales declined in north america , latin america and apme , and increased in ea in 2014 compared to 2013 . the fourth quarter of 2014 was positively impacted by a return to growth in the north america region , as compared to the fourth quarter of 2013 , and 31 reflected increased order activity and faster-than-expected conversion of certain orders . the segment 's backlog was $ 1.2 billion at december 31 , 2014 and $ 1.1 billion at december 31 , 2013 . the segment had an operating loss of $ 667 million in 2014 , compared to operating earnings of $ 639 million in 2013 driven by an allocation of $ 1.3 billion of expense related to the settlement of a u.s pension plan . as a percentage of net sales in 2014 compared to 2013 , gross margin decreased , sg & a expenditures decreased , r & d expenditures decreased , and other charges increased . the decrease in operating earnings was primarily driven by : ( i ) an increase in other charges , reflecting $ 1.3 billion of
| liquidity and capital resources we finance our growth through borrowings secured by our equipment lease portfolio . cash of approximately $ 603.7 million , $ 132.4 million and $ 174.8 million , in the years ended december 31 , 2012 , 2011 and 2010 , respectively , was derived from this activity . in these same time periods $ 626.9 million , $ 146.4 million and $ 170.0 million , respectively , was used to pay down related debt . cash flow from operating activities generated $ 67.3 million , $ 76.7 million and $ 56.6 million in the years ended december 31 , 2012 , 2011 and 2010 , respectively . at december 31 , 2012 , $ 1.2 million in cash and cash equivalents and restricted cash were held in foreign subsidiaries . we do not intend to repatriate the funds held in foreign subsidiaries to the united states . in the event that we decide to repatriate these funds to the united states , we would be required to accrue and pay taxes upon the repatriation . our primary use of funds is for the purchase of equipment for lease . purchases of equipment ( including capitalized costs ) totaled $ 61.5 million , $ 144.3 million and $ 121.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . cash flows from operations are driven significantly by payments made under our lease agreements , which comprise lease revenue and maintenance reserves , and are offset by interest expense and general and administrative costs . cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements . the lease revenue stream , in the short-term , is at fixed rates while a portion of our debt is at variable rates . if interest rates increase , it is unlikely we could increase lease rates in the short term and this would cause a reduction in our earnings and operating cash flows . revenue and maintenance reserves are also affected by the amount of equipment off lease .
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loss from continuing operations was $ 697 million , or $ ( 2.84 ) per diluted common share in 2014 , compared to earnings of $ 933 million , or $ 3.45 per diluted common share in 2013 . cash used for operating activities was $ 685 million in 2014 , compared to cash provided by operating activities of $ 555 million in 2013 . we contributed $ 1.3 billion to our pension plans during 2014 , compared to $ 182 million in 2013 . we provided cash to shareholders through repurchases of $ 2.5 billion in shares and $ 318 million in cash dividends during 2014 . what were the financial results for our two segments in 2014 ? in the products segment , net sales were $ 3.8 billion in 2014 , a decrease of $ 302 million , or 7 % , compared to $ 4.1 billion in 2013 . on a geographic basis , net sales decreased in north america , latin america and asia pacific and middle east ( `` apme `` ) and increased in europe and africa ( `` ea `` ) compared to 2013. operating losses were $ 667 million in 2014 , compared to operating earnings of $ 639 million in 2013 . operating margin decreased in 2014 to ( 17.5 ) % from 15.6 % in 2013 . approximately $ 1.3 billion of pension settlement losses were allocated to the products segment in 2014. in the services segment , net sales were $ 2.1 billion in 2014 , a decrease of $ 44 million , or 2 % , compared to $ 2.1 billion in 2013 . on a geographic basis , net sales decreased in north america , latin america and apme and increased in ea , compared to 2013 . operating losses were $ 339 million in 2014 , compared to operating earnings of $ 308 million in 25 2013 . operating margin decreased in 2014 to ( 16.3 ) % from 14.5 % in 2013 . approximately $ 584 million of pension settlement losses were allocated to the services segment in 2014. what were our major accomplishments in 2014 ? 2014 was a transformational year both structurally and financially . in addition to selling our enterprise business for $ 3.5 billion , we restructured our operations and financial profile to become a more focused , streamlined business . we had pockets of growth in 2014 , most notably in ea , while the north america downturn during the first half of the year pressured overall top-line growth . north america ended 2014 with growth driven by record fourth quarter sales and backlog . finally , our overall financial profile improved with a lower structural cost base , growing backlog position , significantly lower share count and a material reduction in our pension obligations , reducing volatility . structural highlights sold our enterprise business for $ 3.5 billion , enabling us to focus on the core government and public safety mission-critical communications business and associated expansion opportunities ; de-risked our u.s. pension plan by significantly reducing the total liability of the plan and cutting the number of participants by approximately half , with the effect of reducing expected future contributions and volatility ; reduced operating expenses by more than $ 200 million as compared to 2013 , including reorganizing our r & d and sg & a functions . this reorganization both reduced costs and enabled efficiencies that shifted more investment into key areas such as services and public safety lte solutions ; and returned approximately $ 2.9 billion in capital to shareholders through share repurchases and dividends . business highlights ended 2014 with a record backlog position of $ 5.8 billion , up 6 % compared to 2013 ; services backlog up over $ 250 million versus 2013 , including : ◦ significant growth in multi-year software & hardware maintenance contracts ; ◦ significant growth in managed services orders and pipeline opportunities ; and ◦ won six public safety accounts for our smart public safety solutions . awarded largest public safety lte system in the world for $ 175 million ; north america ended 2014 with record fourth quarter sales and orders ; and ea grew sales 5 % year-over-year on a difficult comparison . looking forward entering 2015 , we believe we are well-positioned to compete in both our core markets and adjacent growth areas . we have a broad , compelling product and services portfolio specifically tailored for our mission-critical communications customer base that spans many layers of governments , public safety , and first responders , as well as commercial and industrial customers in a number of key verticals . as we add new products , features , and software upgrades , we ensure our solutions are interoperable and backward-compatible , enabling customers to confidently invest for their future needs while allowing them to utilize their prior investment in our technology . our backlog position has improved as compared to last year , and we believe the funding environment of our largest government customers and the economics surrounding our commercial customers appears to be relatively healthy , although we are experiencing some challenges relating to currency fluctuations , particularly in europe and asia . we expect our core business serving existing private network customers to continue to provide opportunity for growth into new systems , as there are thousands of old , analog systems still being used today that require upgrades for customers to experience full voice , data and video capabilities . these systems are typically converted from analog into new digital systems , and are upgraded for reasons that include : spectrum-efficiency mandates , capacity constraints , coverage expansion , or new feature upgrades . we will continue to offer devices and systems that meet our customers ' specific needs for private mission-critical communications around the world . story_separator_special_tag the net other income in 2012 was primarily comprised of : ( i ) $ 3 million of equity method investment earnings and ( ii ) $ 9 million of other non-operating gains , partially offset by : ( i ) $ 6 million loss from the extinguishment of debt and ( ii ) investment impairments of $ 4 million . effective tax rate we recorded $ 59 million of net tax benefit in 2013 , resulting in a negative effective tax rate of 7 % , compared to $ 211 million of net tax expense in 2012 , resulting in an effective tax rate of 24 % . our effective tax rate in 2013 was favorably impacted by : ( i ) $ 337 million of net tax benefit , or $ 1.25 of diluted earnings per share from continuing operations , associated with excess foreign tax credits , ( ii ) a $ 25 million reduction in our deferred tax liability for undistributed foreign earnings primarily due to our assertion that certain earnings are now permanently reinvested , and ( iii ) a $ 9 million tax benefit for prior year r & d tax credits . the tax benefit associated with the excess foreign tax credits relates to the earnings of certain non-u.s. subsidiaries reorganized under our holding company structure implemented during 2013. our effective tax rate in 2013 was unfavorably impacted by a $ 20 million tax charge associated with the liquidation of the sigma fund , as discussed within `` liquidity and capital resources . `` our effective tax rate in 2012 was lower than the u.s. statutory tax rate of 35 % primarily due to : ( i ) a $ 60 million tax benefit related to the reversal of a significant portion of the valuation allowance established on certain foreign deferred tax assets and ( ii ) a $ 13 million reduction in unrecognized tax benefits for facts that then indicated the extent to which certain tax positions were more-likely-than-not of being sustained . earnings from continuing operations attributable to motorola solutions , inc. we had net earnings from continuing operations attributable to motorola solutions , inc. of $ 933 million , or $ 3.45 per diluted share , in 2013 , compared to $ 670 million , or $ 2.25 per diluted share , in 2012. the increase in net earnings from continuing operations attributable to motorola solutions , inc. in 2013 , as compared to 2012 , was primarily driven by : ( i ) a lower effective tax rate due to the $ 337 million net tax benefit associated with foreign tax credits and ( ii ) decreased defined benefit expenses of over $ 100 million , partially offset by : ( i ) a $ 85 million decrease in gross margin , ( ii ) a $ 43 million increase in reorganization of business charges , and ( iii ) a $ 47 million increase in net interest expense . the increase in earnings per diluted share from continuing operations was driven by higher net earnings as well as the reduction in shares outstanding as a result of our share repurchase program . earnings from discontinued operations in 2013 , we had $ 166 million in earnings from discontinued operations , net of tax , or $ 0.61 per diluted share , compared to $ 211 million of earnings from discontinued operations , net of tax , or $ 0.71 per diluted share , in 2012. the earnings from discontinued operations in 2013 and 2012 were primarily from the enterprise business . the decrease from 2012 to 2013 is primarily related to an increase in amortization of intangible assets , as a result of the purchase of psion at the end of 2012. segment information the following commentary should be read in conjunction with the financial results of each operating business segment as detailed in note 12 , “ information by segment and geographic region , ” to our consolidated financial statements . net sales and operating results for our two segments for 2014 , 2013 , and 2012 are presented below . products segment in 2014 , the products segment 's net sales represented 65 % of our consolidated net sales , compared to 66 % in 2013 and 68 % in 2012 . replace_table_token_5_th segment results— 2014 compared to 2013 in 2014 , the segment 's net sales were $ 3.8 billion , a 7 % decrease compared to 2013 reflecting a decrease in : ( i ) devices sales in north america , latin america , and apme , partially offset by an increase in devices sales within ea and ( ii ) system sales in north america , apme and ea , partially offset by an increase in system sales in latin america . on a geographic basis , net sales declined in north america , latin america and apme , and increased in ea in 2014 compared to 2013 . the fourth quarter of 2014 was positively impacted by a return to growth in the north america region , as compared to the fourth quarter of 2013 , and 31 reflected increased order activity and faster-than-expected conversion of certain orders . the segment 's backlog was $ 1.2 billion at december 31 , 2014 and $ 1.1 billion at december 31 , 2013 . the segment had an operating loss of $ 667 million in 2014 , compared to operating earnings of $ 639 million in 2013 driven by an allocation of $ 1.3 billion of expense related to the settlement of a u.s pension plan . as a percentage of net sales in 2014 compared to 2013 , gross margin decreased , sg & a expenditures decreased , r & d expenditures decreased , and other charges increased . the decrease in operating earnings was primarily driven by : ( i ) an increase in other charges , reflecting $ 1.3 billion of
| net cash used for financing activities was $ 1.7 billion in 2014 compared to $ 842 million in 2013 and $ 2.1 billion in 2012 . cash used for financing activities in 2014 was primarily comprised of : ( i ) $ 2.5 billion used for purchases of common stock under our share repurchase program , ( ii ) $ 465 million of cash used for the repayment of debt , and ( iii ) $ 318 million of cash used for the payment of dividends , partially offset by : ( i ) $ 1.4 billion of net proceeds from the issuance of debt , ( ii ) $ 135 million of net proceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans , and ( iii ) $ 93 million of distributions received from discontinued operations . cash used for financing activities in 2013 was primarily comprised of : ( i ) $ 1.7 billion used for purchases of our common stock under our share repurchase program and ( ii ) $ 292 million of cash used for the payment of dividends , partially offset by : ( i ) $ 593 million of net proceeds from the issuance of debt , ( ii ) $ 365 million of distributions received from discontinued operations , and ( iii ) $ 165 million of netproceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans .
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the company 's marketable securities and certificates of deposit are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income ( loss ) , a component of stockholders ' equity . realized gains or losses on mutual funds are determined using the average cost method , while realized gains or losses on government securities and bonds are determined using the specific-identification method . realized gains or losses on the company 's marketable securities are insignificant for the years ended december 31 , 2011 and 2010. the company evaluates its investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis , the financial condition of the issuer and the company 's ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value . the company would record an impairment charge to the extent that the cost of the available-for-sale securities or certificates of deposit exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary . during 2011 the company did not record an impairment charge regarding its investment in marketable securities or certificates of deposit because , based on management 's evaluation of the circumstances , management believes that the decline in fair value below the cost of certain of the company 's marketable securities is temporary . 14 revenue recognition the company recognizes revenue when products are shipped , title and risk of loss pass to customers , persuasive evidence of a sales arrangement exists , and collections are reasonably assured . any allowances for returns are taken as a reduction in sales within the same period the revenue is recognized . such allowances are based on historical experience as well as other factors that , in the company 's judgment , could reasonably be expected to cause sales returns or doubtful accounts to differ from historical experience . accounts receivable allowance the company performs ongoing credit evaluations of the company 's customers and adjusts credit limits , as determined by review of current credit information . the company continuously monitors collection and payments from customers and maintains an allowance for doubtful accounts based upon historical experience , the company 's anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified . while the company 's credit losses have historically been low and within expectations , the company may not continue to experience the same credit loss rates that have historically been attained . the receivables are highly concentrated in a relatively small number of customers . therefore , a significant change in the liquidity , financial position , or willingness to pay timely , or at all , of any one of the company 's significant customers would have a significant impact on the company 's results of operations and cash flows . inventory valuation allowance in conjunction with the company 's ongoing analysis of inventory valuation , management constantly monitors projected demand on a product-by-product basis . based on these projections , management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers . although the company believes that it has been reasonably successful in identifying write-downs in a timely manner , sudden changes in buying patterns from customers , either due to a shift in product interest and or a complete pull back from their expected order levels , may result in the recognition of larger than anticipated write-downs . 15 results of operations year ended december 31 , 2011 compared with the year ended december 31 , 2010 net sales net sales in 2011 increased by $ 615,438 ( 4.5 % ) compared with 2010. this increase was primarily attributable to the following : ( a ) personal care products : sales of the company 's personal care products , including cosmetic ingredients , increased by $ 845,548 ( 10.1 % ) for the year ended december 31 , 2011 when compared with 2010. the increase was attributable primarily to an increase in sales to asi , the company 's largest marketing partner . sales to the company 's marketing partner in the uk also increased in 2011. sales to the company 's three other marketing partners in europe and its marketing partner in south korea all experienced a decrease in 2011. the company believes that the increase in sales of its personal care products was the result of improving economic conditions in asia and north america , which resulted in new consumer product introductions utilizing its products . the overall increase in sales was almost entirely attributable to an increase in sales of the company 's extensive line of lubrajel® products . the company 's sales to asi increased by 21.5 % in 2011 compared with 2010 , which the company believes is partially due to normal fluctuations in asi 's buying patterns but is also attributable to new consumer product introductions and new customers for the company 's products . the company had combined sales decreases of $ 338,854 ( 15.6 % ) in 2011 compared with 2010 from its other five marketing partners ( four of whom are in western europe ) . the company attributes this decrease to a decline in the economic conditions in western europe in 2011 , which resulted in a decrease in demand for personal care and cosmetic ingredients . story_separator_special_tag overall , sales of the company 's lubrajel products for both personal care and medical uses increased by $ 1,042,529 ( 9.8 % ) in 2011 compared with 2010. the unit volume of all lubrajel products sold , both for personal care and medical uses , increased by approximately 8.7 % in 2011 compared with 2010 . ( b ) pharmaceuticals : sales of the company 's two pharmaceutical products , renacidin and clorpactin , decreased by $ 400,523 ( 14.8 % ) for the year ended december 31 , 2011 compared with 2010. renacidin accounted for approximately 13 % of the company 's sales in 2011 compared with 17 % in 2010. the decrease in sales of the company 's pharmaceutical products in 2011 was due to a decrease in sales of renacidin . this product has been manufactured for the company under a long-term contract with a major u.s. drug company that experienced regulatory problems in 2010 at its facility that manufactures renacidin , which were unrelated to the production of renacidin . the supplier 's problems resulted in a temporary suspension of renacidin production in august 2010. as a result , the company 's inventory of this product was significantly reduced , forcing the company to allocate its supply by reducing sales to the company 's customers from november 2010 until may 2011. this resulted in approximately a 60 % reduction in renacidin sales each month beginning in november 2010 until the company ran out of product completely in the beginning of february 2011. the company 's supplier resumed production of renacidin in the first quarter of 2011 , and sales of the product by the company resumed in may 2011. the reduction in sales of the company 's pharmaceutical products was partially offset by a price increase that went into effect in june 2011 . 16 ( c ) medical ( non-pharmaceutical ) products : sales of the company 's non-pharmaceutical medical products increased $ 285,610 ( 10.9 % ) when compared with 2010. the company believes that the increase was partially due to customer buying patterns , but was also attributable to new customers and an increase in volume to existing customers . ( d ) industrial and other products : sales of the company 's industrial products , as well as other miscellaneous products , decreased by $ 35,383 ( 20.9 % ) when compared with 2010. sales were negatively impacted by an increase of $ 95,964 ( 64.5 % ) in sales discounts and allowance reserves . the increase in sales discounts and allowances was mainly due to increases in the allowance for distribution fees . cost of sales cost of sales as a percentage of net sales in 2011 increased to 39.4 % from 38.3 % in the prior year . the increase was primarily the result of increases in raw material costs , particularly the company 's primary raw material , as well as an increase in direct labor costs . operating expenses operating expenses decreased by $ 14,605 ( 0.6 % ) in 2011 compared with the prior year . this decrease was due to a reduction in legal and accounting fees . portions of the company 's operating expenses are directly attributable to the research and development that the company performs . in 2011 and 2010 , the company incurred approximately $ 637,000 and $ 596,000 , respectively , in research and development expenses , which are included in operating expenses . the increase in r & d costs incurred in 2011 was primarily attributable to increases in payroll costs . no portion of the research and development expenses was directly paid by the company 's customers . pension plan termination on july 13 , 2010 , the company terminated its non-contributory defined benefit pension plan ( `` db plan `` ) . the termination resulted in the company recognizing in 2010 a one-time non-cash expense of $ 518,296 , offset by a $ 179,641 tax benefit associated with recognizing unamortized actuarial losses . in addition , in 2010 the company provided for a cash contribution of $ 337,378 , offset by a $ 116,900 tax benefit , in order to fully fund the db plan . the recognition of the non-cash and cash contributions resulted in a before-tax charge of $ 847,744 , and an after-tax charge of $ 559,133 ( $ 0.12 per share ) for the year ended december 31 , 2010. since the non-cash expense had previously been provided for as a charge to other comprehensive income , the net effect of the termination on stockholders ' equity in 2010 was a decrease of $ 220,478. other income ( expense ) other income ( net ) increased $ 280,299 ( 61.5 % ) for the year ended december 31 , 2011 when compared with 2010. the increase was mainly attributable to $ 385,182 in income the company received from the settlement of a claim for damages between the company and one of its suppliers . the claim resulted from the temporary suspension of production of the company 's renacidin by its supplier at the end of 2010 due to regulatory issues at the supplier 's facility . production did not resume until may 2011. as a result , the company determined that it lost approximately $ 390,000 in gross profit that would have been generated from sales of the product if production had not been curtailed . the company and its supplier entered into a settlement agreement whereby the company would be reimbursed for these losses . the miscellaneous income of $ 385,182 represents the amount that was paid to the company by the supplier during the third quarter of 2011. the company expects to receive the remaining amount ( approximately $ 4,800 ) in the second quarter of 2012. further information on this matter can be found in footnote `` g `` and the company 's filing on form 10-k for 2010 . 17
| net cash used for financing activities was $ 1.7 billion in 2014 compared to $ 842 million in 2013 and $ 2.1 billion in 2012 . cash used for financing activities in 2014 was primarily comprised of : ( i ) $ 2.5 billion used for purchases of common stock under our share repurchase program , ( ii ) $ 465 million of cash used for the repayment of debt , and ( iii ) $ 318 million of cash used for the payment of dividends , partially offset by : ( i ) $ 1.4 billion of net proceeds from the issuance of debt , ( ii ) $ 135 million of net proceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans , and ( iii ) $ 93 million of distributions received from discontinued operations . cash used for financing activities in 2013 was primarily comprised of : ( i ) $ 1.7 billion used for purchases of our common stock under our share repurchase program and ( ii ) $ 292 million of cash used for the payment of dividends , partially offset by : ( i ) $ 593 million of net proceeds from the issuance of debt , ( ii ) $ 365 million of distributions received from discontinued operations , and ( iii ) $ 165 million of netproceeds from the issuance of common stock in connection with our employee stock option and employee stock purchase plans .
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the company 's marketable securities and certificates of deposit are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income ( loss ) , a component of stockholders ' equity . realized gains or losses on mutual funds are determined using the average cost method , while realized gains or losses on government securities and bonds are determined using the specific-identification method . realized gains or losses on the company 's marketable securities are insignificant for the years ended december 31 , 2011 and 2010. the company evaluates its investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis , the financial condition of the issuer and the company 's ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value . the company would record an impairment charge to the extent that the cost of the available-for-sale securities or certificates of deposit exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary . during 2011 the company did not record an impairment charge regarding its investment in marketable securities or certificates of deposit because , based on management 's evaluation of the circumstances , management believes that the decline in fair value below the cost of certain of the company 's marketable securities is temporary . 14 revenue recognition the company recognizes revenue when products are shipped , title and risk of loss pass to customers , persuasive evidence of a sales arrangement exists , and collections are reasonably assured . any allowances for returns are taken as a reduction in sales within the same period the revenue is recognized . such allowances are based on historical experience as well as other factors that , in the company 's judgment , could reasonably be expected to cause sales returns or doubtful accounts to differ from historical experience . accounts receivable allowance the company performs ongoing credit evaluations of the company 's customers and adjusts credit limits , as determined by review of current credit information . the company continuously monitors collection and payments from customers and maintains an allowance for doubtful accounts based upon historical experience , the company 's anticipation of uncollectible accounts receivable and any specific customer collection issues that have been identified . while the company 's credit losses have historically been low and within expectations , the company may not continue to experience the same credit loss rates that have historically been attained . the receivables are highly concentrated in a relatively small number of customers . therefore , a significant change in the liquidity , financial position , or willingness to pay timely , or at all , of any one of the company 's significant customers would have a significant impact on the company 's results of operations and cash flows . inventory valuation allowance in conjunction with the company 's ongoing analysis of inventory valuation , management constantly monitors projected demand on a product-by-product basis . based on these projections , management evaluates the levels of write-downs required for inventory on hand and inventory on order from contract manufacturers . although the company believes that it has been reasonably successful in identifying write-downs in a timely manner , sudden changes in buying patterns from customers , either due to a shift in product interest and or a complete pull back from their expected order levels , may result in the recognition of larger than anticipated write-downs . 15 results of operations year ended december 31 , 2011 compared with the year ended december 31 , 2010 net sales net sales in 2011 increased by $ 615,438 ( 4.5 % ) compared with 2010. this increase was primarily attributable to the following : ( a ) personal care products : sales of the company 's personal care products , including cosmetic ingredients , increased by $ 845,548 ( 10.1 % ) for the year ended december 31 , 2011 when compared with 2010. the increase was attributable primarily to an increase in sales to asi , the company 's largest marketing partner . sales to the company 's marketing partner in the uk also increased in 2011. sales to the company 's three other marketing partners in europe and its marketing partner in south korea all experienced a decrease in 2011. the company believes that the increase in sales of its personal care products was the result of improving economic conditions in asia and north america , which resulted in new consumer product introductions utilizing its products . the overall increase in sales was almost entirely attributable to an increase in sales of the company 's extensive line of lubrajel® products . the company 's sales to asi increased by 21.5 % in 2011 compared with 2010 , which the company believes is partially due to normal fluctuations in asi 's buying patterns but is also attributable to new consumer product introductions and new customers for the company 's products . the company had combined sales decreases of $ 338,854 ( 15.6 % ) in 2011 compared with 2010 from its other five marketing partners ( four of whom are in western europe ) . the company attributes this decrease to a decline in the economic conditions in western europe in 2011 , which resulted in a decrease in demand for personal care and cosmetic ingredients . story_separator_special_tag overall , sales of the company 's lubrajel products for both personal care and medical uses increased by $ 1,042,529 ( 9.8 % ) in 2011 compared with 2010. the unit volume of all lubrajel products sold , both for personal care and medical uses , increased by approximately 8.7 % in 2011 compared with 2010 . ( b ) pharmaceuticals : sales of the company 's two pharmaceutical products , renacidin and clorpactin , decreased by $ 400,523 ( 14.8 % ) for the year ended december 31 , 2011 compared with 2010. renacidin accounted for approximately 13 % of the company 's sales in 2011 compared with 17 % in 2010. the decrease in sales of the company 's pharmaceutical products in 2011 was due to a decrease in sales of renacidin . this product has been manufactured for the company under a long-term contract with a major u.s. drug company that experienced regulatory problems in 2010 at its facility that manufactures renacidin , which were unrelated to the production of renacidin . the supplier 's problems resulted in a temporary suspension of renacidin production in august 2010. as a result , the company 's inventory of this product was significantly reduced , forcing the company to allocate its supply by reducing sales to the company 's customers from november 2010 until may 2011. this resulted in approximately a 60 % reduction in renacidin sales each month beginning in november 2010 until the company ran out of product completely in the beginning of february 2011. the company 's supplier resumed production of renacidin in the first quarter of 2011 , and sales of the product by the company resumed in may 2011. the reduction in sales of the company 's pharmaceutical products was partially offset by a price increase that went into effect in june 2011 . 16 ( c ) medical ( non-pharmaceutical ) products : sales of the company 's non-pharmaceutical medical products increased $ 285,610 ( 10.9 % ) when compared with 2010. the company believes that the increase was partially due to customer buying patterns , but was also attributable to new customers and an increase in volume to existing customers . ( d ) industrial and other products : sales of the company 's industrial products , as well as other miscellaneous products , decreased by $ 35,383 ( 20.9 % ) when compared with 2010. sales were negatively impacted by an increase of $ 95,964 ( 64.5 % ) in sales discounts and allowance reserves . the increase in sales discounts and allowances was mainly due to increases in the allowance for distribution fees . cost of sales cost of sales as a percentage of net sales in 2011 increased to 39.4 % from 38.3 % in the prior year . the increase was primarily the result of increases in raw material costs , particularly the company 's primary raw material , as well as an increase in direct labor costs . operating expenses operating expenses decreased by $ 14,605 ( 0.6 % ) in 2011 compared with the prior year . this decrease was due to a reduction in legal and accounting fees . portions of the company 's operating expenses are directly attributable to the research and development that the company performs . in 2011 and 2010 , the company incurred approximately $ 637,000 and $ 596,000 , respectively , in research and development expenses , which are included in operating expenses . the increase in r & d costs incurred in 2011 was primarily attributable to increases in payroll costs . no portion of the research and development expenses was directly paid by the company 's customers . pension plan termination on july 13 , 2010 , the company terminated its non-contributory defined benefit pension plan ( `` db plan `` ) . the termination resulted in the company recognizing in 2010 a one-time non-cash expense of $ 518,296 , offset by a $ 179,641 tax benefit associated with recognizing unamortized actuarial losses . in addition , in 2010 the company provided for a cash contribution of $ 337,378 , offset by a $ 116,900 tax benefit , in order to fully fund the db plan . the recognition of the non-cash and cash contributions resulted in a before-tax charge of $ 847,744 , and an after-tax charge of $ 559,133 ( $ 0.12 per share ) for the year ended december 31 , 2010. since the non-cash expense had previously been provided for as a charge to other comprehensive income , the net effect of the termination on stockholders ' equity in 2010 was a decrease of $ 220,478. other income ( expense ) other income ( net ) increased $ 280,299 ( 61.5 % ) for the year ended december 31 , 2011 when compared with 2010. the increase was mainly attributable to $ 385,182 in income the company received from the settlement of a claim for damages between the company and one of its suppliers . the claim resulted from the temporary suspension of production of the company 's renacidin by its supplier at the end of 2010 due to regulatory issues at the supplier 's facility . production did not resume until may 2011. as a result , the company determined that it lost approximately $ 390,000 in gross profit that would have been generated from sales of the product if production had not been curtailed . the company and its supplier entered into a settlement agreement whereby the company would be reimbursed for these losses . the miscellaneous income of $ 385,182 represents the amount that was paid to the company by the supplier during the third quarter of 2011. the company expects to receive the remaining amount ( approximately $ 4,800 ) in the second quarter of 2012. further information on this matter can be found in footnote `` g `` and the company 's filing on form 10-k for 2010 . 17
| liquidity and capital resources working capital increased from $ 11,765,995 at december 31 , 2010 to $ 12,895,448 at december 31 , 2011 , an increase of $ 1,129,453 ( 9.6 % ) . the current ratio increased to 13.0 to 1 at december 31 , 2011 from 12.5 to 1 at december 31 , 2010. the increases in working capital and the current ratio were primarily the result of increases in marketable securities , accounts receivable , and inventory . accounts receivable as of december 31 , 2011 increased by $ 562,729 ( net of allowance for doubtful accounts ) as compared with 2010. the average period of time that an account receivable was outstanding was approximately 35 days in 2011 and 33 days in 2010. the company has a bad debt reserve of $ 18,000 , and believes that the balance of its accounts receivable is fully collectable . the company does not maintain a line of credit with a financial institution because the company has no foreseeable need for a line of credit , and therefore management believes that the cost of maintaining a line of credit can not be justified , especially considering the strong financial condition of the company . the company generated cash from operations of $ 4,437,129 in 2011 compared with $ 4,093,318 in 2010. the increase in 2011 was primarily due to a $ 916,838 increase in net income , a $ 557,636 increase in accounts receivable , a $ 146,046 increase in inventory , and a $ 192,146 increase in accounts payable .
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we believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace , our presence in the communities we serve and our long-standing history of providing superior , relationship-based customer service . our core business strategies are discussed below . continue to originate and sell certain residential real estate loans . residential mortgage lending has historically been a significant part of our business , and we recognize that originating one- to four-family residential real estate loans is essential to our status as a community-oriented bank . during the year ended december 31 , 2018 , we originated $ 18.0 million in one- to four-family residential real estate loans , selling $ 8.3 million in one- to four-family residential real estate loans and recording gains of $ 187,000 on the sale of those loans . similarly , during the year ended december 31 , 2017 , we originated $ 21.7 million in one- to four-family residential real estate loans , selling $ 7.4 million in one- to four-family residential real estate loans and recording gains of $ 187,000 on the sale of those loans . we intend to continue to sell in the secondary market a portion of the long-term conforming fixed-rate one- to four-family residential real estate loans that we originate to increase non-interest income and manage the interest rate risk of our loan portfolio . increase nonresidential real estate lending . in order to increase the yield on our loan portfolio and reduce the term to repricing , we plan to increase our nonresidential real estate lending while maintaining what we believe are conservative underwriting standards . we will focus our nonresidential real estate lending on small businesses located in our market area , targeting owner-occupied businesses . maintain high asset quality . strong asset quality is critical to the long-term financial success of a community bank . we attribute our high asset quality to maintaining conservative underwriting standards , the diligence of our loan collection personnel and the stability of the local economy . we hired a chief credit officer , with significant experience , who is critical in our goal to maintain high asset quality . at december 31 , 2018 , our non-performing assets to total assets ratio was 0.98 % . because substantially all of our loans are secured by real estate , and the level of our non-performing loans has been low in recent years , we believe that our allowance for loan losses is adequate to absorb the probable losses inherent in our loan portfolio . increase core deposits , with an emphasis on low-cost commercial demand deposits . deposits are the major source of balance sheet funding for lending and other investments . we have made investments in new products and services , as well as enhancing our electronic delivery solutions including business bill-pay in an effort to become more competitive in the financial services marketplace and attract more core deposits , our least costly source of funds . our ratio of core ( non-time ) deposits to total deposits was 50.81 % at december 31 , 2018. we plan to continue to aggressively market our core deposit accounts , emphasizing our high-quality service and competitive pricing of these products . expand our banking franchise as opportunities arise through organic growth , branch acquisitions and or acquisitions of other financial institutions . we currently operate from four full-service banking offices . in order to grow our assets to mitigate the increasing costs of regulatory compliance , we intend to evaluate expansion opportunities . we will consider expanding our branch network through the opening of additional branches or the acquisition of branches . we must also consider potential acquisitions of branches or local financial institutions . we currently have no understandings or agreements with respect to acquiring any financial institution . 31 critical accounting policies the discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements , which are prepared in conformity with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities , and the reported amounts of income and expenses . we consider the accounting policies discussed below to be critical accounting policies . the estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions , resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations . on april 5 , 2012 , the jobs act was signed into law . the jobs act contains provisions that , among other things , reduce certain reporting requirements for qualifying public companies . as an emerging growth company we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies . we intend to take advantage of the benefits of this extended transition period . accordingly , our financial statements may not be comparable to companies that comply with such new or revised accounting standards . the following represents our critical accounting policies : allowance for loan losses . the allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date . the allowance is established through the provision for loan losses , which is charged to income . determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . story_separator_special_tag this loan relationship was written down to its current fair value 37 and the property securing the loan is in the process of foreclosure . the company reported a higher provision during the year ended december 31 , 2017 due to a $ 657,000 charge-off taken relating to one construction and land development loan relationship for which we have no additional exposure . the increase in the provision was also necessary due to increases in non-performing and impaired loans during the year ended december 31 , 2017. the remaining provisions for loan losses for the years ended december 31 , 2018 and 2017 was related to organic loan growth . non-interest income . non-interest income decreased by $ 245,000 , or 29.66 % , to $ 581,000 for the year ended december 31 , 2018 from $ 826,000 for the year ended december 31 , 2017. the decrease was primarily due to a decrease in income from bank-owned life insurance benefits of $ 205,000 received upon the death of a retired director insured with boli and a decrease of $ 23,000 on the gain on sale of foreclosed real estate . non-interest expense . non-interest expense increased by $ 423,000 , or 7.83 % , to $ 5.8 million for the year ended december 31 , 2018 from $ 5.4 million for the year ended december 31 , 2017. salaries , director fees and employee benefits increased $ 620,000 , or 20.00 % , to $ 3.7 million for the year ended december 31 , 2018 from $ 3.1 million for the year ended december 31 , 2017 due to our expansion of our employee base , including the senior management team and our sales and relationship management personnel , to help support our continued growth strategy as well as the recording of $ 428,000 of stock-based compensation expense relating to the esop . data processing expenses increased $ 26,000 , or 5.08 % , to $ 538,000 for the year ended december 31 , 2018 from $ 512,000 for the year ended december 31 , 2017 which was due to additional services added in order to enhance depositor product offerings . professional fees increased $ 30,000 , or 11.07 % , to $ 301,000 for the year ended december 31 , 2018 from $ 271,000 for the year ended december 31 , 2017 primarily due to increased consulting fees relating to information technology system enhancements and the increased expenses relating to reporting requirements associated with the company 's public company status . fdic premiums and regulatory expenses decreased $ 29,000 , or 20.14 % , to $ 115,000 for the year ended december 31 , 2018 from $ 144,000 for the year ended december 31 , 2017 due to a decrease in the quarterly assessment rate . the provision for losses and costs on foreclosed real estate decreased $ 223,000 to $ 15,000 for the year ended december 31 , 2018 from $ 238,000 for the year ended december 31 , 2017. this decrease was due primarily to the write-down in fair value of a foreclosed real estate property in the amount of $ 215,000 for the year ended december 31 , 2017. income tax expense . income tax expense decreased by $ 284,000 , or 56.02 % , to $ 223,000 for the year ended december 31 , 2018 from $ 507,000 for the year ended december 31 , 2017. the effective tax rate was 24.89 % and 99.81 % for the years ended december 31 , 2018 and december 31 , 2017 , respectively . the decrease in tax expense was the result of an increase in our pre-tax income of $ 388,000 to $ 896,000 for the year ended december 31 , 2018 from $ 508,000 for the year ended december 31 , 2017 , offset by a decrease in the tax rate as the result of the passage of the act that was signed into law on december 22 , 2017. the act amended the internal revenue code to reduce income tax rates and modify policies , credits and deductions for individuals and businesses . for businesses , the act reduced the federal corporate tax rate from a maximum 35 % to a flat 21 % tax rate . as a result , our net deferred tax assets , which were based on a 34 % corporate tax rate , had to be re-valued for the year ended december 31 , 2017 to reflect the new tax rate of 21 % . this non-cash unfavorable adjustment was estimated to be approximately $ 483,000 and was recorded through income tax expense for the year ended december 31 , 2017. management of market risk our most significant form of market risk is interest rate risk because , as a financial institution , the majority of our assets and liabilities are sensitive to changes in interest rates . therefore , a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates . our asset liability committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities , for determining the level of risk that is appropriate , given our business strategy , operating environment , capital , liquidity and performance objectives , and for managing this risk consistent with the policy and guidelines approved by our board of directors . we currently utilize a third-party modeling solution that is prepared on a quarterly basis , to evaluate our sensitivity to changing interest rates , given our business strategy , operating environment , capital , liquidity and performance objectives , and for managing this risk consistent with the guidelines approved by the board of directors . we manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates . we have implemented the following strategies to
| liquidity and capital resources working capital increased from $ 11,765,995 at december 31 , 2010 to $ 12,895,448 at december 31 , 2011 , an increase of $ 1,129,453 ( 9.6 % ) . the current ratio increased to 13.0 to 1 at december 31 , 2011 from 12.5 to 1 at december 31 , 2010. the increases in working capital and the current ratio were primarily the result of increases in marketable securities , accounts receivable , and inventory . accounts receivable as of december 31 , 2011 increased by $ 562,729 ( net of allowance for doubtful accounts ) as compared with 2010. the average period of time that an account receivable was outstanding was approximately 35 days in 2011 and 33 days in 2010. the company has a bad debt reserve of $ 18,000 , and believes that the balance of its accounts receivable is fully collectable . the company does not maintain a line of credit with a financial institution because the company has no foreseeable need for a line of credit , and therefore management believes that the cost of maintaining a line of credit can not be justified , especially considering the strong financial condition of the company . the company generated cash from operations of $ 4,437,129 in 2011 compared with $ 4,093,318 in 2010. the increase in 2011 was primarily due to a $ 916,838 increase in net income , a $ 557,636 increase in accounts receivable , a $ 146,046 increase in inventory , and a $ 192,146 increase in accounts payable .
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we believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace , our presence in the communities we serve and our long-standing history of providing superior , relationship-based customer service . our core business strategies are discussed below . continue to originate and sell certain residential real estate loans . residential mortgage lending has historically been a significant part of our business , and we recognize that originating one- to four-family residential real estate loans is essential to our status as a community-oriented bank . during the year ended december 31 , 2018 , we originated $ 18.0 million in one- to four-family residential real estate loans , selling $ 8.3 million in one- to four-family residential real estate loans and recording gains of $ 187,000 on the sale of those loans . similarly , during the year ended december 31 , 2017 , we originated $ 21.7 million in one- to four-family residential real estate loans , selling $ 7.4 million in one- to four-family residential real estate loans and recording gains of $ 187,000 on the sale of those loans . we intend to continue to sell in the secondary market a portion of the long-term conforming fixed-rate one- to four-family residential real estate loans that we originate to increase non-interest income and manage the interest rate risk of our loan portfolio . increase nonresidential real estate lending . in order to increase the yield on our loan portfolio and reduce the term to repricing , we plan to increase our nonresidential real estate lending while maintaining what we believe are conservative underwriting standards . we will focus our nonresidential real estate lending on small businesses located in our market area , targeting owner-occupied businesses . maintain high asset quality . strong asset quality is critical to the long-term financial success of a community bank . we attribute our high asset quality to maintaining conservative underwriting standards , the diligence of our loan collection personnel and the stability of the local economy . we hired a chief credit officer , with significant experience , who is critical in our goal to maintain high asset quality . at december 31 , 2018 , our non-performing assets to total assets ratio was 0.98 % . because substantially all of our loans are secured by real estate , and the level of our non-performing loans has been low in recent years , we believe that our allowance for loan losses is adequate to absorb the probable losses inherent in our loan portfolio . increase core deposits , with an emphasis on low-cost commercial demand deposits . deposits are the major source of balance sheet funding for lending and other investments . we have made investments in new products and services , as well as enhancing our electronic delivery solutions including business bill-pay in an effort to become more competitive in the financial services marketplace and attract more core deposits , our least costly source of funds . our ratio of core ( non-time ) deposits to total deposits was 50.81 % at december 31 , 2018. we plan to continue to aggressively market our core deposit accounts , emphasizing our high-quality service and competitive pricing of these products . expand our banking franchise as opportunities arise through organic growth , branch acquisitions and or acquisitions of other financial institutions . we currently operate from four full-service banking offices . in order to grow our assets to mitigate the increasing costs of regulatory compliance , we intend to evaluate expansion opportunities . we will consider expanding our branch network through the opening of additional branches or the acquisition of branches . we must also consider potential acquisitions of branches or local financial institutions . we currently have no understandings or agreements with respect to acquiring any financial institution . 31 critical accounting policies the discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements , which are prepared in conformity with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities , and the reported amounts of income and expenses . we consider the accounting policies discussed below to be critical accounting policies . the estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions or conditions , resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations . on april 5 , 2012 , the jobs act was signed into law . the jobs act contains provisions that , among other things , reduce certain reporting requirements for qualifying public companies . as an emerging growth company we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies . we intend to take advantage of the benefits of this extended transition period . accordingly , our financial statements may not be comparable to companies that comply with such new or revised accounting standards . the following represents our critical accounting policies : allowance for loan losses . the allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date . the allowance is established through the provision for loan losses , which is charged to income . determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . story_separator_special_tag this loan relationship was written down to its current fair value 37 and the property securing the loan is in the process of foreclosure . the company reported a higher provision during the year ended december 31 , 2017 due to a $ 657,000 charge-off taken relating to one construction and land development loan relationship for which we have no additional exposure . the increase in the provision was also necessary due to increases in non-performing and impaired loans during the year ended december 31 , 2017. the remaining provisions for loan losses for the years ended december 31 , 2018 and 2017 was related to organic loan growth . non-interest income . non-interest income decreased by $ 245,000 , or 29.66 % , to $ 581,000 for the year ended december 31 , 2018 from $ 826,000 for the year ended december 31 , 2017. the decrease was primarily due to a decrease in income from bank-owned life insurance benefits of $ 205,000 received upon the death of a retired director insured with boli and a decrease of $ 23,000 on the gain on sale of foreclosed real estate . non-interest expense . non-interest expense increased by $ 423,000 , or 7.83 % , to $ 5.8 million for the year ended december 31 , 2018 from $ 5.4 million for the year ended december 31 , 2017. salaries , director fees and employee benefits increased $ 620,000 , or 20.00 % , to $ 3.7 million for the year ended december 31 , 2018 from $ 3.1 million for the year ended december 31 , 2017 due to our expansion of our employee base , including the senior management team and our sales and relationship management personnel , to help support our continued growth strategy as well as the recording of $ 428,000 of stock-based compensation expense relating to the esop . data processing expenses increased $ 26,000 , or 5.08 % , to $ 538,000 for the year ended december 31 , 2018 from $ 512,000 for the year ended december 31 , 2017 which was due to additional services added in order to enhance depositor product offerings . professional fees increased $ 30,000 , or 11.07 % , to $ 301,000 for the year ended december 31 , 2018 from $ 271,000 for the year ended december 31 , 2017 primarily due to increased consulting fees relating to information technology system enhancements and the increased expenses relating to reporting requirements associated with the company 's public company status . fdic premiums and regulatory expenses decreased $ 29,000 , or 20.14 % , to $ 115,000 for the year ended december 31 , 2018 from $ 144,000 for the year ended december 31 , 2017 due to a decrease in the quarterly assessment rate . the provision for losses and costs on foreclosed real estate decreased $ 223,000 to $ 15,000 for the year ended december 31 , 2018 from $ 238,000 for the year ended december 31 , 2017. this decrease was due primarily to the write-down in fair value of a foreclosed real estate property in the amount of $ 215,000 for the year ended december 31 , 2017. income tax expense . income tax expense decreased by $ 284,000 , or 56.02 % , to $ 223,000 for the year ended december 31 , 2018 from $ 507,000 for the year ended december 31 , 2017. the effective tax rate was 24.89 % and 99.81 % for the years ended december 31 , 2018 and december 31 , 2017 , respectively . the decrease in tax expense was the result of an increase in our pre-tax income of $ 388,000 to $ 896,000 for the year ended december 31 , 2018 from $ 508,000 for the year ended december 31 , 2017 , offset by a decrease in the tax rate as the result of the passage of the act that was signed into law on december 22 , 2017. the act amended the internal revenue code to reduce income tax rates and modify policies , credits and deductions for individuals and businesses . for businesses , the act reduced the federal corporate tax rate from a maximum 35 % to a flat 21 % tax rate . as a result , our net deferred tax assets , which were based on a 34 % corporate tax rate , had to be re-valued for the year ended december 31 , 2017 to reflect the new tax rate of 21 % . this non-cash unfavorable adjustment was estimated to be approximately $ 483,000 and was recorded through income tax expense for the year ended december 31 , 2017. management of market risk our most significant form of market risk is interest rate risk because , as a financial institution , the majority of our assets and liabilities are sensitive to changes in interest rates . therefore , a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates . our asset liability committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities , for determining the level of risk that is appropriate , given our business strategy , operating environment , capital , liquidity and performance objectives , and for managing this risk consistent with the policy and guidelines approved by our board of directors . we currently utilize a third-party modeling solution that is prepared on a quarterly basis , to evaluate our sensitivity to changing interest rates , given our business strategy , operating environment , capital , liquidity and performance objectives , and for managing this risk consistent with the guidelines approved by the board of directors . we manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates . we have implemented the following strategies to
| cash and cash equivalents . cash and cash equivalents increased $ 6.8 million , or 56.67 % , to $ 18.8 million at december 31 , 2018 from $ 12.0 million at december 31 , 2017. the increase in cash and cash equivalents was primarily driven by the net proceeds received from the stock offering after investing in time deposits in other banks and investment securities discussed below . time deposits in other banks . time deposits in other banks increased by $ 1.9 million , or 38.00 % , to $ 6.9 million at december 31 , 2018 from $ 5.0 million at december 31 , 2017. this increase was due to purchases of time deposits in other banks in the amount of $ 5.7 million offset by maturities of $ 3.8 million . investment securities . investment securities increased $ 27.2 million to $ 37.4 million at december 31 , 2018 from $ 10.2 million at december 31 , 2017. the increase was primarily due to the investment of a portion of the net proceeds as the result of the capital raise from our stock offering . purchases of investment securities of $ 29.0 million were offset by maturities and principal repayments of $ 1.8 million . we transferred during 2018 , at fair value , our held to maturity residential mortgage-backed investment securities in the amount of $ 2.9 million to available for sale . all of our investment securities are currently classified as available for sale . net loans .
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on february 13 , 2020 , we repaid in full our outstanding aggregate principal amount of senior secured notes ( senior notes ) pursuant to a note purchase agreement dated march 12 , 2015 ( note purchase agreement ) and all subsequent amendments to the note purchase agreement . as a result , for the year ended december 31 , 2020 , we recognized a loss on debt extinguishment of the senior notes of $ 8.2 million composed of the $ 4.9 million prepayment fee and $ 3.3 million of unamortized debt discount and debt issuance costs . on february 19 , 2020 , we entered into separate , privately negotiated agreements with a limited number of holders of the 2021 notes and 2024 notes to repurchase approximately $ 188.0 million aggregate principal amount of the outstanding 2021 notes and 2024 notes . on april 8 , 2020 , we announced the completion of its cash tender offers , initiated on march 11 , 2020 , in which we settled approximately $ 76.7 million aggregate principal amount of the remaining $ 77.0 million of combined outstanding 2021 notes and 2024 notes . as a result of both transactions , for the year ended december 31 , 2020 , we recognized a $ 47.9 million loss on debt extinguishment of the convertible notes , which represented the difference between the carrying value and the fair value of the convertible notes just prior to the repurchase plus transaction costs . we also recognized reacquisition of $ 19.6 million in additional paid-in capital related to the equity component of the convertible notes based on the excess of the fair value of total considerations provided against the fair value of the convertible notes just prior to the repurchase . in may 2020 , we sold our collegium warrants investment for an aggregate purchase price of $ 6.0 million to armistice capital mater fund , ltd. as a result , we derecognized the remaining carrying value of $ 6.5 million of the financial asset and recognized a net loss of approximately $ 0.5 million , recorded within other gain ( loss ) on the condensed consolidated statement of comprehensive income , for the year ended december 31 , 2020. on may 20 , 2020 , we completed a merger ( the zyla merger ) with zyla life sciences ( zyla ) pursuant to an agreement and plan of merger ( merger agreement ) , dated as of march 16 , 2020. upon consummation of the zyla merger , each issued and outstanding share of zyla common stock converted into 2.5 shares of assertio holding 's common stock ( the exchange ratio ) , and each outstanding option or warrant to purchase zyla common stock converted into the right to purchase shares of assertio 's common stock . pursuant to the zyla merger , we acquired indocin products , sprix , and oxaydo , as well as zorvolex® and vivlodex® ( which are collectively known as the solumatrix products ) . subsequent to the zyla merger in may 2020 , we began implementing reorganization plans of our workforce and other restructuring activities to realize the synergies of the zyla merger and to re-align resources to strategic areas and drive growth . the reorganization plan primarily focused on reduction of staff at our headquarters offices ( zyla merger reorganization ) . as a result , $ 5.6 million of severance and benefits costs , which included $ 1.0 million of stock-based compensation expense associated with equity modifications for certain executives , and $ 0.2 million of other exit costs were recognized as restructuring charges , related to the zyla merger , during the year ended december 31 , 2020. we do not expect to incur significant costs related to the zyla merger reorganization beyond 2020. in september 2020 , we terminated our second amended and restated nano-reformulated compound license agreement ( the “ iceutica license ” ) , with iceutica inc. and iceutica pty ltd. ( collectively , “ iceutica ” ) . the iceutica license allowed us to utilize certain technology and intellectual property related to iceutica 's solumatrix technology and certain other rights of iceutica . the intellectual property related to solumatrix technology will no longer be used by us and we will no longer manufacture products using solumatrix technology . on december 15 , 2020 , we announced a restructuring plan designed to substantially reduce our operating footprint through the reduction of our workforce ( the december 2020 plan ) . we believe the december 2020 plan will allow us to adapt to the current market environment by reducing costs and better positioning us to continue to provide our differentiated products to patients and maximize shareholder value . the reorganization plan included a reduction of staff at our headquarters office and remote sales force . as a result , $ 9.6 million of severance and benefits costs and $ 1.6 million of other exit costs for the write off of fixed assets no longer in use and the early termination of fleet leases , were recognized as restructuring charges , related to the december 2020 plan , during the year ended december 31 , 2020. we expect to substantially complete the workforce reduction by the end of the first quarter of 2021. on february 9 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 22,600,000 shares of our common stock at a purchase price of $ 0.62 per share . the gross proceeds from the 43 offering were approximately $ 14.0 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 13.1 million . on february 12 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,000 shares of our common stock at a purchase price of $ 0.98 per share . story_separator_special_tag goodwill under the purchase method of accounting pursuant to asc 805 , goodwill is calculated as the excess of the purchase price over the fair value of the assets acquired and liabilities assumed . goodwill is recognized within other long-term assets , and is not amortized but subject to an annual review for impairment . goodwill is tested for impairment at the reporting unit level at least annually or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts . a reporting unit is the same as , or one level below , an operating segment . our operations are currently comprised of a single reporting unit . as of december 31 , 2020 , we determined , due to declining revenues and a decrease in our market capitalization , that it is more likely than not that the fair value of net assets are below their carrying amounts and , therefore , we performed the required goodwill impairment test under asc 350 , intangibles - goodwill and other . first , we estimated the fair value of the reporting unit to which goodwill is assigned using a combination of the income and market approach . we then compared the carrying amount of the reporting unit , including goodwill , to its fair value . since the fair value was less than the reporting unit 's carrying amount , we calculated the goodwill impairment as the difference between the reporting unit 's fair value and the carrying amount , not to exceed the carrying amount of goodwill . accordingly , we recorded an impairment charge of $ 17.4 million , recognized within total costs and expenses in the consolidated statement of comprehensive income , to impair the carrying amount of goodwill as of december 31 , 2020. income taxes we record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in our accompanying consolidated balance sheets , as well as operating loss and tax credit carryforwards . we follow the guidelines set forth in the applicable accounting guidance regarding the recoverability of any tax assets recorded on the consolidated balance sheet and provide any necessary allowances as required . determining necessary allowances requires us to make assessments about the timing of future events , including the probability of expected future taxable income and available tax planning opportunities . when we determine that it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future , the deferred tax assets are reduced by a valuation allowance . the valuation allowance is sufficient to reduce the deferred tax assets to the amount that we determine is more likely than not to be realized . at this time , we have recorded a full valuation allowance against the net deferred tax assets . we are subject to examination of our income tax returns by various tax authorities on a periodic basis . we regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes . we have applied the provisions of the applicable accounting guidance on accounting for uncertainty in income taxes , which requires application of a more‑likely‑than‑not threshold to the recognition and de‑recognition of uncertain tax positions . if the recognition threshold is met , the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that , in our judgment , is more than 50 percent likely to be realized upon settlement . it further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change . we recognize tax liabilities in accordance with asc topic 740 , tax provisions and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available . due to the complexity of some of these uncertainties , the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities . these differences will be reflected as increases or decreases to income tax expense in the period in which they are determined . 47 results of operations the following table reflects our results of operations for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_2_th 48 revenues the following table reflects total revenues for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_3_th ( 1 ) products acquired in connection with zyla merger represent product sales , net for the period may 20 , 2020 through december 31 , 2020 . ( 2 ) includes product sales for gralise , which was divested in january 2020 ; product sales adjustments for previously divested products nucynta and lazanda ; and , product sales for non-promoted products oxaydo and solumatrix , which were acquired from zyla in may 2020. product sales , net for the year ended december 31 , 2020 , product sales primarily consisted of sales from indocin products , cambia , zipsor and sprix . we began shipping and recognizing product sales for indocin products , sprix , and non-promoted products , oxaydo and solumatrix , upon the zyla merger on may 20 , 2020. cambia net product sales for the year ended december 31 , 2020 decreased $ 4.1 million as compared to the same period in 2019 primarily due to lower volume and unfavorable payor mix . zipsor net product sales for the year ended december 31 , 2020 increased $ 0.8 million as compared to the same period in 2019 primarily due to the effect of prior
| cash and cash equivalents . cash and cash equivalents increased $ 6.8 million , or 56.67 % , to $ 18.8 million at december 31 , 2018 from $ 12.0 million at december 31 , 2017. the increase in cash and cash equivalents was primarily driven by the net proceeds received from the stock offering after investing in time deposits in other banks and investment securities discussed below . time deposits in other banks . time deposits in other banks increased by $ 1.9 million , or 38.00 % , to $ 6.9 million at december 31 , 2018 from $ 5.0 million at december 31 , 2017. this increase was due to purchases of time deposits in other banks in the amount of $ 5.7 million offset by maturities of $ 3.8 million . investment securities . investment securities increased $ 27.2 million to $ 37.4 million at december 31 , 2018 from $ 10.2 million at december 31 , 2017. the increase was primarily due to the investment of a portion of the net proceeds as the result of the capital raise from our stock offering . purchases of investment securities of $ 29.0 million were offset by maturities and principal repayments of $ 1.8 million . we transferred during 2018 , at fair value , our held to maturity residential mortgage-backed investment securities in the amount of $ 2.9 million to available for sale . all of our investment securities are currently classified as available for sale . net loans .
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on february 13 , 2020 , we repaid in full our outstanding aggregate principal amount of senior secured notes ( senior notes ) pursuant to a note purchase agreement dated march 12 , 2015 ( note purchase agreement ) and all subsequent amendments to the note purchase agreement . as a result , for the year ended december 31 , 2020 , we recognized a loss on debt extinguishment of the senior notes of $ 8.2 million composed of the $ 4.9 million prepayment fee and $ 3.3 million of unamortized debt discount and debt issuance costs . on february 19 , 2020 , we entered into separate , privately negotiated agreements with a limited number of holders of the 2021 notes and 2024 notes to repurchase approximately $ 188.0 million aggregate principal amount of the outstanding 2021 notes and 2024 notes . on april 8 , 2020 , we announced the completion of its cash tender offers , initiated on march 11 , 2020 , in which we settled approximately $ 76.7 million aggregate principal amount of the remaining $ 77.0 million of combined outstanding 2021 notes and 2024 notes . as a result of both transactions , for the year ended december 31 , 2020 , we recognized a $ 47.9 million loss on debt extinguishment of the convertible notes , which represented the difference between the carrying value and the fair value of the convertible notes just prior to the repurchase plus transaction costs . we also recognized reacquisition of $ 19.6 million in additional paid-in capital related to the equity component of the convertible notes based on the excess of the fair value of total considerations provided against the fair value of the convertible notes just prior to the repurchase . in may 2020 , we sold our collegium warrants investment for an aggregate purchase price of $ 6.0 million to armistice capital mater fund , ltd. as a result , we derecognized the remaining carrying value of $ 6.5 million of the financial asset and recognized a net loss of approximately $ 0.5 million , recorded within other gain ( loss ) on the condensed consolidated statement of comprehensive income , for the year ended december 31 , 2020. on may 20 , 2020 , we completed a merger ( the zyla merger ) with zyla life sciences ( zyla ) pursuant to an agreement and plan of merger ( merger agreement ) , dated as of march 16 , 2020. upon consummation of the zyla merger , each issued and outstanding share of zyla common stock converted into 2.5 shares of assertio holding 's common stock ( the exchange ratio ) , and each outstanding option or warrant to purchase zyla common stock converted into the right to purchase shares of assertio 's common stock . pursuant to the zyla merger , we acquired indocin products , sprix , and oxaydo , as well as zorvolex® and vivlodex® ( which are collectively known as the solumatrix products ) . subsequent to the zyla merger in may 2020 , we began implementing reorganization plans of our workforce and other restructuring activities to realize the synergies of the zyla merger and to re-align resources to strategic areas and drive growth . the reorganization plan primarily focused on reduction of staff at our headquarters offices ( zyla merger reorganization ) . as a result , $ 5.6 million of severance and benefits costs , which included $ 1.0 million of stock-based compensation expense associated with equity modifications for certain executives , and $ 0.2 million of other exit costs were recognized as restructuring charges , related to the zyla merger , during the year ended december 31 , 2020. we do not expect to incur significant costs related to the zyla merger reorganization beyond 2020. in september 2020 , we terminated our second amended and restated nano-reformulated compound license agreement ( the “ iceutica license ” ) , with iceutica inc. and iceutica pty ltd. ( collectively , “ iceutica ” ) . the iceutica license allowed us to utilize certain technology and intellectual property related to iceutica 's solumatrix technology and certain other rights of iceutica . the intellectual property related to solumatrix technology will no longer be used by us and we will no longer manufacture products using solumatrix technology . on december 15 , 2020 , we announced a restructuring plan designed to substantially reduce our operating footprint through the reduction of our workforce ( the december 2020 plan ) . we believe the december 2020 plan will allow us to adapt to the current market environment by reducing costs and better positioning us to continue to provide our differentiated products to patients and maximize shareholder value . the reorganization plan included a reduction of staff at our headquarters office and remote sales force . as a result , $ 9.6 million of severance and benefits costs and $ 1.6 million of other exit costs for the write off of fixed assets no longer in use and the early termination of fleet leases , were recognized as restructuring charges , related to the december 2020 plan , during the year ended december 31 , 2020. we expect to substantially complete the workforce reduction by the end of the first quarter of 2021. on february 9 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 22,600,000 shares of our common stock at a purchase price of $ 0.62 per share . the gross proceeds from the 43 offering were approximately $ 14.0 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 13.1 million . on february 12 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,000 shares of our common stock at a purchase price of $ 0.98 per share . story_separator_special_tag goodwill under the purchase method of accounting pursuant to asc 805 , goodwill is calculated as the excess of the purchase price over the fair value of the assets acquired and liabilities assumed . goodwill is recognized within other long-term assets , and is not amortized but subject to an annual review for impairment . goodwill is tested for impairment at the reporting unit level at least annually or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts . a reporting unit is the same as , or one level below , an operating segment . our operations are currently comprised of a single reporting unit . as of december 31 , 2020 , we determined , due to declining revenues and a decrease in our market capitalization , that it is more likely than not that the fair value of net assets are below their carrying amounts and , therefore , we performed the required goodwill impairment test under asc 350 , intangibles - goodwill and other . first , we estimated the fair value of the reporting unit to which goodwill is assigned using a combination of the income and market approach . we then compared the carrying amount of the reporting unit , including goodwill , to its fair value . since the fair value was less than the reporting unit 's carrying amount , we calculated the goodwill impairment as the difference between the reporting unit 's fair value and the carrying amount , not to exceed the carrying amount of goodwill . accordingly , we recorded an impairment charge of $ 17.4 million , recognized within total costs and expenses in the consolidated statement of comprehensive income , to impair the carrying amount of goodwill as of december 31 , 2020. income taxes we record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in our accompanying consolidated balance sheets , as well as operating loss and tax credit carryforwards . we follow the guidelines set forth in the applicable accounting guidance regarding the recoverability of any tax assets recorded on the consolidated balance sheet and provide any necessary allowances as required . determining necessary allowances requires us to make assessments about the timing of future events , including the probability of expected future taxable income and available tax planning opportunities . when we determine that it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future , the deferred tax assets are reduced by a valuation allowance . the valuation allowance is sufficient to reduce the deferred tax assets to the amount that we determine is more likely than not to be realized . at this time , we have recorded a full valuation allowance against the net deferred tax assets . we are subject to examination of our income tax returns by various tax authorities on a periodic basis . we regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes . we have applied the provisions of the applicable accounting guidance on accounting for uncertainty in income taxes , which requires application of a more‑likely‑than‑not threshold to the recognition and de‑recognition of uncertain tax positions . if the recognition threshold is met , the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that , in our judgment , is more than 50 percent likely to be realized upon settlement . it further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change . we recognize tax liabilities in accordance with asc topic 740 , tax provisions and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available . due to the complexity of some of these uncertainties , the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities . these differences will be reflected as increases or decreases to income tax expense in the period in which they are determined . 47 results of operations the following table reflects our results of operations for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_2_th 48 revenues the following table reflects total revenues for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_3_th ( 1 ) products acquired in connection with zyla merger represent product sales , net for the period may 20 , 2020 through december 31 , 2020 . ( 2 ) includes product sales for gralise , which was divested in january 2020 ; product sales adjustments for previously divested products nucynta and lazanda ; and , product sales for non-promoted products oxaydo and solumatrix , which were acquired from zyla in may 2020. product sales , net for the year ended december 31 , 2020 , product sales primarily consisted of sales from indocin products , cambia , zipsor and sprix . we began shipping and recognizing product sales for indocin products , sprix , and non-promoted products , oxaydo and solumatrix , upon the zyla merger on may 20 , 2020. cambia net product sales for the year ended december 31 , 2020 decreased $ 4.1 million as compared to the same period in 2019 primarily due to lower volume and unfavorable payor mix . zipsor net product sales for the year ended december 31 , 2020 increased $ 0.8 million as compared to the same period in 2019 primarily due to the effect of prior
| liquidity and capital resources historically and through december 31 , 2020 , we have financed our operations and business development efforts primarily from product sales , private and public sales of equity securities , including convertible debt securities , the proceeds of secured borrowings , the sale of rights to future royalties and milestones , upfront license , milestone and fees from collaborative and license partners . on february 9 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 22,600,000 shares of our common stock at a purchase price of $ 0.62 per share . the gross proceeds from the offering were approximately $ 14.0 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 13.1 million . on february 12 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,000 shares of our common stock at a purchase price of $ 0.98 per share . the gross proceeds from the offering were approximately $ 34.3 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 32.2 million . we intend to use proceeds from both offerings for general corporate purposes , including general working capital . 53 on july 31 , 2020 , we voluntarily redeemed $ 10.0 million of aggregate principal plus accrued interest on our secured notes due 2024 , which was assumed as part of the zyla merger . additionally upon the close of the zyla merger , we assumed and immediately paid off a $ 3.0 million promissory note and a $ 10.0 million credit agreement .
| 1 |
cost of goods sold replace_table_token_3_th * not meaningful cost of goods sold includes direct costs related to the sale of vi 2 olet , our iodine dietary supplement , which began in january 2015 , write-downs of excess and obsolete inventories and amortization of our intangible assets . the increase in cost of goods sold of $ 237,000 for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 is primarily related to the increase in recognized revenue related to our product , inventory reserves and other manufacturing costs . research and development expenses replace_table_token_4_th research and development expenses primarily include headcount-related costs , stock-based compensation and both internal and external research and development expenses . research and development expenses are expensed as incurred . research and development expenses increased $ 3.2 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to increased headcount , consulting , preclinical and clinical studies , and regulatory expenses . we increased staffing to help with the logistics , final testing and meeting regulatory standards related to vi 2 olet , as well as for progressing our bpx01 candidate from preclinical formulation to pilot production in preparation for phase 2a trials . research and development expenses associated with our molecular iodine project for the years ended january 31 , 2016 and december 31 , 2014 were $ 1.3 million and $ 0.9 million , respectively . the 69 increase was primarily due to increased consulting and regulatory expenses . we have commenced an irb study for our molecular iodine project in preparation for phase 3 trials . research and development expenses for our bpx01 product candidate for the years ended january 31 , 2016 and december 31 , 2014 were $ 4.1 million and $ 1.7 million , respectively . the increase was primarily due to increased consulting and clinical trial costs . we initiated our first phase 2a clinical trial under an ind application with the fda in the first quarter of 2017. we expect research and development expenses related to bpx01 to continue to increase period over period , primarily due to the ramping of clinical trial costs . research and development expenses increased $ 262,000 for the one month ended january 31 , 2015 compared to 2014. this increase was primarily due to an increase in headcount-related and consulting costs . sales and marketing expenses replace_table_token_5_th sales and marketing expenses primarily include headcount-related costs , stock-based compensation , costs related to establishing our corporate brand and efforts related to promoting vi 2 olet . sales and marketing expenses are expensed as incurred . sales and marketing expenses increased $ 2.8 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to higher headcount , market research , advertising and stock-based compensation expenses , partially offset by lower consulting expenses . following the launch of vi 2 olet , we have been focusing on increasing customer awareness of the product through multi-media advertising campaigns and participation in tradeshows , as well as increasing awareness among medical professionals through a national physician sampling and trial progam . sales and marketing expenses increased $ 305,000 for the month ended january 31 , 2015 compared to 2014. this increase was primarily due to the ramp up in marketing and sales efforts to launch vi 2 olet , including the hiring of employees and use of outside agencies . general and administrative expenses replace_table_token_6_th general and administrative expenses primarily include headcount-related costs , stock-based compensation and costs of our executive , finance and other administrative functions . general and administrative expenses increased $ 1.2 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to higher headcount , compliance costs of being a new publicly-traded company , and legal and insurance expenses , and was partially offset by lower consulting expenses . general and administrative expenses increased $ 236,000 for the month ended january 31 , 2015 compared to 2014. this increase was primarily due to the cost of the share exchange and overhead related to being a publicly-traded company . 70 other income ( expense ) , net replace_table_token_7_th * not meaningful for the year ended january 31 , 2016 , other income and expenses primarily included an expense related to the modification of warrants and other miscellaneous items . there were no other income and expenses recorded for the months ended january 31 , 2015 and 2014. story_separator_special_tag result from the resolution of any of the above uncertainties . as shown in the accompanying consolidated financial statements , we have incurred a net loss available to common stockholders of $ 16.0 million during the year ended january 31 , 2016 , and had an accumulated deficit of $ 26.2 million as of january 31 , 2016. as of january 31 , 2016 , we had working capital of approximately $ 1.6 million . while we believe we have a plan to fund ongoing operations , there is no assurance that our plan will be successfully implemented . recent accounting pronouncements in july 2015 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) no . 2015-11 , inventory ( topic 330 ) , simplifying the measurement of inventory , which applies to all inventory except that which is measured using last-in , first-out ( lifo ) or the retail inventory method . inventory measured using first-in , first-out ( fifo ) or average cost is included in the new amendment . the amendment will take effect for public business entities for fiscal years beginning after december 15 , 2016 , including interim periods within those fiscal years . we are in process of evaluating the impact of adoption on our consolidated financial statements . story_separator_special_tag in august 2015 , fasb issued accounting standards update no . 2015-14 , revenue from contracts with customers ( asu no . 2014-09 ) . this update defers the effective dates of asu no . 2014-09 ( originally issued in june 2014 ) for public business entities by one year , or until annual reporting periods beginning after december 15 , 2017 , including interim reporting periods within the reporting period . asu no . 2014-09 gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers . the proposed asu , which would apply to any entity that enters into contracts to provide goods or services , would supersede the revenue recognition requirements in topic 605 , revenue recognition , and most industry-specific guidance throughout the industry topics of the codification . additionally , the update would supersede some cost guidance included in subtopic 605-35 , revenue recognitionconstruction-type and production-type contracts . the update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure 73 requirements . in addition , the update improves comparability of revenue recognition practices across entities , industries , jurisdictions , and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer . we are continuing to review the provisions of this asu to determine if there will be any impact on our results of operations , cash flows or financial condition . in february 2016 , fasb issued asu no . 2016-02 , leases , which requires entities to recognize assets and liabilities for leases with lease terms greater than twelve months . the new guidance also requires quantitative and qualitative disclosures regarding the amount , timing and uncertainty of cash flows arising from leases . the standard is effective for annual and interim periods beginning after december 15 , 2018 , with early adoption permitted upon issuance . we are in process of evaluating the impact of adoption on our consolidated financial statements . in august 2014 , fasb issued asu no . 2014-15 , presentation of financial statements-going concern ( subtopic 205-40 ) . this asu provides guidance to determine when and how to disclose going-concern uncertainties in the financial statements . the new standard requires management to perform interim and annual assessments of an entity 's ability to continue as a going concern within one year of the date that the financial statements are issued . an entity must provide certain disclosures if conditions or events raise substantial doubt about the entity 's ability to continue as a going concern . this standard is effective for annual periods ending after december 15 , 2016. we are evaluating the impact of the adoption of this asu on our consolidated financial statements . we have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business , or no material effect is expected on the consolidated financial statements as a result of future adoption . critical accounting policies our consolidated financial statements and related financial information are based on the application of accounting principles generally accepted in the united states , or gaap . gaap requires the use of estimates , assumptions , judgments and subjective interpretations of accounting principles that have an impact on the assets , liabilities , revenues and expense amounts reported . these estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies , risk and financial condition . we believe our use of estimates and underlying accounting assumptions adhere to gaap and are consistently applied . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results may differ materially from these estimates under different assumptions or conditions . we continue to monitor significant estimates made during the preparation of our financial statements . our significant accounting policies are summarized in note 1 of our audited consolidated financial statements . while all these significant accounting policies impact our financial condition and results of operations , we view certain of these policies as critical . policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates . actual results may differ from those estimates and such differences may be material to the financial statements . our management believes that given current facts and circumstances , it is unlikely that applying any other reasonable judgments or estimate methodologies would have an effect on our results of operations , financial position or liquidity for the periods presented in this report . 74 we believe the following critical accounting policies , among others , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : revenue recognition vi 2 olet is a new product in the dietary supplement field . revenue is recognized provided that persuasive evidence of a sales arrangement exists , the price is fixed or determinable , title and risk of loss has transferred , calculability of the resulting receivable is reasonably assured , there are no customer acceptance requirements and we do not have any significant post-shipment obligations . we recognize revenue on a sell-through basis for customer arrangements in which we do not have historical information to estimate product returns , pricing discounts or other concessions upon shipment . for these product shipments , we invoice the reseller , record deferred revenue at the gross invoice sales price and classify the cost basis of the product held by the wholesaler as a component of inventory . we recognize revenue when product is sold by the reseller to the end user , on a
| liquidity and capital resources historically and through december 31 , 2020 , we have financed our operations and business development efforts primarily from product sales , private and public sales of equity securities , including convertible debt securities , the proceeds of secured borrowings , the sale of rights to future royalties and milestones , upfront license , milestone and fees from collaborative and license partners . on february 9 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 22,600,000 shares of our common stock at a purchase price of $ 0.62 per share . the gross proceeds from the offering were approximately $ 14.0 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 13.1 million . on february 12 , 2021 , we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,000 shares of our common stock at a purchase price of $ 0.98 per share . the gross proceeds from the offering were approximately $ 34.3 million . after placement agent fees and other offering expenses payable by us , we received net proceeds of approximately $ 32.2 million . we intend to use proceeds from both offerings for general corporate purposes , including general working capital . 53 on july 31 , 2020 , we voluntarily redeemed $ 10.0 million of aggregate principal plus accrued interest on our secured notes due 2024 , which was assumed as part of the zyla merger . additionally upon the close of the zyla merger , we assumed and immediately paid off a $ 3.0 million promissory note and a $ 10.0 million credit agreement .
| 0 |
cost of goods sold replace_table_token_3_th * not meaningful cost of goods sold includes direct costs related to the sale of vi 2 olet , our iodine dietary supplement , which began in january 2015 , write-downs of excess and obsolete inventories and amortization of our intangible assets . the increase in cost of goods sold of $ 237,000 for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 is primarily related to the increase in recognized revenue related to our product , inventory reserves and other manufacturing costs . research and development expenses replace_table_token_4_th research and development expenses primarily include headcount-related costs , stock-based compensation and both internal and external research and development expenses . research and development expenses are expensed as incurred . research and development expenses increased $ 3.2 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to increased headcount , consulting , preclinical and clinical studies , and regulatory expenses . we increased staffing to help with the logistics , final testing and meeting regulatory standards related to vi 2 olet , as well as for progressing our bpx01 candidate from preclinical formulation to pilot production in preparation for phase 2a trials . research and development expenses associated with our molecular iodine project for the years ended january 31 , 2016 and december 31 , 2014 were $ 1.3 million and $ 0.9 million , respectively . the 69 increase was primarily due to increased consulting and regulatory expenses . we have commenced an irb study for our molecular iodine project in preparation for phase 3 trials . research and development expenses for our bpx01 product candidate for the years ended january 31 , 2016 and december 31 , 2014 were $ 4.1 million and $ 1.7 million , respectively . the increase was primarily due to increased consulting and clinical trial costs . we initiated our first phase 2a clinical trial under an ind application with the fda in the first quarter of 2017. we expect research and development expenses related to bpx01 to continue to increase period over period , primarily due to the ramping of clinical trial costs . research and development expenses increased $ 262,000 for the one month ended january 31 , 2015 compared to 2014. this increase was primarily due to an increase in headcount-related and consulting costs . sales and marketing expenses replace_table_token_5_th sales and marketing expenses primarily include headcount-related costs , stock-based compensation , costs related to establishing our corporate brand and efforts related to promoting vi 2 olet . sales and marketing expenses are expensed as incurred . sales and marketing expenses increased $ 2.8 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to higher headcount , market research , advertising and stock-based compensation expenses , partially offset by lower consulting expenses . following the launch of vi 2 olet , we have been focusing on increasing customer awareness of the product through multi-media advertising campaigns and participation in tradeshows , as well as increasing awareness among medical professionals through a national physician sampling and trial progam . sales and marketing expenses increased $ 305,000 for the month ended january 31 , 2015 compared to 2014. this increase was primarily due to the ramp up in marketing and sales efforts to launch vi 2 olet , including the hiring of employees and use of outside agencies . general and administrative expenses replace_table_token_6_th general and administrative expenses primarily include headcount-related costs , stock-based compensation and costs of our executive , finance and other administrative functions . general and administrative expenses increased $ 1.2 million for the year ended january 31 , 2016 compared to the year ended december 31 , 2014 primarily due to higher headcount , compliance costs of being a new publicly-traded company , and legal and insurance expenses , and was partially offset by lower consulting expenses . general and administrative expenses increased $ 236,000 for the month ended january 31 , 2015 compared to 2014. this increase was primarily due to the cost of the share exchange and overhead related to being a publicly-traded company . 70 other income ( expense ) , net replace_table_token_7_th * not meaningful for the year ended january 31 , 2016 , other income and expenses primarily included an expense related to the modification of warrants and other miscellaneous items . there were no other income and expenses recorded for the months ended january 31 , 2015 and 2014. story_separator_special_tag result from the resolution of any of the above uncertainties . as shown in the accompanying consolidated financial statements , we have incurred a net loss available to common stockholders of $ 16.0 million during the year ended january 31 , 2016 , and had an accumulated deficit of $ 26.2 million as of january 31 , 2016. as of january 31 , 2016 , we had working capital of approximately $ 1.6 million . while we believe we have a plan to fund ongoing operations , there is no assurance that our plan will be successfully implemented . recent accounting pronouncements in july 2015 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) no . 2015-11 , inventory ( topic 330 ) , simplifying the measurement of inventory , which applies to all inventory except that which is measured using last-in , first-out ( lifo ) or the retail inventory method . inventory measured using first-in , first-out ( fifo ) or average cost is included in the new amendment . the amendment will take effect for public business entities for fiscal years beginning after december 15 , 2016 , including interim periods within those fiscal years . we are in process of evaluating the impact of adoption on our consolidated financial statements . story_separator_special_tag in august 2015 , fasb issued accounting standards update no . 2015-14 , revenue from contracts with customers ( asu no . 2014-09 ) . this update defers the effective dates of asu no . 2014-09 ( originally issued in june 2014 ) for public business entities by one year , or until annual reporting periods beginning after december 15 , 2017 , including interim reporting periods within the reporting period . asu no . 2014-09 gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers . the proposed asu , which would apply to any entity that enters into contracts to provide goods or services , would supersede the revenue recognition requirements in topic 605 , revenue recognition , and most industry-specific guidance throughout the industry topics of the codification . additionally , the update would supersede some cost guidance included in subtopic 605-35 , revenue recognitionconstruction-type and production-type contracts . the update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure 73 requirements . in addition , the update improves comparability of revenue recognition practices across entities , industries , jurisdictions , and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer . we are continuing to review the provisions of this asu to determine if there will be any impact on our results of operations , cash flows or financial condition . in february 2016 , fasb issued asu no . 2016-02 , leases , which requires entities to recognize assets and liabilities for leases with lease terms greater than twelve months . the new guidance also requires quantitative and qualitative disclosures regarding the amount , timing and uncertainty of cash flows arising from leases . the standard is effective for annual and interim periods beginning after december 15 , 2018 , with early adoption permitted upon issuance . we are in process of evaluating the impact of adoption on our consolidated financial statements . in august 2014 , fasb issued asu no . 2014-15 , presentation of financial statements-going concern ( subtopic 205-40 ) . this asu provides guidance to determine when and how to disclose going-concern uncertainties in the financial statements . the new standard requires management to perform interim and annual assessments of an entity 's ability to continue as a going concern within one year of the date that the financial statements are issued . an entity must provide certain disclosures if conditions or events raise substantial doubt about the entity 's ability to continue as a going concern . this standard is effective for annual periods ending after december 15 , 2016. we are evaluating the impact of the adoption of this asu on our consolidated financial statements . we have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business , or no material effect is expected on the consolidated financial statements as a result of future adoption . critical accounting policies our consolidated financial statements and related financial information are based on the application of accounting principles generally accepted in the united states , or gaap . gaap requires the use of estimates , assumptions , judgments and subjective interpretations of accounting principles that have an impact on the assets , liabilities , revenues and expense amounts reported . these estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies , risk and financial condition . we believe our use of estimates and underlying accounting assumptions adhere to gaap and are consistently applied . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results may differ materially from these estimates under different assumptions or conditions . we continue to monitor significant estimates made during the preparation of our financial statements . our significant accounting policies are summarized in note 1 of our audited consolidated financial statements . while all these significant accounting policies impact our financial condition and results of operations , we view certain of these policies as critical . policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates . actual results may differ from those estimates and such differences may be material to the financial statements . our management believes that given current facts and circumstances , it is unlikely that applying any other reasonable judgments or estimate methodologies would have an effect on our results of operations , financial position or liquidity for the periods presented in this report . 74 we believe the following critical accounting policies , among others , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements : revenue recognition vi 2 olet is a new product in the dietary supplement field . revenue is recognized provided that persuasive evidence of a sales arrangement exists , the price is fixed or determinable , title and risk of loss has transferred , calculability of the resulting receivable is reasonably assured , there are no customer acceptance requirements and we do not have any significant post-shipment obligations . we recognize revenue on a sell-through basis for customer arrangements in which we do not have historical information to estimate product returns , pricing discounts or other concessions upon shipment . for these product shipments , we invoice the reseller , record deferred revenue at the gross invoice sales price and classify the cost basis of the product held by the wholesaler as a component of inventory . we recognize revenue when product is sold by the reseller to the end user , on a
| liquidity and capital resources a summary of the sources and uses of cash and cash equivalents is as follows ( in thousands ) : replace_table_token_8_th the following table summarizes total current assets , liabilities and working capital ( in thousands ) : as of january 31 , 2016 as of january 31 , 2015 current assets $ 4,431 $ 1,705 current liabilities 2,797 1,557 working capital $ 1,634 $ 148 as of january 31 , 2016 , we had cash and cash equivalents of $ 4.0 million and working capital of $ 1.6 million . in june 2015 , we completed a public offering of common stock , which generated net proceeds of $ 7.8 million . we also issued an unsecured convertible note with a principal amount of $ 0.5 million , which was automatically converted into common stock upon our uplisting to the nyse mkt . in december 2015 we raised net proceeds of $ 5.5 million in a private offering of our common stock and , in april 2016 , we raised net proceeds of approximately $ 3.6 million from the issuance of common stock and warrants to purchase common stock in a public offering . during the year ended december 31 , 2014 , we raised net proceeds of $ 7.3 million upon the completion of the private placement of shares of series a preferred stock and warrants to purchase common stock . the private placement was consummated in a series of closings that occurred between april 2014 and november 2014. in addition , kip has previously informed the company of its intention to complete the kip private placement even if the company 's stock price was not at least $ 3.70 per share . as of may 2 , 2016 , the kip private placement has not closed , and we are unable to predict if or when the private placement will close .
| 1 |
iluvien ® for diabetic macular edema ( “ dme ” ) , our lead licensed product , is sold directly in the u.s. and several european union ( “ eu ” ) countries by alimera sciences , inc. ( “ alimera ” ) . in july 2017 , we expanded its license agreement with alimera to include the uveitis indication utilizing the durasert technology in europe , the middle east and africa ( “ emea ” ) , which received european regulatory approval in march 2019 and , subject to obtaining pricing and reimbursement in each applicable country , will be marketed as iluvien . retisert ® , one of our earlier generation products , was approved in 2005 by the fda for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye and is sold in the u.s. by bausch & lomb inc. ( “ bausch & lomb ” ) . the patent with which retisert is marked expired in march 2019. as such , bausch & lomb discontinued paying royalties after march 2019. our development programs are focused primarily on developing sustained release products that utilize its durasert and verisome technology platforms to deliver approved drugs to treat chronic diseases . our strategy includes developing products independently while continuing to leverage its technology platforms through collaborations and license agreements . eyp-1901 , 6-month bioerodible durasert ® vorolanib - tki is being advanced as a potential treatment for wet age-related macular degeneration , diabetic retinopathy and retinal vein occlusion . we have completed initial animal pk and toxicology studies and expect to initiate formal glp toxicology studies in the first quarter of 2020 to support the filing of an investigational new drug application with the fda . 67 yutiq50 is being developed as a 6-month dosing option for treatment of chronic non-infectious uveitis affecting the posterior segment of the eye . we have consulted with the fda and identified a clinical pathway for an snda filing that involves a clinical trial of approximately 60 patients , randomized 2:1. we are currently evaluating the timeline and investment requirements for the initiation of this study fiscal 2019 overview the fiscal year ended december 31 , 2019 was highlighted by the following events : we successfully launched our two fda approved products , yutiq and dexycu during the first quarter of 2019 ; we added key members of our senior management team , including our chief financial officer and head of corporate development , svp and chief commercial officer , and our svp and chief technical officer ; we refinanced our debt with crg ( from swk ) in february 2019 generating approximately $ 26m ( first and second drawdown ) and participated in an underwritten public stock offering generating approximately $ 20m of gross proceeds to help fund our commercial product launches ; recent developments recent developments and ongoing activities regarding the commercialization of yutiq include : customer demand , represented as units purchased by physicians from our distributors , was up 59 % over q3 , driven by underlying growth and the permanent and specific j-code for yutiq in effect as of october 1 , 2019. repeat customers represented 87 % of order volume , and importantly , 42 % of our target account list has ordered , including 98 % of the treating uveitis specialists , representing solid adoption with continued growth opportunity . recent developments and ongoing activities regarding the commercialization of dexycu include : customer demand , represented as units purchased by ambulatory surgical centers from our distributors , was up 111 % over q3 with repeat customers representing 98 % of q4 order volume . since launch , over 14,000 patients have been treated with dexycu . we secured multiple new agreements for expanded access of dexycu , including contracts with the vision center network of america , llc ( vcna ) and eyesouth partners which collectively perform approximately 115,000 cataract surgeries per year . we are actively negotiating agreements with additional group purchasing organizations and networks . in february 2020 , we completed an underwritten public offering of 15,000,000 shares of our common stock at a public offering price of $ 1.45 per share . the gross proceeds of the offering were $ 21,750,000 , before deducting the underwriting discounts and commissions and other transaction expenses . in addition , underwriters were granted a thirty-day option to purchase up to an additional 2,250,000 shares of common stock at the public offering price , less underwriting discounts and commissions . this offering closed on february 25 , 2020. in january 2020 , we entered into an exclusive license agreement with ocumension therapeutics for the development and commercialization in mainland china , hong kong , macau and taiwan of dexycu for the treatment of post-operative inflammation following ocular surgery . under the terms of the license agreement , we received an upfront payment of $ 2 million and will be eligible to receive up to an additional $ 12.0 million if certain future prespecified development , regulatory and commercial sales milestones are achieved by ocumension . in addition , we are entitled to receive a mid-single digit sales-based royalty . in exchange , ocumension will receive exclusive rights to develop and commercialize the product in the greater china territory , at its own cost and expense with us supplying product for clinical trials and commercial sale . in november 2019 , george o. elston was appointed chief financial officer and head of corporate development . mr. elston brings more than 25 years of diverse financial and senior leadership experience in the biopharmaceutical sector with both global publicly-traded and privately-held organizations . story_separator_special_tag we make our assessments of the services performed based on various factors , including evaluation by the third-party cros and our own internal review of the work performed during the period , measurements of progress by us or by the third-party cros , data analysis with respect to work completed and our management 's judgment . we have agreements with two cros to conduct the phase 3 clinical trial program for yutiq , which we expect to complete in the first half of 2020. as of december 31 , 2019 , there were no material obligations remaining . during fiscal 2019 , the six months ended december 31 , 2018 and for fiscal 2018 , we recognized approximately $ 1.2 million , $ 1.5 million and $ 4.6 million , respectively , of research and development expense attributable to our yutiq phase 3 clinical trial program . changes in our estimates or differences between the actual level of services performed and our estimates may result in changes to our research and development expenses in future periods . 71 results of operations years ended december 31 , 2019 and 2018 replace_table_token_5_th product sales , net product sales , net represents the gross sales of dexycu and yutiq less provisions for product sales allowances and accruals . we commenced u.s. commercial sales of yutiq in february 2019 and recorded net sales totaled $ 12.0 million for fiscal 2019. we commenced commercial sales of dexycu in march 2019 and recorded net sales totaled $ 4.8 million for fiscal 2019. we had no product revenue during the year ended december 31 , 2018. license and collaboration agreement license and collaboration agreement revenues decreased by $ 1.3 million , or 48 % to $ 1.4 million for fiscal 2019 compared to the prior year . this decrease was attributable primarily to ( i ) the $ 1.7 million payment we received from ocumension in the year ended december 31 , 2018 as initial payment for the yutiq license compared with the $ 1 million payment upon achieving their first development milestone for yutiq in china in fiscal 2019 and ( ii ) $ 540,000 in lower revenue associated with feasibility studies . royalty income royalty income increased by $ 234,000 , or 12 % , to $ 2.2 million in fiscal 2019 compared to $ 1.9 million in the prior year . the increase was attributable primarily to a combination of an increase in the net sales-based royalty rate from 2 % to 4 % ( effective december 2018 ) and higher iluvien net sales under the amended alimera agreement . this increase in iluvien royalties was offset by recognizing revenue during only the first quarter of 2019 for retisert royalty , as the licensee , bausch and lomb informed us that they consider this agreement to have ended due to the expiration of certain patents . cost of sales , excluding amortization of acquired intangible assets 72 cost of sales , excluding amortization of acquired intangible assets , of approximately $ 2.7 million for fiscal 2019 consisted of costs associated with the manufacturing of yutiq and dexycu , certain period costs and product shipping costs . we expensed manufacturing costs as research and development expenses in the periods prior to fda approval of the products . in the fourth quart er of 2018 , we began capitalizing inventory costs for yutiq and dexycu manufactured in preparation for our launch in the united states . we had no cost of sales during the prior year . research and development research and development expenses decreased by $ 3.1 million , or 17 % , to $ 15.4 million for fiscal 2019 from $ 18.5 million in the prior year . this decrease was attributable primarily to ( i ) $ 2.2 million of contract research organization costs for our yutiq phase 3 clinical development program , ( ii ) $ 1.8 million of amortization of the acquired intangible asset from the icon acquisition ( classified as a separate line item post product launches , ( iii ) $ 1.1 million related to pre-launch dexycu batches for stability and manufacturing testing , and ( iv ) 887,000 of consulting expense , primarily regulatory related , partially offset by increases of ( i ) $ 1.7 million of net personnel and related expenses for the build-out of our medical affairs group and expansion of regulatory and quality staffs and ( ii ) $ 1.1 million for medical affairs related program expenses . sales and marketing with commencement of the commercial launches of dexycu and yutiq , we continued the build-out of our commercial infrastructure and marketing activities during fiscal 2019. sales and marketing expenses increased by $ 20.1 million , or 208 % , to $ 29.8 million for fiscal 2019 from $ 9.7 million in the prior year . this increase was primarily attributable to ( i ) $ 10.6 million related to our contract sales organization which includes our yutiq and dexycu key account managers , ( ii ) $ 4.7 million of marketing programs and agency costs and ( iii ) $ 4.7 million of personnel and related costs . general and administrative general and administrative expenses increased by $ 2.5 million , or 16 % , to $ 17.9 million for fiscal 2019 from $ 15.4 million in the prior year . this increase was attributable primarily to ( i ) a $ 2.5 million increase in personnel and related expenses related to senior management additions and the full year impact of prior additions , in finance , legal , human resources , information technology and business development , including $ 760,000 of stock-based compensation and ( ii ) $ 347,000 in contracted services , primarily in outsourced it for the build-out of commercial systems , partially offset by a $ 482,000 decrease in insurance costs , legal , audit and other professional fees . amortization of acquired intangible assets amortization of acquired intangible
| liquidity and capital resources a summary of the sources and uses of cash and cash equivalents is as follows ( in thousands ) : replace_table_token_8_th the following table summarizes total current assets , liabilities and working capital ( in thousands ) : as of january 31 , 2016 as of january 31 , 2015 current assets $ 4,431 $ 1,705 current liabilities 2,797 1,557 working capital $ 1,634 $ 148 as of january 31 , 2016 , we had cash and cash equivalents of $ 4.0 million and working capital of $ 1.6 million . in june 2015 , we completed a public offering of common stock , which generated net proceeds of $ 7.8 million . we also issued an unsecured convertible note with a principal amount of $ 0.5 million , which was automatically converted into common stock upon our uplisting to the nyse mkt . in december 2015 we raised net proceeds of $ 5.5 million in a private offering of our common stock and , in april 2016 , we raised net proceeds of approximately $ 3.6 million from the issuance of common stock and warrants to purchase common stock in a public offering . during the year ended december 31 , 2014 , we raised net proceeds of $ 7.3 million upon the completion of the private placement of shares of series a preferred stock and warrants to purchase common stock . the private placement was consummated in a series of closings that occurred between april 2014 and november 2014. in addition , kip has previously informed the company of its intention to complete the kip private placement even if the company 's stock price was not at least $ 3.70 per share . as of may 2 , 2016 , the kip private placement has not closed , and we are unable to predict if or when the private placement will close .
| 0 |
iluvien ® for diabetic macular edema ( “ dme ” ) , our lead licensed product , is sold directly in the u.s. and several european union ( “ eu ” ) countries by alimera sciences , inc. ( “ alimera ” ) . in july 2017 , we expanded its license agreement with alimera to include the uveitis indication utilizing the durasert technology in europe , the middle east and africa ( “ emea ” ) , which received european regulatory approval in march 2019 and , subject to obtaining pricing and reimbursement in each applicable country , will be marketed as iluvien . retisert ® , one of our earlier generation products , was approved in 2005 by the fda for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye and is sold in the u.s. by bausch & lomb inc. ( “ bausch & lomb ” ) . the patent with which retisert is marked expired in march 2019. as such , bausch & lomb discontinued paying royalties after march 2019. our development programs are focused primarily on developing sustained release products that utilize its durasert and verisome technology platforms to deliver approved drugs to treat chronic diseases . our strategy includes developing products independently while continuing to leverage its technology platforms through collaborations and license agreements . eyp-1901 , 6-month bioerodible durasert ® vorolanib - tki is being advanced as a potential treatment for wet age-related macular degeneration , diabetic retinopathy and retinal vein occlusion . we have completed initial animal pk and toxicology studies and expect to initiate formal glp toxicology studies in the first quarter of 2020 to support the filing of an investigational new drug application with the fda . 67 yutiq50 is being developed as a 6-month dosing option for treatment of chronic non-infectious uveitis affecting the posterior segment of the eye . we have consulted with the fda and identified a clinical pathway for an snda filing that involves a clinical trial of approximately 60 patients , randomized 2:1. we are currently evaluating the timeline and investment requirements for the initiation of this study fiscal 2019 overview the fiscal year ended december 31 , 2019 was highlighted by the following events : we successfully launched our two fda approved products , yutiq and dexycu during the first quarter of 2019 ; we added key members of our senior management team , including our chief financial officer and head of corporate development , svp and chief commercial officer , and our svp and chief technical officer ; we refinanced our debt with crg ( from swk ) in february 2019 generating approximately $ 26m ( first and second drawdown ) and participated in an underwritten public stock offering generating approximately $ 20m of gross proceeds to help fund our commercial product launches ; recent developments recent developments and ongoing activities regarding the commercialization of yutiq include : customer demand , represented as units purchased by physicians from our distributors , was up 59 % over q3 , driven by underlying growth and the permanent and specific j-code for yutiq in effect as of october 1 , 2019. repeat customers represented 87 % of order volume , and importantly , 42 % of our target account list has ordered , including 98 % of the treating uveitis specialists , representing solid adoption with continued growth opportunity . recent developments and ongoing activities regarding the commercialization of dexycu include : customer demand , represented as units purchased by ambulatory surgical centers from our distributors , was up 111 % over q3 with repeat customers representing 98 % of q4 order volume . since launch , over 14,000 patients have been treated with dexycu . we secured multiple new agreements for expanded access of dexycu , including contracts with the vision center network of america , llc ( vcna ) and eyesouth partners which collectively perform approximately 115,000 cataract surgeries per year . we are actively negotiating agreements with additional group purchasing organizations and networks . in february 2020 , we completed an underwritten public offering of 15,000,000 shares of our common stock at a public offering price of $ 1.45 per share . the gross proceeds of the offering were $ 21,750,000 , before deducting the underwriting discounts and commissions and other transaction expenses . in addition , underwriters were granted a thirty-day option to purchase up to an additional 2,250,000 shares of common stock at the public offering price , less underwriting discounts and commissions . this offering closed on february 25 , 2020. in january 2020 , we entered into an exclusive license agreement with ocumension therapeutics for the development and commercialization in mainland china , hong kong , macau and taiwan of dexycu for the treatment of post-operative inflammation following ocular surgery . under the terms of the license agreement , we received an upfront payment of $ 2 million and will be eligible to receive up to an additional $ 12.0 million if certain future prespecified development , regulatory and commercial sales milestones are achieved by ocumension . in addition , we are entitled to receive a mid-single digit sales-based royalty . in exchange , ocumension will receive exclusive rights to develop and commercialize the product in the greater china territory , at its own cost and expense with us supplying product for clinical trials and commercial sale . in november 2019 , george o. elston was appointed chief financial officer and head of corporate development . mr. elston brings more than 25 years of diverse financial and senior leadership experience in the biopharmaceutical sector with both global publicly-traded and privately-held organizations . story_separator_special_tag we make our assessments of the services performed based on various factors , including evaluation by the third-party cros and our own internal review of the work performed during the period , measurements of progress by us or by the third-party cros , data analysis with respect to work completed and our management 's judgment . we have agreements with two cros to conduct the phase 3 clinical trial program for yutiq , which we expect to complete in the first half of 2020. as of december 31 , 2019 , there were no material obligations remaining . during fiscal 2019 , the six months ended december 31 , 2018 and for fiscal 2018 , we recognized approximately $ 1.2 million , $ 1.5 million and $ 4.6 million , respectively , of research and development expense attributable to our yutiq phase 3 clinical trial program . changes in our estimates or differences between the actual level of services performed and our estimates may result in changes to our research and development expenses in future periods . 71 results of operations years ended december 31 , 2019 and 2018 replace_table_token_5_th product sales , net product sales , net represents the gross sales of dexycu and yutiq less provisions for product sales allowances and accruals . we commenced u.s. commercial sales of yutiq in february 2019 and recorded net sales totaled $ 12.0 million for fiscal 2019. we commenced commercial sales of dexycu in march 2019 and recorded net sales totaled $ 4.8 million for fiscal 2019. we had no product revenue during the year ended december 31 , 2018. license and collaboration agreement license and collaboration agreement revenues decreased by $ 1.3 million , or 48 % to $ 1.4 million for fiscal 2019 compared to the prior year . this decrease was attributable primarily to ( i ) the $ 1.7 million payment we received from ocumension in the year ended december 31 , 2018 as initial payment for the yutiq license compared with the $ 1 million payment upon achieving their first development milestone for yutiq in china in fiscal 2019 and ( ii ) $ 540,000 in lower revenue associated with feasibility studies . royalty income royalty income increased by $ 234,000 , or 12 % , to $ 2.2 million in fiscal 2019 compared to $ 1.9 million in the prior year . the increase was attributable primarily to a combination of an increase in the net sales-based royalty rate from 2 % to 4 % ( effective december 2018 ) and higher iluvien net sales under the amended alimera agreement . this increase in iluvien royalties was offset by recognizing revenue during only the first quarter of 2019 for retisert royalty , as the licensee , bausch and lomb informed us that they consider this agreement to have ended due to the expiration of certain patents . cost of sales , excluding amortization of acquired intangible assets 72 cost of sales , excluding amortization of acquired intangible assets , of approximately $ 2.7 million for fiscal 2019 consisted of costs associated with the manufacturing of yutiq and dexycu , certain period costs and product shipping costs . we expensed manufacturing costs as research and development expenses in the periods prior to fda approval of the products . in the fourth quart er of 2018 , we began capitalizing inventory costs for yutiq and dexycu manufactured in preparation for our launch in the united states . we had no cost of sales during the prior year . research and development research and development expenses decreased by $ 3.1 million , or 17 % , to $ 15.4 million for fiscal 2019 from $ 18.5 million in the prior year . this decrease was attributable primarily to ( i ) $ 2.2 million of contract research organization costs for our yutiq phase 3 clinical development program , ( ii ) $ 1.8 million of amortization of the acquired intangible asset from the icon acquisition ( classified as a separate line item post product launches , ( iii ) $ 1.1 million related to pre-launch dexycu batches for stability and manufacturing testing , and ( iv ) 887,000 of consulting expense , primarily regulatory related , partially offset by increases of ( i ) $ 1.7 million of net personnel and related expenses for the build-out of our medical affairs group and expansion of regulatory and quality staffs and ( ii ) $ 1.1 million for medical affairs related program expenses . sales and marketing with commencement of the commercial launches of dexycu and yutiq , we continued the build-out of our commercial infrastructure and marketing activities during fiscal 2019. sales and marketing expenses increased by $ 20.1 million , or 208 % , to $ 29.8 million for fiscal 2019 from $ 9.7 million in the prior year . this increase was primarily attributable to ( i ) $ 10.6 million related to our contract sales organization which includes our yutiq and dexycu key account managers , ( ii ) $ 4.7 million of marketing programs and agency costs and ( iii ) $ 4.7 million of personnel and related costs . general and administrative general and administrative expenses increased by $ 2.5 million , or 16 % , to $ 17.9 million for fiscal 2019 from $ 15.4 million in the prior year . this increase was attributable primarily to ( i ) a $ 2.5 million increase in personnel and related expenses related to senior management additions and the full year impact of prior additions , in finance , legal , human resources , information technology and business development , including $ 760,000 of stock-based compensation and ( ii ) $ 347,000 in contracted services , primarily in outsourced it for the build-out of commercial systems , partially offset by a $ 482,000 decrease in insurance costs , legal , audit and other professional fees . amortization of acquired intangible assets amortization of acquired intangible
| loss on extinguishment of debt repayment of the swk loan in february 2019 resulted in a $ 3.8 million loss on extinguishment of debt , which consisted of ( i ) a $ 2.3 million write-off of the remaining balance of unamortized debt discount ; ( ii ) a $ 1.2 million prepayment penalty ; and ( iii ) a $ 306,000 make-whole interest payment covering the period from the date of the loan repayment to what would have been the first anniversary of the original loan closing date , or march 28 , 2019. change in fair value of derivative liability 73 change in fair value of derivative liability totaled $ 45.2 million for fiscal 2018 , attributable to the revaluation of the second tranche warrants liability immediately prior to the late september 2018 exercise of the second tranche warrants ( see note 13 ) . the resulting second tranche warrants derivative liability balance of $ 38.7 million was reclassified to equity upon exercise of these warrants . six months ended december 31 , 2018 and 2017 replace_table_token_6_th revenues collaborative research and development revenue totaled $ 1.9 million for the six months ended december 31 , 2018 , an increase of $ 1.3 million , or 213 % , compared to $ 601,000 for the six months ended december 31 , 2017. this increase was attributable primarily to $ 1.7 million of revenue recognized from an upfront payment received under the ocumension license , partially offset by a $ 390,000 decrease in feasibility study revenues earned in the prior six-month period .
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25 index the specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans . these include : · the present value of expected future cash flows discounted at the loan 's effective interest rate . the effective interest rate on a loan is the rate of return implicit in the loan ( that is , the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan ) ; · the loan 's observable market price , or · the fair value of the collateral , net of estimated costs to dispose , if the loan is collateral dependent . the use of these computed values is inherently subjective and actual losses could be greater or less than the estimates . no single statistic , formula , or measurement determines the adequacy of the allowance . management makes subjective and complex judgments about matters that are inherently uncertain , and different amounts would be reported under different conditions or using different assumptions . for analytical purposes , management allocates a portion of the allowance to specific loan categories and specific loans . however , the entire allowance is used to absorb credit losses inherent in the loan portfolio , including identified and unidentified losses . the relationships and ratios used in calculating the allowance , including the qualitative factors , may change from period to period as facts and circumstances evolve . furthermore , management can not provide assurance that in any particular period the bank will not have sizeable credit losses in relation to the amount reserved . management may find it necessary to significantly adjust the allowance , considering current factors at the time . mergers and acquisitions business combinations are accounted for under accounting standards codification ( `` asc `` ) 805 , business combinations , using the acquisition method of accounting . the acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date . to determine the fair values , the company will rely on third party valuations , such as appraisals , or internal valuations based on discounted cash flow analyses or other valuation techniques . under the acquisition method of accounting , the company will identify the acquirer and the closing date and apply applicable recognition principles and conditions . acquisition-related costs are costs the company incurs to effect a business combination . those costs include advisory , legal , accounting , valuation , and other professional or consulting fees . some other examples of costs to the company include systems conversions , integration planning , consultants and advertising costs . the company will account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received , with one exception . the costs to issue debt or equity securities will be recognized in accordance with other applicable gaap . these acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption . acquired loans with specific credit-related deterioration acquired loans with specific credit deterioration are accounted for by the company in accordance with the financial accounting standards board ( `` fasb `` ) asc 310-30 , receivables - loans and debt securities acquired with deteriorated credit quality . certain acquired loans , those for which specific credit-related deterioration , since origination , is identified , are recorded at fair value reflecting the present value of the amounts expected to be collected . income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected . acquired loans deemed impaired and considered collateral dependent , with the timing of the sale of loan collateral indeterminate , remain on non-accrual status and have no accretable yield . 26 index goodwill impairment the company performs its annual analysis as of june 30 each fiscal year . accounting guidance permits preliminary assessment of qualitative factors to determine whether more substantial impairment testing is required . the company chose to bypass the preliminary assessment and utilized a two-step process for impairment testing of goodwill . the first step tests for impairment , while the second step , if necessary , measures the impairment . no indicators of impairment were identified during the years ended december 31 , 2013 , 2012 and 2011. non-gaap presentations the analysis of net interest income in this document is performed on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets . acquisition of midcarolina financial corporation on july 1 , 2011 , the company completed its merger with midcarolina financial corporation pursuant to the agreement and plan of reorganization , dated december 15 , 2010 , between the company and midcarolina . midcarolina was headquartered in burlington , north carolina , and engaged in banking operations through its subsidiary bank , midcarolina bank . the transaction has significantly expanded the company 's footprint in north carolina , adding eight branches in alamance and guilford counties . details of the transaction are discussed in note 2 of the consolidated financial statements contained in item 8 of this form 10-k. management information system changes coincidentally with the merger with midcarolina , the company converted its management information systems from an in-house data processing system to an outsourced processing strategy . both banks ' management information systems were fully integrated and converted to jack henry & associates silverlake processing system in mid-february 2012. results of operations net income net income available to common shareholders for 2013 was $ 15,747,000 compared to $ 16,006,000 for 2012 , a decrease of $ 259,000 or 1.6 % . story_separator_special_tag 34 index december 31 , 2012 ( in thousands ) income statement effect premium/ ( discount ) balance on december 31 , 2011 for the year ended remaining premium/ ( discount ) balance interest income/ ( expense ) : loans income $ ( 15,908 ) $ 6,098 $ ( 9,631 ) ( 1 ) accretable portion of acquired impaired loans income ( 1,056 ) 2,616 ( 2,165 ) ( 2 ) time deposits income ( 110 ) 110 - time deposits - brokered income ( 694 ) 416 ( 278 ) fhlb advances expense 131 ( 22 ) 109 trust preferred securities expense 2,171 ( 105 ) 2,066 net interest income 9,113 non-interest ( expense ) amortization of core deposit intangible expense $ 5,652 ( 1,558 ) $ 4,094 net non-interest expense ( 1,558 ) change in pretax income $ 7,555 ( 1 ) - remaining discount balance includes $ 179,000 in charge-offs against the mark . ( 2 ) - remaining discount balance includes $ 3,725,000 in reclassifications from the non-accretable difference . impact of inflation and changing prices the majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories . the most significant effect of inflation is on noninterest expenses that tend to rise during periods of inflation . changes in interest rates have a greater impact on a financial institution 's profitability than do the effects of higher costs for goods and services . through its balance sheet management practices , the company has the ability to react to those changes and measure and monitor its interest rate and liquidity risk . market risk management effectively managing market risk is essential to achieving the company 's financial objectives . market risk reflects the risk of economic loss resulting from changes in interest rates and market prices . the company is generally not subject to currency exchange risk or commodity price risk . the company 's primary market risk exposure is interest rate risk ; however , market risk also includes liquidity risk . both are discussed in the following sections . interest rate risk management interest rate risk and its impact on net interest income is a primary market risk exposure . the company manages its exposure to fluctuations in interest rates through policies approved by its asset liability committee ( `` alco `` ) and board of directors , both of which receive and review periodic reports of the company 's interest rate risk position . the company uses computer simulation analysis to measure the sensitivity of projected earnings to changes in interest rates . simulation takes into account current balance sheet volumes and the scheduled repricing dates , instrument level optionality , and maturities of assets and liabilities . it incorporates numerous assumptions including growth , changes in the mix of assets and liabilities , prepayments , and average rates earned and paid . based on this information , management uses the model to project net interest income under multiple interest rate scenarios . 35 index a balance sheet is considered asset sensitive when its earning assets ( loans and securities ) reprice faster or to a greater extent than its liabilities ( deposits and borrowings ) . an asset sensitive balance sheet will produce relatively more net interest income when interest rates rise and less net interest income when they decline . based on the company 's simulation analysis , management believes the company 's interest sensitivity position at december 31 , 2013 is asset sensitive . management has no expectation that market interest rates will materially decline in the near term , given the prevailing economy and apparent frb policy . earnings simulation the table below shows the estimated impact of changes in interest rates on net interest income as of december 31 , 2013 , assuming gradual and parallel changes in interest rates , and consistent levels of assets and liabilities . net interest income for the following twelve months is projected to increase when interest rates are higher than current rates . due to the current low interest rate environment , no measurement was considered necessary for a further decline in interest rates . estimated changes in net interest income ( dollars in thousands ) replace_table_token_7_th management can not predict future interest rates or their exact effect on net interest income . computations of future effects of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results . certain limitations are inherent in such computations . assets and liabilities may react differently than projected to changes in market interest rates . the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates , while rates on other types of assets and liabilities may lag changes in market interest rates . interest rate shifts may not be parallel . changes in interest rates can cause substantial changes in the amount of prepayments of loans and mortgage-backed securities , which may in turn affect the company 's interest rate sensitivity position . additionally , credit risk may rise if an interest rate increase adversely affects the ability of borrowers to service their debt . economic value simulation economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments . economic values are calculated based on discounted cash flow analysis . the net economic value of equity is the economic value of all assets minus the economic value of all liabilities . the change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet . the same assumptions are used in the economic value simulation as in the earnings simulation . the economic value simulation uses instantaneous rate shocks to the balance sheet .
| loss on extinguishment of debt repayment of the swk loan in february 2019 resulted in a $ 3.8 million loss on extinguishment of debt , which consisted of ( i ) a $ 2.3 million write-off of the remaining balance of unamortized debt discount ; ( ii ) a $ 1.2 million prepayment penalty ; and ( iii ) a $ 306,000 make-whole interest payment covering the period from the date of the loan repayment to what would have been the first anniversary of the original loan closing date , or march 28 , 2019. change in fair value of derivative liability 73 change in fair value of derivative liability totaled $ 45.2 million for fiscal 2018 , attributable to the revaluation of the second tranche warrants liability immediately prior to the late september 2018 exercise of the second tranche warrants ( see note 13 ) . the resulting second tranche warrants derivative liability balance of $ 38.7 million was reclassified to equity upon exercise of these warrants . six months ended december 31 , 2018 and 2017 replace_table_token_6_th revenues collaborative research and development revenue totaled $ 1.9 million for the six months ended december 31 , 2018 , an increase of $ 1.3 million , or 213 % , compared to $ 601,000 for the six months ended december 31 , 2017. this increase was attributable primarily to $ 1.7 million of revenue recognized from an upfront payment received under the ocumension license , partially offset by a $ 390,000 decrease in feasibility study revenues earned in the prior six-month period .
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25 index the specific allowance uses various techniques to arrive at an estimate of loss for specifically identified impaired loans . these include : · the present value of expected future cash flows discounted at the loan 's effective interest rate . the effective interest rate on a loan is the rate of return implicit in the loan ( that is , the contractual interest rate adjusted for any net deferred loan fees or costs and any premium or discount existing at the origination or acquisition of the loan ) ; · the loan 's observable market price , or · the fair value of the collateral , net of estimated costs to dispose , if the loan is collateral dependent . the use of these computed values is inherently subjective and actual losses could be greater or less than the estimates . no single statistic , formula , or measurement determines the adequacy of the allowance . management makes subjective and complex judgments about matters that are inherently uncertain , and different amounts would be reported under different conditions or using different assumptions . for analytical purposes , management allocates a portion of the allowance to specific loan categories and specific loans . however , the entire allowance is used to absorb credit losses inherent in the loan portfolio , including identified and unidentified losses . the relationships and ratios used in calculating the allowance , including the qualitative factors , may change from period to period as facts and circumstances evolve . furthermore , management can not provide assurance that in any particular period the bank will not have sizeable credit losses in relation to the amount reserved . management may find it necessary to significantly adjust the allowance , considering current factors at the time . mergers and acquisitions business combinations are accounted for under accounting standards codification ( `` asc `` ) 805 , business combinations , using the acquisition method of accounting . the acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date . to determine the fair values , the company will rely on third party valuations , such as appraisals , or internal valuations based on discounted cash flow analyses or other valuation techniques . under the acquisition method of accounting , the company will identify the acquirer and the closing date and apply applicable recognition principles and conditions . acquisition-related costs are costs the company incurs to effect a business combination . those costs include advisory , legal , accounting , valuation , and other professional or consulting fees . some other examples of costs to the company include systems conversions , integration planning , consultants and advertising costs . the company will account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received , with one exception . the costs to issue debt or equity securities will be recognized in accordance with other applicable gaap . these acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expense caption . acquired loans with specific credit-related deterioration acquired loans with specific credit deterioration are accounted for by the company in accordance with the financial accounting standards board ( `` fasb `` ) asc 310-30 , receivables - loans and debt securities acquired with deteriorated credit quality . certain acquired loans , those for which specific credit-related deterioration , since origination , is identified , are recorded at fair value reflecting the present value of the amounts expected to be collected . income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected . acquired loans deemed impaired and considered collateral dependent , with the timing of the sale of loan collateral indeterminate , remain on non-accrual status and have no accretable yield . 26 index goodwill impairment the company performs its annual analysis as of june 30 each fiscal year . accounting guidance permits preliminary assessment of qualitative factors to determine whether more substantial impairment testing is required . the company chose to bypass the preliminary assessment and utilized a two-step process for impairment testing of goodwill . the first step tests for impairment , while the second step , if necessary , measures the impairment . no indicators of impairment were identified during the years ended december 31 , 2013 , 2012 and 2011. non-gaap presentations the analysis of net interest income in this document is performed on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets . acquisition of midcarolina financial corporation on july 1 , 2011 , the company completed its merger with midcarolina financial corporation pursuant to the agreement and plan of reorganization , dated december 15 , 2010 , between the company and midcarolina . midcarolina was headquartered in burlington , north carolina , and engaged in banking operations through its subsidiary bank , midcarolina bank . the transaction has significantly expanded the company 's footprint in north carolina , adding eight branches in alamance and guilford counties . details of the transaction are discussed in note 2 of the consolidated financial statements contained in item 8 of this form 10-k. management information system changes coincidentally with the merger with midcarolina , the company converted its management information systems from an in-house data processing system to an outsourced processing strategy . both banks ' management information systems were fully integrated and converted to jack henry & associates silverlake processing system in mid-february 2012. results of operations net income net income available to common shareholders for 2013 was $ 15,747,000 compared to $ 16,006,000 for 2012 , a decrease of $ 259,000 or 1.6 % . story_separator_special_tag 34 index december 31 , 2012 ( in thousands ) income statement effect premium/ ( discount ) balance on december 31 , 2011 for the year ended remaining premium/ ( discount ) balance interest income/ ( expense ) : loans income $ ( 15,908 ) $ 6,098 $ ( 9,631 ) ( 1 ) accretable portion of acquired impaired loans income ( 1,056 ) 2,616 ( 2,165 ) ( 2 ) time deposits income ( 110 ) 110 - time deposits - brokered income ( 694 ) 416 ( 278 ) fhlb advances expense 131 ( 22 ) 109 trust preferred securities expense 2,171 ( 105 ) 2,066 net interest income 9,113 non-interest ( expense ) amortization of core deposit intangible expense $ 5,652 ( 1,558 ) $ 4,094 net non-interest expense ( 1,558 ) change in pretax income $ 7,555 ( 1 ) - remaining discount balance includes $ 179,000 in charge-offs against the mark . ( 2 ) - remaining discount balance includes $ 3,725,000 in reclassifications from the non-accretable difference . impact of inflation and changing prices the majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories . the most significant effect of inflation is on noninterest expenses that tend to rise during periods of inflation . changes in interest rates have a greater impact on a financial institution 's profitability than do the effects of higher costs for goods and services . through its balance sheet management practices , the company has the ability to react to those changes and measure and monitor its interest rate and liquidity risk . market risk management effectively managing market risk is essential to achieving the company 's financial objectives . market risk reflects the risk of economic loss resulting from changes in interest rates and market prices . the company is generally not subject to currency exchange risk or commodity price risk . the company 's primary market risk exposure is interest rate risk ; however , market risk also includes liquidity risk . both are discussed in the following sections . interest rate risk management interest rate risk and its impact on net interest income is a primary market risk exposure . the company manages its exposure to fluctuations in interest rates through policies approved by its asset liability committee ( `` alco `` ) and board of directors , both of which receive and review periodic reports of the company 's interest rate risk position . the company uses computer simulation analysis to measure the sensitivity of projected earnings to changes in interest rates . simulation takes into account current balance sheet volumes and the scheduled repricing dates , instrument level optionality , and maturities of assets and liabilities . it incorporates numerous assumptions including growth , changes in the mix of assets and liabilities , prepayments , and average rates earned and paid . based on this information , management uses the model to project net interest income under multiple interest rate scenarios . 35 index a balance sheet is considered asset sensitive when its earning assets ( loans and securities ) reprice faster or to a greater extent than its liabilities ( deposits and borrowings ) . an asset sensitive balance sheet will produce relatively more net interest income when interest rates rise and less net interest income when they decline . based on the company 's simulation analysis , management believes the company 's interest sensitivity position at december 31 , 2013 is asset sensitive . management has no expectation that market interest rates will materially decline in the near term , given the prevailing economy and apparent frb policy . earnings simulation the table below shows the estimated impact of changes in interest rates on net interest income as of december 31 , 2013 , assuming gradual and parallel changes in interest rates , and consistent levels of assets and liabilities . net interest income for the following twelve months is projected to increase when interest rates are higher than current rates . due to the current low interest rate environment , no measurement was considered necessary for a further decline in interest rates . estimated changes in net interest income ( dollars in thousands ) replace_table_token_7_th management can not predict future interest rates or their exact effect on net interest income . computations of future effects of hypothetical interest rate changes are based on numerous assumptions and should not be relied upon as indicative of actual results . certain limitations are inherent in such computations . assets and liabilities may react differently than projected to changes in market interest rates . the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates , while rates on other types of assets and liabilities may lag changes in market interest rates . interest rate shifts may not be parallel . changes in interest rates can cause substantial changes in the amount of prepayments of loans and mortgage-backed securities , which may in turn affect the company 's interest rate sensitivity position . additionally , credit risk may rise if an interest rate increase adversely affects the ability of borrowers to service their debt . economic value simulation economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments . economic values are calculated based on discounted cash flow analysis . the net economic value of equity is the economic value of all assets minus the economic value of all liabilities . the change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet . the same assumptions are used in the economic value simulation as in the earnings simulation . the economic value simulation uses instantaneous rate shocks to the balance sheet .
| liquidity risk management liquidity is the ability of the company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities in a timely manner . liquidity management involves maintaining the company 's ability to meet the daily cash flow requirements of its customers , whether they are borrowers requiring funds or depositors desiring to withdraw funds . additionally , the company requires cash for various operating needs including dividends to shareholders , the servicing of debt , and the payment of general corporate expenses . the company manages its exposure to fluctuations in interest rates through policies approved by the alco and board of directors , both of which receive periodic reports of the company 's interest rate risk and liquidity position . the company uses a computer simulation model to assist in the management of the future liquidity needs of the company . liquidity sources include on balance sheet and off balance sheet sources . balance sheet liquidity sources include cash , amounts due from banks , loan repayments , and increases in deposits . the company also maintains a large , high quality , very liquid bond portfolio , which is generally 50 % to 60 % unpledged and would , accordingly , be available for sale if necessary . off balance sheet sources include lines of credit from the federal home loan bank of atlanta ( `` fhlb '' ) , federal funds lines of credit , and access to the federal reserve bank of richmond 's discount window management believes that these sources provide sufficient and timely liquidity , both on and off balance sheet . the company has a line of credit with the fhlb , equal to 30 % of the company 's assets , subject to the amount of collateral pledged . under the terms of its collateral agreement with the fhlb , the company provides a blanket lien covering all of its residential first mortgage loans , home equity lines of credit , commercial real estate loans and commercial construction loans .
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32 the economic environment related to the covid-19 pandemic , which slowed business activity in several key end-markets , negatively impacted the company 's results in 2020. the pandemic has affected and may continue to affect the demand for a number of our performance materials segment 's products and services . paper consumption has been and may continue to be impacted . global steel production has been and may continue to be affected by volatility in the market due to the pandemic , which could impact our refractory segment . oil and natural gas prices have been volatile as a result of the pandemic , and this could cause oil and natural gas companies to reduce their capital expenditures and production and exploration activities . the impacts of the covid-19 pandemic may continue to impact our results during 2021. the extent to which our operations will be impacted by the pandemic will depend largely on future developments , including the continued severity of the pandemic and future actions by government authorities to contain it or treat its impact . these conditions are highly uncertain and can not be accurately predicted . we will continue to actively monitor and respond to the evolving situation . in 2020 , the company continued to execute on its growth strategies of geographic expansion and new product innovation . the company delivered sales growth across several product lines and geographies , increased volumes through capacity expansions and a new pcc satellite facility , and capitalized on customer demand for our latest innovative products . long-term debt as of december 31 , 2020 was $ 933.2 million . on june 30 , 2020 , the company issued $ 400 million aggregate principal amount of 5.0 % senior notes due 2028. the net proceeds were used to repay $ 148 million of fixed rate term loans and $ 100 million of outstanding borrowing under its revolving credit facility and the remainder for general corporate purposes . additionally , in 2020 , we repurchased $ 40.7 million of treasury shares . our balance sheet continues to be strong . cash , cash equivalents and short-term investments were $ 371.8 million as of december 31 , 2020. cash flow from operations for 2020 was $ 240.6 million . the company currently has more than $ 650 million of available liquidity , including cash on hand , as well as availability under its revolving credit facility . we believe these factors will allow us to meet our anticipated funding requirements . our intention is to maintain a balanced approach to capital deployment , by using excess cash flow for investments in growth , continued debt reduction and selective share repurchases . outlook the covid-19 pandemic had an adverse effect on our reported results for 2020 , and may continue to negatively impact our business and results of operations for 2021. the extent to which our operations will be impacted by the pandemic will depend largely on future developments , including the severity of the pandemic and actions by government authorities to contain it or treat its impact . these are highly uncertain and can not be accurately predicted . we will continue to actively monitor and respond to the covid-19 pandemic . the company will continue to focus on innovation and new product development and other opportunities for sales growth in 2021 from its existing businesses , as follows : ● 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 . ● 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 . ● 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 newyield ® and envirofil ® 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 . ● 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 . 33 ● 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 . ● deploy our laser measurement technologies into new applications . ● expand our refractory maintenance model to other steel makers globally . ● increase our presence and market penetration in offshore produced water and offshore filtration and well testing within the energy services segment . ● deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . story_separator_special_tag these swaps mature in may 2023. as a result of these swaps , the company 's effective fixed interest rate on the notional floating rate indebtedness will be 2.5 % . on october 23 , 2019 , the company 's board of directors authorized the company 's management to repurchase , at its discretion , up to $ 75 million of the company 's shares over a one-year period . over this program 's one-year period , 984,202 shares were repurchased for $ 49.6 million , or an average price of approximately $ 50.36 per share . this program is now completed . on october 21 , 2020 , the company 's board of directors authorized the company 's management to repurchase , at its discretion , up to $ 75 million of the company 's shares over a one-year period . as of december 31 , 2020 , 179,810 shares have been repurchased under this program for $ 11.1 million , or an average price of approximately $ 61.63 per share . on january 27 , 2021 , the company 's board of directors declared a regular quarterly dividend on its common stock of $ 0.05 per share . no dividend will be payable unless declared by the board and unless funds are legally available for payment thereof . 41 contractual obligations the company has committed cash outflow related to long-term debt , interest on debt , pension and post-retirement benefit obligations , operating lease agreements , and other long-term contractual obligations . as of december 31 , 2020 , minimum payments for these obligations were as follows : replace_table_token_13_th debt amounts in the preceding table represent the principal amounts of all outstanding long-term debt , including current portion . as of december 31 , 2020 , maturities for long-term debt extended to 2028. the above table does not include borrowings under our revolving facility as such amounts can be borrowed and repaid as required . any remaining outstanding loans under the revolving facility will mature in april 2023. interest related to long-term debt is based on interest rates in effect as of december 31 , 2020 and is calculated on debt with maturities that , on december 31 , 2020 extended to 2024. as the contractual interest rate for a portion of our debt is variable , actual cash payments may differ from the estimates provided in the preceding table . estimated minimum required pension funding and post-retirement benefits are based on actuarial estimates using current assumptions for discount rates , long-term rate of return on plan assets , rate of compensation increases , and health care cost trend rates . the company has determined that it is not practicable to present expected pension funding and other postretirement benefit payments beyond 2022 and , accordingly , no amounts have been included in the table beyond such dates . the company has several non-cancelable operating leases , primarily for office space and equipment . operating lease obligations includes future minimum rental commitments under non-cancelable leases . the company recorded a tax liability for the one-time transition tax on accumulated foreign subsidiary earnings under u.s. tax reform of $ 35.1 million , payable in eight annual interest-free installments beginning in 2018. the company paid its first installment in 2018 and was required to apply certain overpayments to the outstanding liability . the remaining liability is payable through 2025. other long-term liabilities include asset retirement obligations relating to the retirement of certain tangible long-lived assets and land restoration obligations at the company 's pcc satellite facilities and mining operations . see note 21 to the consolidated financial statements . the total amount of contingent obligations associated with gross unrecognized tax benefits for uncertain tax positions , including positions impacting only the timing of tax benefits was $ 7.6 million at december 31 , 2020. payment of these obligations would result from settlements with taxing authorities . due to the difficulty in determining the timing of settlements , these obligations are not included in the table above . we do not expect to make a tax payment related to these obligations within the next year that would significantly impact liquidity . 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 , valuation of long-lived assets , goodwill and other intangible assets , income taxes , including valuation allowances and pension plan assumptions . 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 . 42 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 is recognized at the point in time when the customer obtains control of the promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services . the company 's revenues are primarily derived from the sale of products . our primary performance obligation is satisfied upon shipment or delivery to our customer based on written sales terms , which is also when control is transferred . revenues from sales of equipment are recorded upon completion of installation and transfer of control to the
| liquidity risk management liquidity is the ability of the company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities in a timely manner . liquidity management involves maintaining the company 's ability to meet the daily cash flow requirements of its customers , whether they are borrowers requiring funds or depositors desiring to withdraw funds . additionally , the company requires cash for various operating needs including dividends to shareholders , the servicing of debt , and the payment of general corporate expenses . the company manages its exposure to fluctuations in interest rates through policies approved by the alco and board of directors , both of which receive periodic reports of the company 's interest rate risk and liquidity position . the company uses a computer simulation model to assist in the management of the future liquidity needs of the company . liquidity sources include on balance sheet and off balance sheet sources . balance sheet liquidity sources include cash , amounts due from banks , loan repayments , and increases in deposits . the company also maintains a large , high quality , very liquid bond portfolio , which is generally 50 % to 60 % unpledged and would , accordingly , be available for sale if necessary . off balance sheet sources include lines of credit from the federal home loan bank of atlanta ( `` fhlb '' ) , federal funds lines of credit , and access to the federal reserve bank of richmond 's discount window management believes that these sources provide sufficient and timely liquidity , both on and off balance sheet . the company has a line of credit with the fhlb , equal to 30 % of the company 's assets , subject to the amount of collateral pledged . under the terms of its collateral agreement with the fhlb , the company provides a blanket lien covering all of its residential first mortgage loans , home equity lines of credit , commercial real estate loans and commercial construction loans .
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32 the economic environment related to the covid-19 pandemic , which slowed business activity in several key end-markets , negatively impacted the company 's results in 2020. the pandemic has affected and may continue to affect the demand for a number of our performance materials segment 's products and services . paper consumption has been and may continue to be impacted . global steel production has been and may continue to be affected by volatility in the market due to the pandemic , which could impact our refractory segment . oil and natural gas prices have been volatile as a result of the pandemic , and this could cause oil and natural gas companies to reduce their capital expenditures and production and exploration activities . the impacts of the covid-19 pandemic may continue to impact our results during 2021. the extent to which our operations will be impacted by the pandemic will depend largely on future developments , including the continued severity of the pandemic and future actions by government authorities to contain it or treat its impact . these conditions are highly uncertain and can not be accurately predicted . we will continue to actively monitor and respond to the evolving situation . in 2020 , the company continued to execute on its growth strategies of geographic expansion and new product innovation . the company delivered sales growth across several product lines and geographies , increased volumes through capacity expansions and a new pcc satellite facility , and capitalized on customer demand for our latest innovative products . long-term debt as of december 31 , 2020 was $ 933.2 million . on june 30 , 2020 , the company issued $ 400 million aggregate principal amount of 5.0 % senior notes due 2028. the net proceeds were used to repay $ 148 million of fixed rate term loans and $ 100 million of outstanding borrowing under its revolving credit facility and the remainder for general corporate purposes . additionally , in 2020 , we repurchased $ 40.7 million of treasury shares . our balance sheet continues to be strong . cash , cash equivalents and short-term investments were $ 371.8 million as of december 31 , 2020. cash flow from operations for 2020 was $ 240.6 million . the company currently has more than $ 650 million of available liquidity , including cash on hand , as well as availability under its revolving credit facility . we believe these factors will allow us to meet our anticipated funding requirements . our intention is to maintain a balanced approach to capital deployment , by using excess cash flow for investments in growth , continued debt reduction and selective share repurchases . outlook the covid-19 pandemic had an adverse effect on our reported results for 2020 , and may continue to negatively impact our business and results of operations for 2021. the extent to which our operations will be impacted by the pandemic will depend largely on future developments , including the severity of the pandemic and actions by government authorities to contain it or treat its impact . these are highly uncertain and can not be accurately predicted . we will continue to actively monitor and respond to the covid-19 pandemic . the company will continue to focus on innovation and new product development and other opportunities for sales growth in 2021 from its existing businesses , as follows : ● 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 . ● 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 . ● 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 newyield ® and envirofil ® 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 . ● 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 . 33 ● 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 . ● deploy our laser measurement technologies into new applications . ● expand our refractory maintenance model to other steel makers globally . ● increase our presence and market penetration in offshore produced water and offshore filtration and well testing within the energy services segment . ● deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . story_separator_special_tag these swaps mature in may 2023. as a result of these swaps , the company 's effective fixed interest rate on the notional floating rate indebtedness will be 2.5 % . on october 23 , 2019 , the company 's board of directors authorized the company 's management to repurchase , at its discretion , up to $ 75 million of the company 's shares over a one-year period . over this program 's one-year period , 984,202 shares were repurchased for $ 49.6 million , or an average price of approximately $ 50.36 per share . this program is now completed . on october 21 , 2020 , the company 's board of directors authorized the company 's management to repurchase , at its discretion , up to $ 75 million of the company 's shares over a one-year period . as of december 31 , 2020 , 179,810 shares have been repurchased under this program for $ 11.1 million , or an average price of approximately $ 61.63 per share . on january 27 , 2021 , the company 's board of directors declared a regular quarterly dividend on its common stock of $ 0.05 per share . no dividend will be payable unless declared by the board and unless funds are legally available for payment thereof . 41 contractual obligations the company has committed cash outflow related to long-term debt , interest on debt , pension and post-retirement benefit obligations , operating lease agreements , and other long-term contractual obligations . as of december 31 , 2020 , minimum payments for these obligations were as follows : replace_table_token_13_th debt amounts in the preceding table represent the principal amounts of all outstanding long-term debt , including current portion . as of december 31 , 2020 , maturities for long-term debt extended to 2028. the above table does not include borrowings under our revolving facility as such amounts can be borrowed and repaid as required . any remaining outstanding loans under the revolving facility will mature in april 2023. interest related to long-term debt is based on interest rates in effect as of december 31 , 2020 and is calculated on debt with maturities that , on december 31 , 2020 extended to 2024. as the contractual interest rate for a portion of our debt is variable , actual cash payments may differ from the estimates provided in the preceding table . estimated minimum required pension funding and post-retirement benefits are based on actuarial estimates using current assumptions for discount rates , long-term rate of return on plan assets , rate of compensation increases , and health care cost trend rates . the company has determined that it is not practicable to present expected pension funding and other postretirement benefit payments beyond 2022 and , accordingly , no amounts have been included in the table beyond such dates . the company has several non-cancelable operating leases , primarily for office space and equipment . operating lease obligations includes future minimum rental commitments under non-cancelable leases . the company recorded a tax liability for the one-time transition tax on accumulated foreign subsidiary earnings under u.s. tax reform of $ 35.1 million , payable in eight annual interest-free installments beginning in 2018. the company paid its first installment in 2018 and was required to apply certain overpayments to the outstanding liability . the remaining liability is payable through 2025. other long-term liabilities include asset retirement obligations relating to the retirement of certain tangible long-lived assets and land restoration obligations at the company 's pcc satellite facilities and mining operations . see note 21 to the consolidated financial statements . the total amount of contingent obligations associated with gross unrecognized tax benefits for uncertain tax positions , including positions impacting only the timing of tax benefits was $ 7.6 million at december 31 , 2020. payment of these obligations would result from settlements with taxing authorities . due to the difficulty in determining the timing of settlements , these obligations are not included in the table above . we do not expect to make a tax payment related to these obligations within the next year that would significantly impact liquidity . 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 , valuation of long-lived assets , goodwill and other intangible assets , income taxes , including valuation allowances and pension plan assumptions . 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 . 42 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 is recognized at the point in time when the customer obtains control of the promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services . the company 's revenues are primarily derived from the sale of products . our primary performance obligation is satisfied upon shipment or delivery to our customer based on written sales terms , which is also when control is transferred . revenues from sales of equipment are recorded upon completion of installation and transfer of control to the
| liquidity and capital resources cash provided from continuing operations in 2020 was $ 240.6 million , compared with $ 238.3 million in prior year . cash flows provided from operations in 2020 were principally used to repay debt , fund capital expenditures , acquire assets , repurchase shares and to pay the company 's dividend to common shareholders . the company 's intention is to use excess cash flow for investments in growth , continued debt reduction and selective share repurchases . on may 9 , 2014 , in connection with the acquisition of amcol international corporation ( “ 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 ” ) . on june 23 , 2015 , the company entered into an amendment ( the “ first amendment ” ) to the credit agreement to reprice the $ 1.378 billion then outstanding on the term facility . as amended , the term facility had a $ 1.078 billion floating rate tranche and a $ 300 million fixed rate tranche . on february 14 , 2017 , the company entered into an amendment ( the “ second amendment ” ) to the credit agreement to reprice the $ 788 million floating rate tranche then outstanding , which extended the maturity and lowered the interest costs by 75 basis points . on april 18 , 2018 , the company entered into an amendment ( the “ third amendment ” ) to the credit agreement to refinance its then existing senior secured revolving credit facility . in connection with the third amendment , the existing senior secured revolving credit facility was replaced with a new revolving credit facility with $ 300 million of aggregate commitments ( the “ revolving credit facility ” and , together with the term facility , the “ senior secured credit facilities ” ) .
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compensation costs for share-based grants are recognized on a straight-line basis over the requisite service period for the entire award ( from the date of grant through the period of the last separately vesting portion of the grant ) . the fair value of each option award is calculated on the date of grant using the black-scholes option pricing model which includes certain subjective assumptions . expected volatilities are calculated based on our historical trading activities . we recognize forfeitures as they occur . the risk-free rate for the periods is based on the u.s. treasury rates in effect at the time of grant . the expected term of options is based on the company 's historical experience . income taxes income taxes are accounted for under the asset and liability method in accordance with asc 740 , accounting for income taxes . deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date . we provide a valuation allowance when we consider it “ more likely than not ” ( greater than a 50 % probability ) that a deferred income tax asset will not be fully recovered . adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the consolidated statement of operations . results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 revenue – asset management revenue from asset management for the years ended december 31 , 2020 and 2019 was $ 21.9 million and $ 19.6 million , respectively . the 11.8 % year over year growth of $ 2.3 million in revenue was primarily due to increased headcount and other costs that are reimbursable from comstock development services ( `` cds `` ) under the 2019 ama and the other asset management agreements . the reimbursable costs are recognized as revenue in the period in which the related costs are incurred . the increased headcount and associated personnel costs are primarily attributable to the additional real estate assets being managed along with the additional management agreements year over year . please see note 2 - summary of significant accounting policies for more information on the additional management agreements . revenue – real estate services revenue from real estate services for the years ended december 31 , 2020 and 2019 was $ 6.8 million and $ 5.7 million , respectively . the 19.1 % increase of $ 1.1 million is primarily attributable to continued organic revenue growth within our comstock environmental business , partially offset by a decrease in closing financing transactions which generated incremental revenue of $ 0.6 million and $ 1.1 million during the years ended december 31 , 2020 and 2019 , respectively . direct costs – asset management direct costs – asset management for the years ended december 31 , 2020 and 2019 was $ 18.4 million and $ 16.6 million , respectively . this 11.4 % increase of $ 1.9 million was primarily related to increased personnel expense from headcount increases as well as from the continued growth of our asset management operations . 12 direct costs – real estate services direct costs – real estate services decreased by $ 0.5 million to $ 4.1 million during the year ended december 31 , 2020 , as compared to $ 4.6 million during the year ended december 31 , 2019. the decrease is primarily due to the recognition of $ 419 thousand in direct costs related to the real estate services segment from the paycheck protection program loan ( `` ppp loan `` ) as a government grant . please see note 9 - cares act for more information on the ppp loan and the paycheck protection program ( `` ppp `` ) . the grant was recognized during the covered period of the ppp loan in the second quarter of 2020 as the related payroll costs were incurred , and the company has complied with the forgiveness conditions attached to the ppp loan . general and administrative general and administrative expenses for the year ended december 31 , 2020 increased $ 1.5 million to $ 3.0 million , as compared to $ 1.5 million for the year ended december 31 , 2019. the year-over-year increase is attributable to increases in employee headcount and general overhead increases associated with the increased headcount . general overhead costs include such items as software expense and non-capitalized computer expenses . sales and marketing sales and marketing expenses was $ 661.0 thousand and $ 383.0 thousand for the years ended december 31 , 2020 and 2019 , respectively . the increase is attributable to increased sales development programs launched by our environmental business unit to grow the business . the increase in sale development costs has helped drive our 19.1 % $ 1.1 million increase in real estate services revenue year over year . interest expense for the years ended december 31 , 2020 and 2019 non-capitalized interest expense was $ 379.0 thousand and $ 474.0 thousand , respectively . this was a decrease of 20.0 % . the $ 95.0 thousand decrease was primarily related to the retiring of the comstock growth fund loan in 2020 that carried a higher interest rate than the cds note , partially offset by the april 30 , 2019 master transfer agreement ( “ mta ” ) . prior to the mta certain interest expense was capitalized to homebuilding projects and expensed when the projects were sold . after the mta this interest expense story_separator_special_tag compensation costs for share-based grants are recognized on a straight-line basis over the requisite service period for the entire award ( from the date of grant through the period of the last separately vesting portion of the grant ) . the fair value of each option award is calculated on the date of grant using the black-scholes option pricing model which includes certain subjective assumptions . expected volatilities are calculated based on our historical trading activities . we recognize forfeitures as they occur . the risk-free rate for the periods is based on the u.s. treasury rates in effect at the time of grant . the expected term of options is based on the company 's historical experience . income taxes income taxes are accounted for under the asset and liability method in accordance with asc 740 , accounting for income taxes . deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date . we provide a valuation allowance when we consider it “ more likely than not ” ( greater than a 50 % probability ) that a deferred income tax asset will not be fully recovered . adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the consolidated statement of operations . results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 revenue – asset management revenue from asset management for the years ended december 31 , 2020 and 2019 was $ 21.9 million and $ 19.6 million , respectively . the 11.8 % year over year growth of $ 2.3 million in revenue was primarily due to increased headcount and other costs that are reimbursable from comstock development services ( `` cds `` ) under the 2019 ama and the other asset management agreements . the reimbursable costs are recognized as revenue in the period in which the related costs are incurred . the increased headcount and associated personnel costs are primarily attributable to the additional real estate assets being managed along with the additional management agreements year over year . please see note 2 - summary of significant accounting policies for more information on the additional management agreements . revenue – real estate services revenue from real estate services for the years ended december 31 , 2020 and 2019 was $ 6.8 million and $ 5.7 million , respectively . the 19.1 % increase of $ 1.1 million is primarily attributable to continued organic revenue growth within our comstock environmental business , partially offset by a decrease in closing financing transactions which generated incremental revenue of $ 0.6 million and $ 1.1 million during the years ended december 31 , 2020 and 2019 , respectively . direct costs – asset management direct costs – asset management for the years ended december 31 , 2020 and 2019 was $ 18.4 million and $ 16.6 million , respectively . this 11.4 % increase of $ 1.9 million was primarily related to increased personnel expense from headcount increases as well as from the continued growth of our asset management operations . 12 direct costs – real estate services direct costs – real estate services decreased by $ 0.5 million to $ 4.1 million during the year ended december 31 , 2020 , as compared to $ 4.6 million during the year ended december 31 , 2019. the decrease is primarily due to the recognition of $ 419 thousand in direct costs related to the real estate services segment from the paycheck protection program loan ( `` ppp loan `` ) as a government grant . please see note 9 - cares act for more information on the ppp loan and the paycheck protection program ( `` ppp `` ) . the grant was recognized during the covered period of the ppp loan in the second quarter of 2020 as the related payroll costs were incurred , and the company has complied with the forgiveness conditions attached to the ppp loan . general and administrative general and administrative expenses for the year ended december 31 , 2020 increased $ 1.5 million to $ 3.0 million , as compared to $ 1.5 million for the year ended december 31 , 2019. the year-over-year increase is attributable to increases in employee headcount and general overhead increases associated with the increased headcount . general overhead costs include such items as software expense and non-capitalized computer expenses . sales and marketing sales and marketing expenses was $ 661.0 thousand and $ 383.0 thousand for the years ended december 31 , 2020 and 2019 , respectively . the increase is attributable to increased sales development programs launched by our environmental business unit to grow the business . the increase in sale development costs has helped drive our 19.1 % $ 1.1 million increase in real estate services revenue year over year . interest expense for the years ended december 31 , 2020 and 2019 non-capitalized interest expense was $ 379.0 thousand and $ 474.0 thousand , respectively . this was a decrease of 20.0 % . the $ 95.0 thousand decrease was primarily related to the retiring of the comstock growth fund loan in 2020 that carried a higher interest rate than the cds note , partially offset by the april 30 , 2019 master transfer agreement ( “ mta ” ) . prior to the mta certain interest expense was capitalized to homebuilding projects and expensed when the projects were sold . after the mta this interest expense
| liquidity and capital resources cash provided from continuing operations in 2020 was $ 240.6 million , compared with $ 238.3 million in prior year . cash flows provided from operations in 2020 were principally used to repay debt , fund capital expenditures , acquire assets , repurchase shares and to pay the company 's dividend to common shareholders . the company 's intention is to use excess cash flow for investments in growth , continued debt reduction and selective share repurchases . on may 9 , 2014 , in connection with the acquisition of amcol international corporation ( “ 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 ” ) . on june 23 , 2015 , the company entered into an amendment ( the “ first amendment ” ) to the credit agreement to reprice the $ 1.378 billion then outstanding on the term facility . as amended , the term facility had a $ 1.078 billion floating rate tranche and a $ 300 million fixed rate tranche . on february 14 , 2017 , the company entered into an amendment ( the “ second amendment ” ) to the credit agreement to reprice the $ 788 million floating rate tranche then outstanding , which extended the maturity and lowered the interest costs by 75 basis points . on april 18 , 2018 , the company entered into an amendment ( the “ third amendment ” ) to the credit agreement to refinance its then existing senior secured revolving credit facility . in connection with the third amendment , the existing senior secured revolving credit facility was replaced with a new revolving credit facility with $ 300 million of aggregate commitments ( the “ revolving credit facility ” and , together with the term facility , the “ senior secured credit facilities ” ) .
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compensation costs for share-based grants are recognized on a straight-line basis over the requisite service period for the entire award ( from the date of grant through the period of the last separately vesting portion of the grant ) . the fair value of each option award is calculated on the date of grant using the black-scholes option pricing model which includes certain subjective assumptions . expected volatilities are calculated based on our historical trading activities . we recognize forfeitures as they occur . the risk-free rate for the periods is based on the u.s. treasury rates in effect at the time of grant . the expected term of options is based on the company 's historical experience . income taxes income taxes are accounted for under the asset and liability method in accordance with asc 740 , accounting for income taxes . deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date . we provide a valuation allowance when we consider it “ more likely than not ” ( greater than a 50 % probability ) that a deferred income tax asset will not be fully recovered . adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the consolidated statement of operations . results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 revenue – asset management revenue from asset management for the years ended december 31 , 2020 and 2019 was $ 21.9 million and $ 19.6 million , respectively . the 11.8 % year over year growth of $ 2.3 million in revenue was primarily due to increased headcount and other costs that are reimbursable from comstock development services ( `` cds `` ) under the 2019 ama and the other asset management agreements . the reimbursable costs are recognized as revenue in the period in which the related costs are incurred . the increased headcount and associated personnel costs are primarily attributable to the additional real estate assets being managed along with the additional management agreements year over year . please see note 2 - summary of significant accounting policies for more information on the additional management agreements . revenue – real estate services revenue from real estate services for the years ended december 31 , 2020 and 2019 was $ 6.8 million and $ 5.7 million , respectively . the 19.1 % increase of $ 1.1 million is primarily attributable to continued organic revenue growth within our comstock environmental business , partially offset by a decrease in closing financing transactions which generated incremental revenue of $ 0.6 million and $ 1.1 million during the years ended december 31 , 2020 and 2019 , respectively . direct costs – asset management direct costs – asset management for the years ended december 31 , 2020 and 2019 was $ 18.4 million and $ 16.6 million , respectively . this 11.4 % increase of $ 1.9 million was primarily related to increased personnel expense from headcount increases as well as from the continued growth of our asset management operations . 12 direct costs – real estate services direct costs – real estate services decreased by $ 0.5 million to $ 4.1 million during the year ended december 31 , 2020 , as compared to $ 4.6 million during the year ended december 31 , 2019. the decrease is primarily due to the recognition of $ 419 thousand in direct costs related to the real estate services segment from the paycheck protection program loan ( `` ppp loan `` ) as a government grant . please see note 9 - cares act for more information on the ppp loan and the paycheck protection program ( `` ppp `` ) . the grant was recognized during the covered period of the ppp loan in the second quarter of 2020 as the related payroll costs were incurred , and the company has complied with the forgiveness conditions attached to the ppp loan . general and administrative general and administrative expenses for the year ended december 31 , 2020 increased $ 1.5 million to $ 3.0 million , as compared to $ 1.5 million for the year ended december 31 , 2019. the year-over-year increase is attributable to increases in employee headcount and general overhead increases associated with the increased headcount . general overhead costs include such items as software expense and non-capitalized computer expenses . sales and marketing sales and marketing expenses was $ 661.0 thousand and $ 383.0 thousand for the years ended december 31 , 2020 and 2019 , respectively . the increase is attributable to increased sales development programs launched by our environmental business unit to grow the business . the increase in sale development costs has helped drive our 19.1 % $ 1.1 million increase in real estate services revenue year over year . interest expense for the years ended december 31 , 2020 and 2019 non-capitalized interest expense was $ 379.0 thousand and $ 474.0 thousand , respectively . this was a decrease of 20.0 % . the $ 95.0 thousand decrease was primarily related to the retiring of the comstock growth fund loan in 2020 that carried a higher interest rate than the cds note , partially offset by the april 30 , 2019 master transfer agreement ( “ mta ” ) . prior to the mta certain interest expense was capitalized to homebuilding projects and expensed when the projects were sold . after the mta this interest expense story_separator_special_tag compensation costs for share-based grants are recognized on a straight-line basis over the requisite service period for the entire award ( from the date of grant through the period of the last separately vesting portion of the grant ) . the fair value of each option award is calculated on the date of grant using the black-scholes option pricing model which includes certain subjective assumptions . expected volatilities are calculated based on our historical trading activities . we recognize forfeitures as they occur . the risk-free rate for the periods is based on the u.s. treasury rates in effect at the time of grant . the expected term of options is based on the company 's historical experience . income taxes income taxes are accounted for under the asset and liability method in accordance with asc 740 , accounting for income taxes . deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date . we provide a valuation allowance when we consider it “ more likely than not ” ( greater than a 50 % probability ) that a deferred income tax asset will not be fully recovered . adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the consolidated statement of operations . results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 revenue – asset management revenue from asset management for the years ended december 31 , 2020 and 2019 was $ 21.9 million and $ 19.6 million , respectively . the 11.8 % year over year growth of $ 2.3 million in revenue was primarily due to increased headcount and other costs that are reimbursable from comstock development services ( `` cds `` ) under the 2019 ama and the other asset management agreements . the reimbursable costs are recognized as revenue in the period in which the related costs are incurred . the increased headcount and associated personnel costs are primarily attributable to the additional real estate assets being managed along with the additional management agreements year over year . please see note 2 - summary of significant accounting policies for more information on the additional management agreements . revenue – real estate services revenue from real estate services for the years ended december 31 , 2020 and 2019 was $ 6.8 million and $ 5.7 million , respectively . the 19.1 % increase of $ 1.1 million is primarily attributable to continued organic revenue growth within our comstock environmental business , partially offset by a decrease in closing financing transactions which generated incremental revenue of $ 0.6 million and $ 1.1 million during the years ended december 31 , 2020 and 2019 , respectively . direct costs – asset management direct costs – asset management for the years ended december 31 , 2020 and 2019 was $ 18.4 million and $ 16.6 million , respectively . this 11.4 % increase of $ 1.9 million was primarily related to increased personnel expense from headcount increases as well as from the continued growth of our asset management operations . 12 direct costs – real estate services direct costs – real estate services decreased by $ 0.5 million to $ 4.1 million during the year ended december 31 , 2020 , as compared to $ 4.6 million during the year ended december 31 , 2019. the decrease is primarily due to the recognition of $ 419 thousand in direct costs related to the real estate services segment from the paycheck protection program loan ( `` ppp loan `` ) as a government grant . please see note 9 - cares act for more information on the ppp loan and the paycheck protection program ( `` ppp `` ) . the grant was recognized during the covered period of the ppp loan in the second quarter of 2020 as the related payroll costs were incurred , and the company has complied with the forgiveness conditions attached to the ppp loan . general and administrative general and administrative expenses for the year ended december 31 , 2020 increased $ 1.5 million to $ 3.0 million , as compared to $ 1.5 million for the year ended december 31 , 2019. the year-over-year increase is attributable to increases in employee headcount and general overhead increases associated with the increased headcount . general overhead costs include such items as software expense and non-capitalized computer expenses . sales and marketing sales and marketing expenses was $ 661.0 thousand and $ 383.0 thousand for the years ended december 31 , 2020 and 2019 , respectively . the increase is attributable to increased sales development programs launched by our environmental business unit to grow the business . the increase in sale development costs has helped drive our 19.1 % $ 1.1 million increase in real estate services revenue year over year . interest expense for the years ended december 31 , 2020 and 2019 non-capitalized interest expense was $ 379.0 thousand and $ 474.0 thousand , respectively . this was a decrease of 20.0 % . the $ 95.0 thousand decrease was primarily related to the retiring of the comstock growth fund loan in 2020 that carried a higher interest rate than the cds note , partially offset by the april 30 , 2019 master transfer agreement ( “ mta ” ) . prior to the mta certain interest expense was capitalized to homebuilding projects and expensed when the projects were sold . after the mta this interest expense
| liquidity and capital resources we finance our asset management and real estate services operations , capital expenditures , and business acquisitions with internally generated funds , borrowings from our credit facilities and long-term debt . pursuant to the master transfer agreement ( the `` mta '' ) , the company transferred to cds management of its class a membership interests in investors x , the entity owning the company 's residual homebuilding operations in exchange for residual cash flows . the associated debt obligations were also transferred to cds . see note 8 in the accompanying consolidated financial statements for more details on our debt and credit facilities . on march 19 , 2020 , the company entered into a revolving capital line of credit agreement ( the “ loan documents ” ) with cds , pursuant to which the company secured a $ 10.0 million capital line of credit ( the “ revolver ” ) . under the terms of the loan documents , the revolver provides for an initial variable interest rate of the wsj prime rate plus 1.00 % per annum on advances made under the revolver , payable monthly in arrears . the five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by cds . on march 27 , 2020 the company borrowed $ 5.5 million under the revolver . the $ 5.5 million borrowing has a maturity date of april 30 , 2023. on april 10 , 2020 , the capital provided to the company by the revolver was utilized to retire all of the company 's 10 % corporate indebtedness maturing in 2020 owed to comstock growth fund , l.c .
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electric utility 's total margin represents total revenues less total cost of sales and electric utility gross receipts taxes , of $ 4.8 million and $ 5.6 million during fiscal 2016 and fiscal 2015 , respectively . gross receipt taxes are included in taxes other than income taxes on the consolidated statements of income . ( b ) deviation from average heating degree days for the 15-year period 2000-2014 based upon weather statistics provided by the national oceanic and atmospheric administration ( “ noaa ” ) for airports located within gas utility 's service territory . ( c ) amounts exclude png gas ' heating , ventilation and air-conditioning service business sold in june 2015 ( see note 16 to consolidated financial statements ) . temperatures in gas utility 's service territory during fiscal 2016 based upon heating degree days were 13.6 % warmer than normal and 17.8 % warmer than fiscal 2015. in particular , gas utility temperatures in the critical heating-season month of december were 37 % warmer than normal . gas utility core market volumes declined 15.1 bcf ( 18.6 % ) reflecting the effects of the significantly warmer weather . total gas utility fiscal 2016 distribution system throughput was about equal to fiscal 2015 as the lower core market volumes were substantially offset by higher large firm delivery service volumes . gas utility 's core market customers comprise firm- residential , commercial and industrial ( “ retail core-market ” ) customers who purchase their gas from gas utility and , to a much lesser extent , residential and small commercial customers who purchase their gas from others . electric utility kilowatt-hour sales were 4.8 % lower than in the prior year principally reflecting the impact of the warmer weather on heating-related sales . ugi utilities revenues decreased $ 273.1 million principally reflecting a $ 255.7 million decrease in gas utility revenues and a $ 16.5 million decrease in electric utility revenues . the lower gas utility revenues principally reflect a decrease in core market revenues ( $ 203.1 million ) and lower off-system sales revenues ( $ 51.4 million ) . the $ 203.1 million decrease in fiscal 2016 gas utility core market revenues reflects the effects of the lower core market throughput ( $ 135.4 million ) and lower average pgc rates ( $ 67.7 million ) . the lower electric utility revenues principally resulted from lower ds rates ( $ 8.0 million ) , lower sales 15 volumes ( $ 5.4 million ) and lower transmission revenue ( $ 2.6 million ) . because gas utility and electric utility are subject to reconcilable pgc and ds recovery mechanisms , increases or decreases in the actual cost of gas or electricity associated with customers who purchase their gas or electricity from ugi utilities impact revenues and cost of sales but have no direct effect on retail core-market margin ( see note 4 to consolidated financial statements for a discussion of these recovery mechanisms ) . ugi utilities cost of sales was $ 289.8 million in fiscal 2016 compared with $ 510.8 million in fiscal 2015 principally reflecting the combined effects of the lower average gas utility pgc rates ( $ 92.3 million ) , lower cost of sales associated with gas utility off-system sales ( $ 51.4 million ) and lower gas utility retail core-market volumes sold ( $ 67.5 million ) . electric utility cost of sales was $ 11.5 million lower reflecting lower ds rates ( $ 8.5 million ) and the lower volumes sold . ugi utilities fiscal 2016 total margin decreased $ 51.3 million principally reflecting lower gas utility total margin from core market customers ( $ 43.3 million ) . the decrease in gas utility core market margin reflects the lower core market throughput . electric utility total margin decreased $ 4.2 million principally reflecting the lower volume sales as a result of the warmer fiscal 2016 weather and the lower transmission revenue . ugi utilities operating income and income before income taxes decreased $ 40.8 million and $ 37.3 million , respectively . the decreases in operating income and income before income taxes principally reflects the decrease in total margin ( $ 51.3 million ) , higher depreciation expense ( $ 4.4 million ) and lower other operating income ( $ 10.9 million ) which includes , among other things , higher environmental matters expense ( $ 4.1 million ) , lower margin from off-system sales ( $ 2.2 million ) , lower revenue from construction services ( $ 2.1 million ) and higher interest on pgc overcollections ( $ 1.1 million ) . these were partially offset by operating and administrative expenses that were $ 25.6 million lower than the prior year primarily reflecting lower net preliminary development stage expenses associated with an information technology ( “ it ” ) project ( $ 8.6 million ) , including the year-over-year impact of the current year capitalization of $ 5.4 million of such it costs expensed in prior years ( see note 4 to consolidated financial statements ) , and , to a lesser extent , lower uncollectible accounts ( $ 5.7 million ) , system maintenance expenses ( $ 4.8 million ) and employee benefits ( $ 4.7 million ) . interest expense and income taxes . our interest expense in fiscal 2016 was $ 3.5 million lower than in fiscal 2015 principally reflecting ugi utilities ' lower average long-term debt outstanding and lower average interest rates . our effective income tax rate in fiscal 2016 was slightly higher than in the prior year . fiscal 2015 compared with fiscal 2014 replace_table_token_1_th ( a ) gas utility 's total margin represents total revenues less total cost of sales . electric utility 's total margin represents total revenues less total cost of sales and electric utility gross receipts taxes , of $ 5.6 million and $ 5.8 million during fiscal 2015 and fiscal 2014 , respectively . story_separator_special_tag ugi utilities also transferred certain associated storage inventories upon the commencement of the scaas , receives a transfer of storage inventories at the end of the scaas , and makes payments associated with refilling storage inventories during the term of the scaas . energy services , in turn , provides a firm delivery service and makes certain payments to ugi utilities for its various obligations under the scaas . during fiscal 2016 , fiscal 2015 and fiscal 2014 , these payments were not material . ugi utilities incurred costs associated with energy services ' scaas totaling $ 12.7 million , $ 16.8 million and $ 38.3 million in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . in conjunction with the scaas , ugi utilities received security deposits from energy services . the amounts of such security deposits , which are included in other current liabilities on the consolidated balance sheets , were $ 8.1 million and $ 10.7 million at september 30 , 2016 and 2015 , respectively . ugi utilities reflects the historical cost of the gas storage inventories and any exchange receivable from energy services ( representing amounts of natural gas inventories used but not yet replenished by energy services ) on its balance sheet under the caption inventories . the carrying values of these gas storage inventories at september 30 , 2016 and 2015 , comprising approximately 4.6 bcf and 5.0 bcf of natural gas , were $ 11.1 million and $ 12.9 million , respectively . ugi utilities has gas supply and delivery service agreements with energy services pursuant to which energy services provides certain gas supply and related delivery service to gas utility primarily during the heating season months of november through march . the aggregate amount of these transactions ( exclusive of transactions pursuant to the scaas ) during fiscal 2016 , fiscal 2015 and fiscal 2014 totaled $ 63.3 million , $ 47.8 million and $ 35.8 million , respectively . 21 from time to time , the company sells natural gas or pipeline capacity to energy services . during fiscal 2016 , fiscal 2015 and fiscal 2014 , revenues associated with sales to energy services totaled $ 30.7 million , $ 79.2 million and $ 109.9 million , respectively . also from time to time , the company purchases natural gas , pipeline capacity and electricity from energy services ( in addition to those transactions already described above ) and purchases a firm storage service from ugi storage company , a subsidiary of energy services , under one-year agreements . during fiscal 2016 , fiscal 2015 and fiscal 2014 , such purchases totaled $ 35.1 million , $ 85.4 million and $ 128.1 million , respectively . off-balance-sheet arrangements we do not have any off-balance-sheet arrangements that are expected to have an effect on the company 's financial condition , revenues and expenses , results of operations , liquidity , capital expenditures or capital resources . market risk disclosures our primary market risk exposures are ( 1 ) commodity price risk and ( 2 ) interest rate risk . although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions , we do not use derivative financial and commodity instruments for speculative or trading purposes . commodity price risk gas utility 's tariffs contain clauses that permit recovery of all of the prudently incurred costs of natural gas it sells to its retail core-market customers , including the cost of financial instruments used to hedge purchased gas costs . the recovery clauses provide for periodic adjustments for the difference between the total amounts actually collected from customers through pgc rates and the recoverable costs incurred . because of this ratemaking mechanism , there is limited commodity price risk associated with our gas utility operations . gas utility uses derivative financial instruments including natural gas futures and option contracts traded on the new york mercantile exchange ( “ nymex ” ) to reduce volatility in the cost of gas it purchases for its retail core-market customers . the cost of these derivative financial instruments , net of any associated gains or losses , is included in gas utility 's pgc recovery mechanism . the change in market value of natural gas futures contracts can require daily deposits of cash in futures accounts . at september 30 , 2016 and 2015 , gas utility had $ 0.6 million and $ 6.6 million of restricted cash in brokerage accounts , respectively . at september 30 , 2016 and 2015 , the fair values of our natural gas futures and option contracts were gains and ( losses ) of $ 4.3 million and $ ( 3.3 ) million , respectively . electric utility 's ds tariffs contain clauses which permit recovery of all prudently incurred power costs , including the cost of financial instruments used to hedge electricity costs , through the application of ds rates . because of this ratemaking mechanism , there is limited power cost risk , including the cost of financial transmission rights ( “ ftrs ” ) and forward electricity purchase contracts , associated with our electric utility operations . at september 30 , 2016 , all of our electric utility 's forward electricity purchase contracts were subject to the normal purchase and normal sale ( “ npns ” ) exception . in addition , gas utility and electric utility from time to time enter into exchange-traded gasoline futures contracts for a portion of gasoline volumes expected to be used in their operations . these gasoline futures contracts are recorded at fair value with changes in fair value reflected in operating expenses and other income . the amount of unrealized gains on these contracts and associated volumes under contract at september 30 , 2016 and 2015 , were not material . interest rate risk we have both fixed-rate debt and variable rate debt . changes in interest rates impact the cash flows
| liquidity and capital resources we finance our asset management and real estate services operations , capital expenditures , and business acquisitions with internally generated funds , borrowings from our credit facilities and long-term debt . pursuant to the master transfer agreement ( the `` mta '' ) , the company transferred to cds management of its class a membership interests in investors x , the entity owning the company 's residual homebuilding operations in exchange for residual cash flows . the associated debt obligations were also transferred to cds . see note 8 in the accompanying consolidated financial statements for more details on our debt and credit facilities . on march 19 , 2020 , the company entered into a revolving capital line of credit agreement ( the “ loan documents ” ) with cds , pursuant to which the company secured a $ 10.0 million capital line of credit ( the “ revolver ” ) . under the terms of the loan documents , the revolver provides for an initial variable interest rate of the wsj prime rate plus 1.00 % per annum on advances made under the revolver , payable monthly in arrears . the five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by cds . on march 27 , 2020 the company borrowed $ 5.5 million under the revolver . the $ 5.5 million borrowing has a maturity date of april 30 , 2023. on april 10 , 2020 , the capital provided to the company by the revolver was utilized to retire all of the company 's 10 % corporate indebtedness maturing in 2020 owed to comstock growth fund , l.c .
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electric utility 's total margin represents total revenues less total cost of sales and electric utility gross receipts taxes , of $ 4.8 million and $ 5.6 million during fiscal 2016 and fiscal 2015 , respectively . gross receipt taxes are included in taxes other than income taxes on the consolidated statements of income . ( b ) deviation from average heating degree days for the 15-year period 2000-2014 based upon weather statistics provided by the national oceanic and atmospheric administration ( “ noaa ” ) for airports located within gas utility 's service territory . ( c ) amounts exclude png gas ' heating , ventilation and air-conditioning service business sold in june 2015 ( see note 16 to consolidated financial statements ) . temperatures in gas utility 's service territory during fiscal 2016 based upon heating degree days were 13.6 % warmer than normal and 17.8 % warmer than fiscal 2015. in particular , gas utility temperatures in the critical heating-season month of december were 37 % warmer than normal . gas utility core market volumes declined 15.1 bcf ( 18.6 % ) reflecting the effects of the significantly warmer weather . total gas utility fiscal 2016 distribution system throughput was about equal to fiscal 2015 as the lower core market volumes were substantially offset by higher large firm delivery service volumes . gas utility 's core market customers comprise firm- residential , commercial and industrial ( “ retail core-market ” ) customers who purchase their gas from gas utility and , to a much lesser extent , residential and small commercial customers who purchase their gas from others . electric utility kilowatt-hour sales were 4.8 % lower than in the prior year principally reflecting the impact of the warmer weather on heating-related sales . ugi utilities revenues decreased $ 273.1 million principally reflecting a $ 255.7 million decrease in gas utility revenues and a $ 16.5 million decrease in electric utility revenues . the lower gas utility revenues principally reflect a decrease in core market revenues ( $ 203.1 million ) and lower off-system sales revenues ( $ 51.4 million ) . the $ 203.1 million decrease in fiscal 2016 gas utility core market revenues reflects the effects of the lower core market throughput ( $ 135.4 million ) and lower average pgc rates ( $ 67.7 million ) . the lower electric utility revenues principally resulted from lower ds rates ( $ 8.0 million ) , lower sales 15 volumes ( $ 5.4 million ) and lower transmission revenue ( $ 2.6 million ) . because gas utility and electric utility are subject to reconcilable pgc and ds recovery mechanisms , increases or decreases in the actual cost of gas or electricity associated with customers who purchase their gas or electricity from ugi utilities impact revenues and cost of sales but have no direct effect on retail core-market margin ( see note 4 to consolidated financial statements for a discussion of these recovery mechanisms ) . ugi utilities cost of sales was $ 289.8 million in fiscal 2016 compared with $ 510.8 million in fiscal 2015 principally reflecting the combined effects of the lower average gas utility pgc rates ( $ 92.3 million ) , lower cost of sales associated with gas utility off-system sales ( $ 51.4 million ) and lower gas utility retail core-market volumes sold ( $ 67.5 million ) . electric utility cost of sales was $ 11.5 million lower reflecting lower ds rates ( $ 8.5 million ) and the lower volumes sold . ugi utilities fiscal 2016 total margin decreased $ 51.3 million principally reflecting lower gas utility total margin from core market customers ( $ 43.3 million ) . the decrease in gas utility core market margin reflects the lower core market throughput . electric utility total margin decreased $ 4.2 million principally reflecting the lower volume sales as a result of the warmer fiscal 2016 weather and the lower transmission revenue . ugi utilities operating income and income before income taxes decreased $ 40.8 million and $ 37.3 million , respectively . the decreases in operating income and income before income taxes principally reflects the decrease in total margin ( $ 51.3 million ) , higher depreciation expense ( $ 4.4 million ) and lower other operating income ( $ 10.9 million ) which includes , among other things , higher environmental matters expense ( $ 4.1 million ) , lower margin from off-system sales ( $ 2.2 million ) , lower revenue from construction services ( $ 2.1 million ) and higher interest on pgc overcollections ( $ 1.1 million ) . these were partially offset by operating and administrative expenses that were $ 25.6 million lower than the prior year primarily reflecting lower net preliminary development stage expenses associated with an information technology ( “ it ” ) project ( $ 8.6 million ) , including the year-over-year impact of the current year capitalization of $ 5.4 million of such it costs expensed in prior years ( see note 4 to consolidated financial statements ) , and , to a lesser extent , lower uncollectible accounts ( $ 5.7 million ) , system maintenance expenses ( $ 4.8 million ) and employee benefits ( $ 4.7 million ) . interest expense and income taxes . our interest expense in fiscal 2016 was $ 3.5 million lower than in fiscal 2015 principally reflecting ugi utilities ' lower average long-term debt outstanding and lower average interest rates . our effective income tax rate in fiscal 2016 was slightly higher than in the prior year . fiscal 2015 compared with fiscal 2014 replace_table_token_1_th ( a ) gas utility 's total margin represents total revenues less total cost of sales . electric utility 's total margin represents total revenues less total cost of sales and electric utility gross receipts taxes , of $ 5.6 million and $ 5.8 million during fiscal 2015 and fiscal 2014 , respectively . story_separator_special_tag ugi utilities also transferred certain associated storage inventories upon the commencement of the scaas , receives a transfer of storage inventories at the end of the scaas , and makes payments associated with refilling storage inventories during the term of the scaas . energy services , in turn , provides a firm delivery service and makes certain payments to ugi utilities for its various obligations under the scaas . during fiscal 2016 , fiscal 2015 and fiscal 2014 , these payments were not material . ugi utilities incurred costs associated with energy services ' scaas totaling $ 12.7 million , $ 16.8 million and $ 38.3 million in fiscal 2016 , fiscal 2015 and fiscal 2014 , respectively . in conjunction with the scaas , ugi utilities received security deposits from energy services . the amounts of such security deposits , which are included in other current liabilities on the consolidated balance sheets , were $ 8.1 million and $ 10.7 million at september 30 , 2016 and 2015 , respectively . ugi utilities reflects the historical cost of the gas storage inventories and any exchange receivable from energy services ( representing amounts of natural gas inventories used but not yet replenished by energy services ) on its balance sheet under the caption inventories . the carrying values of these gas storage inventories at september 30 , 2016 and 2015 , comprising approximately 4.6 bcf and 5.0 bcf of natural gas , were $ 11.1 million and $ 12.9 million , respectively . ugi utilities has gas supply and delivery service agreements with energy services pursuant to which energy services provides certain gas supply and related delivery service to gas utility primarily during the heating season months of november through march . the aggregate amount of these transactions ( exclusive of transactions pursuant to the scaas ) during fiscal 2016 , fiscal 2015 and fiscal 2014 totaled $ 63.3 million , $ 47.8 million and $ 35.8 million , respectively . 21 from time to time , the company sells natural gas or pipeline capacity to energy services . during fiscal 2016 , fiscal 2015 and fiscal 2014 , revenues associated with sales to energy services totaled $ 30.7 million , $ 79.2 million and $ 109.9 million , respectively . also from time to time , the company purchases natural gas , pipeline capacity and electricity from energy services ( in addition to those transactions already described above ) and purchases a firm storage service from ugi storage company , a subsidiary of energy services , under one-year agreements . during fiscal 2016 , fiscal 2015 and fiscal 2014 , such purchases totaled $ 35.1 million , $ 85.4 million and $ 128.1 million , respectively . off-balance-sheet arrangements we do not have any off-balance-sheet arrangements that are expected to have an effect on the company 's financial condition , revenues and expenses , results of operations , liquidity , capital expenditures or capital resources . market risk disclosures our primary market risk exposures are ( 1 ) commodity price risk and ( 2 ) interest rate risk . although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions , we do not use derivative financial and commodity instruments for speculative or trading purposes . commodity price risk gas utility 's tariffs contain clauses that permit recovery of all of the prudently incurred costs of natural gas it sells to its retail core-market customers , including the cost of financial instruments used to hedge purchased gas costs . the recovery clauses provide for periodic adjustments for the difference between the total amounts actually collected from customers through pgc rates and the recoverable costs incurred . because of this ratemaking mechanism , there is limited commodity price risk associated with our gas utility operations . gas utility uses derivative financial instruments including natural gas futures and option contracts traded on the new york mercantile exchange ( “ nymex ” ) to reduce volatility in the cost of gas it purchases for its retail core-market customers . the cost of these derivative financial instruments , net of any associated gains or losses , is included in gas utility 's pgc recovery mechanism . the change in market value of natural gas futures contracts can require daily deposits of cash in futures accounts . at september 30 , 2016 and 2015 , gas utility had $ 0.6 million and $ 6.6 million of restricted cash in brokerage accounts , respectively . at september 30 , 2016 and 2015 , the fair values of our natural gas futures and option contracts were gains and ( losses ) of $ 4.3 million and $ ( 3.3 ) million , respectively . electric utility 's ds tariffs contain clauses which permit recovery of all prudently incurred power costs , including the cost of financial instruments used to hedge electricity costs , through the application of ds rates . because of this ratemaking mechanism , there is limited power cost risk , including the cost of financial transmission rights ( “ ftrs ” ) and forward electricity purchase contracts , associated with our electric utility operations . at september 30 , 2016 , all of our electric utility 's forward electricity purchase contracts were subject to the normal purchase and normal sale ( “ npns ” ) exception . in addition , gas utility and electric utility from time to time enter into exchange-traded gasoline futures contracts for a portion of gasoline volumes expected to be used in their operations . these gasoline futures contracts are recorded at fair value with changes in fair value reflected in operating expenses and other income . the amount of unrealized gains on these contracts and associated volumes under contract at september 30 , 2016 and 2015 , were not material . interest rate risk we have both fixed-rate debt and variable rate debt . changes in interest rates impact the cash flows
| capitalization and liquidity ugi utilities ' total debt outstanding was $ 783.9 million at september 30 , 2016 , which includes $ 112.5 million of short-term borrowings , compared with total debt outstanding of $ 691.5 million at september 30 , 2015 , which includes $ 71.7 million of short-term borrowings . ugi utilities ' total long-term debt outstanding at september 30 , 2016 , comprises $ 575.0 million of senior notes and $ 100.0 million of medium-term notes , and is net of $ 3.6 million of unamortized debt issuance costs . in april 2016 , ugi utilities entered into a note purchase agreement ( the “ 2016 note purchase agreement ” ) with a consortium of lenders . pursuant to the 2016 note purchase agreement , ugi utilities issued $ 100 million aggregate principal amount of 2.95 % senior notes due june 2026 and $ 200 million aggregate principal amount of 4.12 % senior notes due september 2046 in june 2016 and september 2016 , respectively . in october 2016 , ugi utilities issued $ 100 million aggregate principal amount of 4.12 % senior notes due in october 2046. the net proceeds of the issuance of these senior notes were used 1 ) to repay ugi utilities ' maturing 5.75 % senior notes , 7.37 % medium-term notes and 5.64 % medium-term notes ; 2 ) to provide additional financing for ugi utilities ' infrastructure replacement and betterment capital program and information technology initiatives ; and 3 ) for general corporate purposes . 17 ugi utilities has a credit agreement ( the “ credit agreement ” ) with a group of banks providing for borrowings of up to $ 300 million ( including a $ 100 million sublimit for letters of credit ) which expires in march 2020. borrowings under the credit agreement are classified as short-term borrowings on the consolidated balance sheets . during fiscal 2016 and fiscal 2015 , average daily short-term borrowings under the credit agreement were $ 150.8 million and $ 61.7 million , respectively , and peak short-term borrowings totaled $ 232.0 million and $ 163.6 million , respectively .
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unlike the automotive industry , commercial vehicle oems generally afford the end-user the ability to specify many of the component parts that will be used to manufacture the commercial vehicle , including a wide variety of cab interior styles and colors , the brand and type of seats , type of seat fabric and color and specific mirror styling . in addition , certain of our products are only utilized in heavy-duty ( class 8 ) trucks , such as our storage systems , sleeper boxes , sleeper bunks and privacy curtains , and , as a result , changes in demand for heavy-duty ( class 8 ) trucks or the mix of options on a vehicle can have a greater impact on our business than changes in the overall demand for commercial vehicles . to the extent that demand for higher content vehicles increases or decreases , our revenues and gross profit will be impacted positively or negatively . demand for our construction products is dependent on the overall vehicle demand for new commercial vehicles in the global construction equipment market and generally follows certain economic conditions around the world . our products are primarily used in the medium/heavy construction equipment markets ( weighing over 12 metric tons ) . demand in the medium/heavy construction equipment market is typically related to the level of larger scale infrastructure development projects such as highways , dams , harbors , hospitals , airports and industrial development , as well as activity in the mining , forestry and other raw material based industries . oem demand for our products is directly correlated with new vehicle production . we generally compete for new business at the beginning of the development of a new vehicle platform and upon the redesign of existing programs . new platform development generally begins at least one to three years before the marketing of such models by our customers . contract durations for commercial vehicle products generally extend for the entire life of the platform , which is typically five to seven years . along with the u.s. , we have operations in europe , asia , australia and mexico . our operating results are , therefore , impacted by exchange rate fluctuations to the extent we translate our foreign operations from their local currencies into u.s. dollars . changes in these foreign currencies as compared to the u.s. dollar resulted in an approximately $ 1.7 million decrease in our revenues in 2013 as compared to 2012 and changes to these foreign currencies as compared to the u.s. dollar resulted in an approximately $ 4.2 million increase in our revenues in 2012 as compared to 2011. because our costs were generally impacted to the same degree as our revenue , this exchange rate fluctuation did not have a material impact on our net income in 2013 as compared to 2012 and in 2012 as compared to 2011. during 2013 , we conducted an in-depth evaluation of the company . that evaluation led to the identification of key initiatives intended to enhance the company 's growth prospects and profitability . as a part of this process , the company undertook a spans and layers analysis , resulting in a reduction in force ; all of which are expected to result in ongoing efficiencies and cost savings . management anticipates it will reinvest a significant part of those savings to implement a number of the identified initiatives . during 2014 , management plans to incorporate the initiatives it identified during the evaluation process into a comprehensive strategic plan intended to create a performance-based culture that is concentrated on becoming more efficient , more global , better centered on product development and more engaged with customers . the primary goals of the plan are expected to center on delivering increased organic growth , more fully developed sales and marketing efforts and deeper penetration of the chinese , north american and other world markets . as we formulate a plan to grow our business globally , we recognize customer expectations in markets outside the u.s. will be different in terms of technology , features and price point . to help drive this effort , we undertook a re-organization and began the implementation of several new market focused initiatives . we intend to continue examining acquisition candidates that meet our strategic growth criteria including the addition of new customers , diversified global expansion opportunities or technology acquisition and development opportunities . however , we currently anticipate more focus will be placed on our organic growth opportunities and global expansion plans than merger and acquisition activities . 41 recently issued accounting pronouncements see note 2 to our consolidated financial statements in item 8 in this annual report on form 10-k for a description of recently issued and or adopted accounting pronouncements . results of operations the table below sets forth certain operating data expressed as a percentage of revenues for the periods indicated : replace_table_token_9_th year ended december 31 , 2013 compared to year ended december 31 , 2012 revenues . revenues decreased $ 110.2 million , or 12.8 % , to $ 747.7 million for the year ended december 31 , 2013 from $ 857.9 million for the year ended december 31 , 2012. this change resulted primarily from : a 20 % decrease in oem north american heavy-duty ( class 8 ) truck production and fluctuations in production levels for other north american end markets resulting in approximately $ 85.0 million decrease in revenues ; a 23 % decrease in global construction production revenue driven by customer destocking resulting in approximately $ 45.7 million decrease in revenues ; a 43 % decrease in military production driven by a significant decline in us government military defense spending resulting in $ 11.7 million decrease in revenues ; a 24 % increase in oem bus resulting in a $ 5.0 million increase in revenues ; and a 59 % increase in other markets driven primarily by automotive story_separator_special_tag in addition , subject to certain exceptions , the 7.875 % notes indenture does not permit us to pay dividends on , redeem or repurchase our capital stock or make other restricted payments unless certain conditions are met , including ( i ) no default under the 7.875 % notes indenture has occurred and is continuing , ( ii ) we and our subsidiaries maintain a consolidated coverage ratio of 2.0 to 1.0 on a pro forma basis and ( iii ) the aggregate amount of the dividends or payments made under this restriction would not exceed 50 % of consolidated net income from october 1 , 2010 to the end of the most recent fiscal quarter ( or , if consolidated net income for such period is a deficit , minus 100 % of such deficit ) , plus cash proceeds received from certain issuances of capital stock , plus certain other amounts . these covenants are subject to important qualifications and exceptions set forth in the 7.875 % notes indenture . we were in compliance with these covenants as of december 31 , 2013. the 7.875 % notes indenture provides for events of default ( subject in certain cases to customary grace and cure periods ) which include , among others : nonpayment of principal or interest when due ; breach of covenants or other agreements in the 7.875 % notes indenture ; defaults in payment of certain other indebtedness ; certain events of bankruptcy or insolvency ; and certain defaults with respect to the security interests . generally , if an event of default occurs , the trustee or the holders of at least 25 % in principal amount of the then outstanding 7.875 % notes may declare the principal of and accrued but unpaid interest on all of the 7.875 % notes to be due and payable immediately . all provisions regarding remedies in an event of default are subject to the intercreditor agreement . we may redeem the 7.875 % notes , in whole or in part , at any time prior to april 15 , 2014 at a redemption price equal to 100 % of the principal amount , plus accrued and unpaid interest , if any , to the redemption date , plus the make-whole premium in the 7.875 % notes indenture . we evaluated the make-whole premium under asc 815-15 and determined that the premium is not required to be bifurcated from the 7.875 % notes and 48 accounted for as a separate derivative instrument . we may redeem the 7.875 % notes , in whole or in part , at any time on or after april 15 , 2014 at the optional redemption prices set forth in the 7.875 % notes indenture , plus accrued and unpaid interest , if any , to the redemption date . not more than once during each twelve-month period ending on april 15 , 2012 , april 15 , 2013 and april 15 , 2014 , we may redeem up to $ 25.0 million of the aggregate principal amount of the 7.875 % notes at a redemption price equal to 103 % of the principal amount , plus accrued and unpaid interest , if any , to the redemption date . in addition , at any time on or prior to april 15 , 2014 , on one or more occasions , we may redeem up to 35 % of the aggregate principal amount of the 7.875 % notes with the net proceeds of certain equity offerings , as described in the 7.875 % notes indenture , at a redemption price equal to 107.875 % of the principal amount thereof , plus accrued and unpaid interest , if any , to the redemption date . if we experience certain change of control events , holders of the 7.875 % notes may require us to repurchase all or part of their notes at 101 % of the principal amount thereof , plus accrued and unpaid interest , if any , to the repurchase date . covenants and liquidity we continue to operate in a challenging economic environment , and our ability to comply with the covenants in the second arls agreement may be affected in the future by economic or business conditions beyond our control . based on our current forecast , we believe that we will be able to maintain compliance with the fixed charge coverage ratio covenant , if applicable , and other covenants in the second arls agreement for the next twelve months ; however , no assurances can be given that we will be able to comply . we base our forecasts on historical experience , industry forecasts and various other assumptions that we believe are reasonable under the circumstances . if actual results are substantially different than our current forecast , or if we do not realize a significant portion of our planned cost savings or sustain sufficient cash or borrowing availability , we could be required to comply with our financial covenants , and there is no assurance that we would be able to comply with such financial covenants . if we do not comply with the financial and other covenants in the second arls agreement , and we are unable to obtain necessary waivers or amendments from the lender , we would be precluded from borrowing under the second arls agreement , which could have a material adverse effect on our business , financial condition and liquidity . if we are unable to borrow under the second arls agreement , we will need to meet our capital requirements using other sources and alternative sources of liquidity may not be available on acceptable terms . in addition , if we do not comply with the financial and other covenants in the second arls agreement , the lender could declare an event of default under the second arls agreement , and our indebtedness thereunder could be declared immediately due and payable
| capitalization and liquidity ugi utilities ' total debt outstanding was $ 783.9 million at september 30 , 2016 , which includes $ 112.5 million of short-term borrowings , compared with total debt outstanding of $ 691.5 million at september 30 , 2015 , which includes $ 71.7 million of short-term borrowings . ugi utilities ' total long-term debt outstanding at september 30 , 2016 , comprises $ 575.0 million of senior notes and $ 100.0 million of medium-term notes , and is net of $ 3.6 million of unamortized debt issuance costs . in april 2016 , ugi utilities entered into a note purchase agreement ( the “ 2016 note purchase agreement ” ) with a consortium of lenders . pursuant to the 2016 note purchase agreement , ugi utilities issued $ 100 million aggregate principal amount of 2.95 % senior notes due june 2026 and $ 200 million aggregate principal amount of 4.12 % senior notes due september 2046 in june 2016 and september 2016 , respectively . in october 2016 , ugi utilities issued $ 100 million aggregate principal amount of 4.12 % senior notes due in october 2046. the net proceeds of the issuance of these senior notes were used 1 ) to repay ugi utilities ' maturing 5.75 % senior notes , 7.37 % medium-term notes and 5.64 % medium-term notes ; 2 ) to provide additional financing for ugi utilities ' infrastructure replacement and betterment capital program and information technology initiatives ; and 3 ) for general corporate purposes . 17 ugi utilities has a credit agreement ( the “ credit agreement ” ) with a group of banks providing for borrowings of up to $ 300 million ( including a $ 100 million sublimit for letters of credit ) which expires in march 2020. borrowings under the credit agreement are classified as short-term borrowings on the consolidated balance sheets . during fiscal 2016 and fiscal 2015 , average daily short-term borrowings under the credit agreement were $ 150.8 million and $ 61.7 million , respectively , and peak short-term borrowings totaled $ 232.0 million and $ 163.6 million , respectively .
| 0 |
unlike the automotive industry , commercial vehicle oems generally afford the end-user the ability to specify many of the component parts that will be used to manufacture the commercial vehicle , including a wide variety of cab interior styles and colors , the brand and type of seats , type of seat fabric and color and specific mirror styling . in addition , certain of our products are only utilized in heavy-duty ( class 8 ) trucks , such as our storage systems , sleeper boxes , sleeper bunks and privacy curtains , and , as a result , changes in demand for heavy-duty ( class 8 ) trucks or the mix of options on a vehicle can have a greater impact on our business than changes in the overall demand for commercial vehicles . to the extent that demand for higher content vehicles increases or decreases , our revenues and gross profit will be impacted positively or negatively . demand for our construction products is dependent on the overall vehicle demand for new commercial vehicles in the global construction equipment market and generally follows certain economic conditions around the world . our products are primarily used in the medium/heavy construction equipment markets ( weighing over 12 metric tons ) . demand in the medium/heavy construction equipment market is typically related to the level of larger scale infrastructure development projects such as highways , dams , harbors , hospitals , airports and industrial development , as well as activity in the mining , forestry and other raw material based industries . oem demand for our products is directly correlated with new vehicle production . we generally compete for new business at the beginning of the development of a new vehicle platform and upon the redesign of existing programs . new platform development generally begins at least one to three years before the marketing of such models by our customers . contract durations for commercial vehicle products generally extend for the entire life of the platform , which is typically five to seven years . along with the u.s. , we have operations in europe , asia , australia and mexico . our operating results are , therefore , impacted by exchange rate fluctuations to the extent we translate our foreign operations from their local currencies into u.s. dollars . changes in these foreign currencies as compared to the u.s. dollar resulted in an approximately $ 1.7 million decrease in our revenues in 2013 as compared to 2012 and changes to these foreign currencies as compared to the u.s. dollar resulted in an approximately $ 4.2 million increase in our revenues in 2012 as compared to 2011. because our costs were generally impacted to the same degree as our revenue , this exchange rate fluctuation did not have a material impact on our net income in 2013 as compared to 2012 and in 2012 as compared to 2011. during 2013 , we conducted an in-depth evaluation of the company . that evaluation led to the identification of key initiatives intended to enhance the company 's growth prospects and profitability . as a part of this process , the company undertook a spans and layers analysis , resulting in a reduction in force ; all of which are expected to result in ongoing efficiencies and cost savings . management anticipates it will reinvest a significant part of those savings to implement a number of the identified initiatives . during 2014 , management plans to incorporate the initiatives it identified during the evaluation process into a comprehensive strategic plan intended to create a performance-based culture that is concentrated on becoming more efficient , more global , better centered on product development and more engaged with customers . the primary goals of the plan are expected to center on delivering increased organic growth , more fully developed sales and marketing efforts and deeper penetration of the chinese , north american and other world markets . as we formulate a plan to grow our business globally , we recognize customer expectations in markets outside the u.s. will be different in terms of technology , features and price point . to help drive this effort , we undertook a re-organization and began the implementation of several new market focused initiatives . we intend to continue examining acquisition candidates that meet our strategic growth criteria including the addition of new customers , diversified global expansion opportunities or technology acquisition and development opportunities . however , we currently anticipate more focus will be placed on our organic growth opportunities and global expansion plans than merger and acquisition activities . 41 recently issued accounting pronouncements see note 2 to our consolidated financial statements in item 8 in this annual report on form 10-k for a description of recently issued and or adopted accounting pronouncements . results of operations the table below sets forth certain operating data expressed as a percentage of revenues for the periods indicated : replace_table_token_9_th year ended december 31 , 2013 compared to year ended december 31 , 2012 revenues . revenues decreased $ 110.2 million , or 12.8 % , to $ 747.7 million for the year ended december 31 , 2013 from $ 857.9 million for the year ended december 31 , 2012. this change resulted primarily from : a 20 % decrease in oem north american heavy-duty ( class 8 ) truck production and fluctuations in production levels for other north american end markets resulting in approximately $ 85.0 million decrease in revenues ; a 23 % decrease in global construction production revenue driven by customer destocking resulting in approximately $ 45.7 million decrease in revenues ; a 43 % decrease in military production driven by a significant decline in us government military defense spending resulting in $ 11.7 million decrease in revenues ; a 24 % increase in oem bus resulting in a $ 5.0 million increase in revenues ; and a 59 % increase in other markets driven primarily by automotive story_separator_special_tag in addition , subject to certain exceptions , the 7.875 % notes indenture does not permit us to pay dividends on , redeem or repurchase our capital stock or make other restricted payments unless certain conditions are met , including ( i ) no default under the 7.875 % notes indenture has occurred and is continuing , ( ii ) we and our subsidiaries maintain a consolidated coverage ratio of 2.0 to 1.0 on a pro forma basis and ( iii ) the aggregate amount of the dividends or payments made under this restriction would not exceed 50 % of consolidated net income from october 1 , 2010 to the end of the most recent fiscal quarter ( or , if consolidated net income for such period is a deficit , minus 100 % of such deficit ) , plus cash proceeds received from certain issuances of capital stock , plus certain other amounts . these covenants are subject to important qualifications and exceptions set forth in the 7.875 % notes indenture . we were in compliance with these covenants as of december 31 , 2013. the 7.875 % notes indenture provides for events of default ( subject in certain cases to customary grace and cure periods ) which include , among others : nonpayment of principal or interest when due ; breach of covenants or other agreements in the 7.875 % notes indenture ; defaults in payment of certain other indebtedness ; certain events of bankruptcy or insolvency ; and certain defaults with respect to the security interests . generally , if an event of default occurs , the trustee or the holders of at least 25 % in principal amount of the then outstanding 7.875 % notes may declare the principal of and accrued but unpaid interest on all of the 7.875 % notes to be due and payable immediately . all provisions regarding remedies in an event of default are subject to the intercreditor agreement . we may redeem the 7.875 % notes , in whole or in part , at any time prior to april 15 , 2014 at a redemption price equal to 100 % of the principal amount , plus accrued and unpaid interest , if any , to the redemption date , plus the make-whole premium in the 7.875 % notes indenture . we evaluated the make-whole premium under asc 815-15 and determined that the premium is not required to be bifurcated from the 7.875 % notes and 48 accounted for as a separate derivative instrument . we may redeem the 7.875 % notes , in whole or in part , at any time on or after april 15 , 2014 at the optional redemption prices set forth in the 7.875 % notes indenture , plus accrued and unpaid interest , if any , to the redemption date . not more than once during each twelve-month period ending on april 15 , 2012 , april 15 , 2013 and april 15 , 2014 , we may redeem up to $ 25.0 million of the aggregate principal amount of the 7.875 % notes at a redemption price equal to 103 % of the principal amount , plus accrued and unpaid interest , if any , to the redemption date . in addition , at any time on or prior to april 15 , 2014 , on one or more occasions , we may redeem up to 35 % of the aggregate principal amount of the 7.875 % notes with the net proceeds of certain equity offerings , as described in the 7.875 % notes indenture , at a redemption price equal to 107.875 % of the principal amount thereof , plus accrued and unpaid interest , if any , to the redemption date . if we experience certain change of control events , holders of the 7.875 % notes may require us to repurchase all or part of their notes at 101 % of the principal amount thereof , plus accrued and unpaid interest , if any , to the repurchase date . covenants and liquidity we continue to operate in a challenging economic environment , and our ability to comply with the covenants in the second arls agreement may be affected in the future by economic or business conditions beyond our control . based on our current forecast , we believe that we will be able to maintain compliance with the fixed charge coverage ratio covenant , if applicable , and other covenants in the second arls agreement for the next twelve months ; however , no assurances can be given that we will be able to comply . we base our forecasts on historical experience , industry forecasts and various other assumptions that we believe are reasonable under the circumstances . if actual results are substantially different than our current forecast , or if we do not realize a significant portion of our planned cost savings or sustain sufficient cash or borrowing availability , we could be required to comply with our financial covenants , and there is no assurance that we would be able to comply with such financial covenants . if we do not comply with the financial and other covenants in the second arls agreement , and we are unable to obtain necessary waivers or amendments from the lender , we would be precluded from borrowing under the second arls agreement , which could have a material adverse effect on our business , financial condition and liquidity . if we are unable to borrow under the second arls agreement , we will need to meet our capital requirements using other sources and alternative sources of liquidity may not be available on acceptable terms . in addition , if we do not comply with the financial and other covenants in the second arls agreement , the lender could declare an event of default under the second arls agreement , and our indebtedness thereunder could be declared immediately due and payable
| liquidity and capital resources cash flows our primary sources of liquidity during the year ended december 31 , 2013 were cash generated from the sale of our various products to our customers throughout the year . we believe that cash from operations , existing cash reserves , and availability under our revolving credit facility will provide adequate funds for our working capital needs , planned capital expenditures and cash interest payments through 2014. however , no assurance can be given that this will be the case . we did not borrow under our revolving credit facility during 2013. for the year ended december 31 , 2013 , cash provided by operations was approximately $ 19.2 million compared to approximately $ 24.0 million in the year ended december 31 , 2012. this decrease was primarily the result of lower net income , partially offset by reductions in working capital employed as a consequence of the reduction in sales . cash flow from operations benefited by a reduction in the number of days on hand of inventory at december 31 , 2013 compared to december 31 , 2012. this improvement is principally a consequence of the decline in north american heavy duty ( class 8 ) build in the last half of 2012 that resulted in higher than normal inventory levels at year end . for the year ended december 31 , 2012 , cash provided by operations was approximately $ 24.0 million compared to approximately $ 7.8 million in the year ended december 31 , 2011. this increase was primarily the result of a reduction in accounts receivable , which was partially offset by higher inventory as production volumes increased and lower accounts payable .
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such factors , risks , uncertainties and assumptions include , but are not limited to , competitive and general economic conditions , both domestically and internationally ; changes in customer demands ; technological changes in our operations or in our industry ; dependence on customers ' required delivery schedules ; risks related to fluctuations in the company 's operating results from quarter to quarter ; risks related to international operations , including foreign currency fluctuations ; changes in the legal and regulatory environment ; changes in raw materials and commodity costs ; the effects of covid-19 ; and acts of terrorism , war , governmental action , natural disasters and other force majeure events . the cautionary statements made pursuant to the reform act herein and elsewhere by us should not be construed as exhaustive . we can not always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements . over time , our actual results , performance , or achievements will likely differ from the anticipated results , performance or achievements that are expressed or implied by our forward-looking statements , and such difference might be significant and harmful to our stockholders ' interest . many important factors that could cause such a difference are described under the caption “ risk factors , ” in item 1a of this annual report , which you should review carefully . management 's discussion and analysis introduction kewaunee scientific corporation is a recognized leader in the design , manufacture and installation of laboratory , healthcare and technical furniture products . the company 's corporate headquarters are located in statesville , north carolina . direct sales offices are located in the united states , india , and singapore . three manufacturing facilities are located in statesville serving the domestic and international markets , and one manufacturing facility is located in bangalore , india serving the indian , middle east and asian markets . kewaunee scientific corporation 's website is located at www.kewaunee.com . our products are primarily sold through purchase orders and contracts submitted by customers through our dealers and commissioned agents , a national distributor , and through competitive bids submitted by us and our subsidiaries . products are sold 10 principally to pharmaceutical , biotechnology , industrial , chemical and commercial research laboratories , educational institutions , healthcare institutions , governmental entities , manufacturing facilities and users of networking furniture . we consider the markets in which we compete to be highly competitive , with a significant amount of the business involving competitive public bidding . it is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates , as products are frequently to be installed in buildings yet to be constructed . changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale . since prices are normally quoted on a firm basis in the industry , we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product . the impact of such possible increases is considered when determining the sales price . the principal raw materials and products manufactured by others used in our products are cold-rolled carbon and stainless steel , hardwood lumbers and plywood , paint , chemicals , resins , hardware , plumbing and electrical fittings . such materials and products are purchased from multiple suppliers and are typically readily available . critical accounting policies in the ordinary course of business , we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the united states of america . actual results could differ significantly from those estimates . we believe that the following discussion addresses our most critical accounting policies , which are those that are most important to the portrayal of our financial condition and results of operations , and require management 's most difficult , subjective and complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . revenue recognition the company recognizes revenue when control of a good or service promised in a contract ( i.e . , performance obligation ) is transferred to a customer . control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service . the majority of the company 's revenues are recognized over time as the customer receives control as the company performs work under a contract . however , a portion of the company 's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract . allowance for doubtful accounts evaluation of the allowance for doubtful accounts involves management judgments and estimates . we evaluate the collectability of our trade accounts receivable based on a number of factors . in circumstances where management is aware of a customer 's inability to meet its financial obligations to us , or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected , a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected . story_separator_special_tag rates as discussed in note 5 of the notes to the consolidated financial statements included in item 8. net earnings attributable to the noncontrolling interest related to our subsidiaries that are not 100 % owned by the company were $ 63,000 and $ 159,000 for fiscal years 2020 and 2019 , respectively . the changes in the net earnings attributable to the noncontrolling interest for each year were due to changes in the levels of net income of the subsidiaries . net loss in fiscal year 2020 was $ 4,687,000 , or $ 1.70 per diluted share . net earnings in fiscal year 2019 were $ 1,529,000 , or $ 0.55 per diluted share . the decrease in earnings was attributable to the factors discussed above . story_separator_special_tag style= `` line-height:120 % ; padding-top:13px ; text-align : left ; font-size:10pt ; `` > income statement . a modified retrospective transition approach is required for lessees for capital and operating leases existing at , or entered into after , the beginning of the earliest comparative period presented in the financial statements , with certain practical expedients available . this guidance became effective for fiscal years , and interim periods within those years , beginning after december 15 , 2018. the company adopted this standard effective may 1 , 2019. the adoption of asu 2016-02 resulted in the recognition of rou assets and corresponding lease liabilities on the company 's consolidated financial position . see note 8 of the notes to consolidated financial statements included in item 8 of this annual report for additional information . in june 2016 , the fasb issued asu 2016-13 , “ measurement of credit losses on financial instruments , ” which replaces the current incurred loss method used for determining credit losses on financial assets , including trade receivables , with an expected credit loss method . this guidance is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2022. the company will adopt this standard in fiscal year 2024. the company does not expect the adoption of this standard to have a significant impact on the company 's consolidated financial position or results of operations . in january 2017 , the fasb issued asu 2017-04 , “ simplifying the test for goodwill impairment , ” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge . this guidance is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2019. the company will adopt this standard in fiscal year 2021. the company does not expect the adoption of this standard to have a significant impact on the company 's consolidated financial position or results of operations . in march 2017 , the fasb issued asu 2017-07 , “ compensation—retirement benefits—improving the presentation of net periodic pension cost and net periodic postretirement benefit cost , ” which requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the respective employees during the year . the other components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations . this guidance allows for the service cost component to be eligible for capitalization when applicable . this guidance became effective for fiscal years , and interim periods within those years , beginning after december 15 , 2017. the company adopted this standard effective may 1 , 2018 using the full retrospective approach . in february 2018 , the fasb issued asu 2018-2 , “ reclassification of certain tax effects from accumulated other comprehensive income . ” this guidance provides the company with an option to reclassify stranded tax effects resulting from the tax cuts and jobs act ( `` 2017 tax act `` ) from accumulated other comprehensive income to retained earnings . this guidance became effective for fiscal years , and interim periods within those fiscal years , beginning after december 15 , 2018 , with early adoption permitted . the company adopted this standard effective may 1 , 2019 and did not elect to reclassify tax effects as a result of tax reform ; therefore , the adoption did not have a significant impact on the company 's consolidated financial position or results of operations . in march 2018 , the fasb issued asu 2018-09 , “ compensation - stock compensation ( `` topic 718 `` ) : improvements to employee share-based payment accounting ” ( `` asu 2018-09 `` ) . this asu makes several modifications to topic 718 related to the accounting for forfeitures , employer tax withholding on share-based compensation , and the financial statement presentation of excess tax benefits or deficiencies . asu 2018-09 also clarifies the statement of cash flows presentation for certain components of share-based awards . the standard is effective for interim and annual reporting periods beginning after december 15 , 2018 , with early adoption permitted . the company adopted this standard effective may 1 , 2019. the adoption of this standard did not have a significant impact on the company 's consolidated financial position or results of operations . in august 2018 , the fasb issued asu 2018-14 , “ compensation -retirement benefits -defined benefit plans -general ( subtopic 715-20 ) - disclosure framework - changes to the disclosure requirements for defined benefit plans `` ( `` asu 2018-14 `` ) . the amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial , clarify the specific requirements of disclosures , and add disclosure requirements identified as relevant . asu 2018-14 is effective for fiscal years ending after december 15 , 2020. early adoption is permitted . the company will adopt this standard in fiscal year 2021. the company does not expect the adoption of this standard
| liquidity and capital resources cash flows our primary sources of liquidity during the year ended december 31 , 2013 were cash generated from the sale of our various products to our customers throughout the year . we believe that cash from operations , existing cash reserves , and availability under our revolving credit facility will provide adequate funds for our working capital needs , planned capital expenditures and cash interest payments through 2014. however , no assurance can be given that this will be the case . we did not borrow under our revolving credit facility during 2013. for the year ended december 31 , 2013 , cash provided by operations was approximately $ 19.2 million compared to approximately $ 24.0 million in the year ended december 31 , 2012. this decrease was primarily the result of lower net income , partially offset by reductions in working capital employed as a consequence of the reduction in sales . cash flow from operations benefited by a reduction in the number of days on hand of inventory at december 31 , 2013 compared to december 31 , 2012. this improvement is principally a consequence of the decline in north american heavy duty ( class 8 ) build in the last half of 2012 that resulted in higher than normal inventory levels at year end . for the year ended december 31 , 2012 , cash provided by operations was approximately $ 24.0 million compared to approximately $ 7.8 million in the year ended december 31 , 2011. this increase was primarily the result of a reduction in accounts receivable , which was partially offset by higher inventory as production volumes increased and lower accounts payable .
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such factors , risks , uncertainties and assumptions include , but are not limited to , competitive and general economic conditions , both domestically and internationally ; changes in customer demands ; technological changes in our operations or in our industry ; dependence on customers ' required delivery schedules ; risks related to fluctuations in the company 's operating results from quarter to quarter ; risks related to international operations , including foreign currency fluctuations ; changes in the legal and regulatory environment ; changes in raw materials and commodity costs ; the effects of covid-19 ; and acts of terrorism , war , governmental action , natural disasters and other force majeure events . the cautionary statements made pursuant to the reform act herein and elsewhere by us should not be construed as exhaustive . we can not always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements . over time , our actual results , performance , or achievements will likely differ from the anticipated results , performance or achievements that are expressed or implied by our forward-looking statements , and such difference might be significant and harmful to our stockholders ' interest . many important factors that could cause such a difference are described under the caption “ risk factors , ” in item 1a of this annual report , which you should review carefully . management 's discussion and analysis introduction kewaunee scientific corporation is a recognized leader in the design , manufacture and installation of laboratory , healthcare and technical furniture products . the company 's corporate headquarters are located in statesville , north carolina . direct sales offices are located in the united states , india , and singapore . three manufacturing facilities are located in statesville serving the domestic and international markets , and one manufacturing facility is located in bangalore , india serving the indian , middle east and asian markets . kewaunee scientific corporation 's website is located at www.kewaunee.com . our products are primarily sold through purchase orders and contracts submitted by customers through our dealers and commissioned agents , a national distributor , and through competitive bids submitted by us and our subsidiaries . products are sold 10 principally to pharmaceutical , biotechnology , industrial , chemical and commercial research laboratories , educational institutions , healthcare institutions , governmental entities , manufacturing facilities and users of networking furniture . we consider the markets in which we compete to be highly competitive , with a significant amount of the business involving competitive public bidding . it is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates , as products are frequently to be installed in buildings yet to be constructed . changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale . since prices are normally quoted on a firm basis in the industry , we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product . the impact of such possible increases is considered when determining the sales price . the principal raw materials and products manufactured by others used in our products are cold-rolled carbon and stainless steel , hardwood lumbers and plywood , paint , chemicals , resins , hardware , plumbing and electrical fittings . such materials and products are purchased from multiple suppliers and are typically readily available . critical accounting policies in the ordinary course of business , we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the united states of america . actual results could differ significantly from those estimates . we believe that the following discussion addresses our most critical accounting policies , which are those that are most important to the portrayal of our financial condition and results of operations , and require management 's most difficult , subjective and complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . revenue recognition the company recognizes revenue when control of a good or service promised in a contract ( i.e . , performance obligation ) is transferred to a customer . control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service . the majority of the company 's revenues are recognized over time as the customer receives control as the company performs work under a contract . however , a portion of the company 's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract . allowance for doubtful accounts evaluation of the allowance for doubtful accounts involves management judgments and estimates . we evaluate the collectability of our trade accounts receivable based on a number of factors . in circumstances where management is aware of a customer 's inability to meet its financial obligations to us , or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected , a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected . story_separator_special_tag rates as discussed in note 5 of the notes to the consolidated financial statements included in item 8. net earnings attributable to the noncontrolling interest related to our subsidiaries that are not 100 % owned by the company were $ 63,000 and $ 159,000 for fiscal years 2020 and 2019 , respectively . the changes in the net earnings attributable to the noncontrolling interest for each year were due to changes in the levels of net income of the subsidiaries . net loss in fiscal year 2020 was $ 4,687,000 , or $ 1.70 per diluted share . net earnings in fiscal year 2019 were $ 1,529,000 , or $ 0.55 per diluted share . the decrease in earnings was attributable to the factors discussed above . story_separator_special_tag style= `` line-height:120 % ; padding-top:13px ; text-align : left ; font-size:10pt ; `` > income statement . a modified retrospective transition approach is required for lessees for capital and operating leases existing at , or entered into after , the beginning of the earliest comparative period presented in the financial statements , with certain practical expedients available . this guidance became effective for fiscal years , and interim periods within those years , beginning after december 15 , 2018. the company adopted this standard effective may 1 , 2019. the adoption of asu 2016-02 resulted in the recognition of rou assets and corresponding lease liabilities on the company 's consolidated financial position . see note 8 of the notes to consolidated financial statements included in item 8 of this annual report for additional information . in june 2016 , the fasb issued asu 2016-13 , “ measurement of credit losses on financial instruments , ” which replaces the current incurred loss method used for determining credit losses on financial assets , including trade receivables , with an expected credit loss method . this guidance is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2022. the company will adopt this standard in fiscal year 2024. the company does not expect the adoption of this standard to have a significant impact on the company 's consolidated financial position or results of operations . in january 2017 , the fasb issued asu 2017-04 , “ simplifying the test for goodwill impairment , ” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge . this guidance is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2019. the company will adopt this standard in fiscal year 2021. the company does not expect the adoption of this standard to have a significant impact on the company 's consolidated financial position or results of operations . in march 2017 , the fasb issued asu 2017-07 , “ compensation—retirement benefits—improving the presentation of net periodic pension cost and net periodic postretirement benefit cost , ” which requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the respective employees during the year . the other components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations . this guidance allows for the service cost component to be eligible for capitalization when applicable . this guidance became effective for fiscal years , and interim periods within those years , beginning after december 15 , 2017. the company adopted this standard effective may 1 , 2018 using the full retrospective approach . in february 2018 , the fasb issued asu 2018-2 , “ reclassification of certain tax effects from accumulated other comprehensive income . ” this guidance provides the company with an option to reclassify stranded tax effects resulting from the tax cuts and jobs act ( `` 2017 tax act `` ) from accumulated other comprehensive income to retained earnings . this guidance became effective for fiscal years , and interim periods within those fiscal years , beginning after december 15 , 2018 , with early adoption permitted . the company adopted this standard effective may 1 , 2019 and did not elect to reclassify tax effects as a result of tax reform ; therefore , the adoption did not have a significant impact on the company 's consolidated financial position or results of operations . in march 2018 , the fasb issued asu 2018-09 , “ compensation - stock compensation ( `` topic 718 `` ) : improvements to employee share-based payment accounting ” ( `` asu 2018-09 `` ) . this asu makes several modifications to topic 718 related to the accounting for forfeitures , employer tax withholding on share-based compensation , and the financial statement presentation of excess tax benefits or deficiencies . asu 2018-09 also clarifies the statement of cash flows presentation for certain components of share-based awards . the standard is effective for interim and annual reporting periods beginning after december 15 , 2018 , with early adoption permitted . the company adopted this standard effective may 1 , 2019. the adoption of this standard did not have a significant impact on the company 's consolidated financial position or results of operations . in august 2018 , the fasb issued asu 2018-14 , “ compensation -retirement benefits -defined benefit plans -general ( subtopic 715-20 ) - disclosure framework - changes to the disclosure requirements for defined benefit plans `` ( `` asu 2018-14 `` ) . the amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial , clarify the specific requirements of disclosures , and add disclosure requirements identified as relevant . asu 2018-14 is effective for fiscal years ending after december 15 , 2020. early adoption is permitted . the company will adopt this standard in fiscal year 2021. the company does not expect the adoption of this standard
| liquidity and capital resources our principal sources of liquidity have historically been funds generated from operating activities , supplemented as needed by borrowings under our revolving credit facility . additionally , certain machinery and equipment are financed by non-cancelable operating leases . we believe that these sources of funds will be sufficient to support ongoing business requirements , including capital expenditures , through fiscal year 2021. at april 30 , 2020 , we had advances of $ 4.7 million and standby letters of credit aggregating $ 512,000 outstanding under our unsecured revolving credit facility . on june 19 , 2019 we entered into a security agreement pursuant to which we granted a security interest in substantially all of our assets to secure our obligations under the credit facility . see note 4 of the notes to consolidated financial statements included in item 8 of this annual report for additional information concerning our credit facility . we did not have any off balance sheet arrangements at april 30 , 2020. the following table summarizes the cash payment obligations for our lease arrangements as of april 30 , 2020 : payments due by period 12 ( $ in thousands ) replace_table_token_3_th operating activities provided cash of $ 4,161,000 in fiscal year 2020 , primarily from operations , and decreases in inventories of $ 1,876,000 and receivables of $ 4,833,000 , partially offset by decreases in accounts payable and accrued expenses of $ 2,016,000. operating activities provided cash of $ 2,490,000 in fiscal year 2019 , primarily from operating earnings , and an increase in accounts payable and other accrued expenses , partially offset by increases in inventories and deferred revenue .
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73 financing in 2016 and 2015 , we completed multiple financings involving loans , convertible debt , non-convertible debt , mezzanine equity and equity offerings . in january 2015 , we closed a second installment of the $ 21.7 million in convertible notes from total under the total fuel agreements , as described in more detail in note 5 , `` debt `` in “ notes to consolidated financial statements ” included in this annual report on form 10-k , in the amount of $ 10.85 million . in july 2015 , we sold to certain purchasers 16,025,642 shares of our common stock at a price per share of $ 1.56 , for aggregate proceeds to us of $ 25 million . we also granted to the purchasers warrants exercisable at an exercise price of $ 0.01 per share for the purchase of an aggregate of 1,602,562 shares of our common stock . the exercisability of these warrants was subject to stockholder approval , which was obtained on september 17 , 2015. as of december 31 , 2016 , 160,255 of such warrants had been exercised . in october 2015 , we issued $ 57.6 million aggregate principal amount of 9.50 % convertible senior notes due 2019 to certain qualified institutional buyers , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in february 2016 , we issued to certain purchasers an aggregate of $ 20.0 million of unsecured promissory notes and warrants for the purchase , at an exercise price of $ 0.01 per share , of an aggregate of 2,857,142 shares of our common stock , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. the exercisability of these warrants was subject to stockholder approval , which was obtained on may 17 , 2016. as of december 31 , 2016 , all of such warrants remained outstanding and unexercised . in march 2016 , we sold to total one half of our ownership stake in tab in exchange for total cancelling $ 1.3 million of r & d notes and certain other indebtedness , as described in more detail under “ relationship with total ” above and in note 5 , “ debt ” and note 7 , “ joint ventures and noncontrolling interest ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in may 2016 , we sold and issued 4,385,964 shares of common stock to the bill & melinda gates foundation at a purchase price per share of $ 1.14 , as described in more detail in note 8 , “ significant agreements ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in may , september , october and december 2016 , we sold and issued $ 25.0 million in aggregate principal amount of convertible promissory notes to a private investor , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in june and october 2016 , we sold and issued $ 19.5 million in aggregate principal amount of secured promissory notes to foris ventures , llc , an entity affiliated with director john doerr of kleiner perkins caufield & byers , a current stockholder , and ginkgo , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. 74 in october 2016 , we entered into a credit agreement with guanfu holding co. , ltd. to make available to amyris an unsecured credit facility with an aggregate principal amount of up to $ 25.0 million , which amount was fully drawn on december 31 , 2016 , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in december 2016 , we sold and issued a purchase money promissory note in the principal amount of $ 3.5 million to salisbury partners , llc in connection with our purchase of a production facility in leland , north carolina , as described in more detail in note 5 , “ debt ” and note 7 , `` joint ventures and noncontrolling interest `` in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in december 2016 , we sold and issued a promissory note in the principal amount of $ 3.9 million to nikko chemicals co. , ltd. in connection with the formation of our neossance joint venture , as described in more detail in note 5 , “ debt ” and note 7 , “ joint ventures and noncontrolling interest ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. see note 16 , “ subsequent events ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k for details regarding financing transactions completed subsequent to december 31 , 2016. exchange ( debt conversion ) on july 29 , 2015 , we closed the `` exchange `` pursuant to that certain exchange agreement , dated as of july 26 , 2015 ( or the “ exchange agreement ” ) , among us , maxwell ( mauritius ) pte ltd ( “ temasek ” ) and total . story_separator_special_tag we make significant judgments in relation to the valuation of goodwill and intangible assets resulting from business combinations and asset acquisitions . goodwill and intangible assets with indefinite lives are assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review . when required , a comparison of fair value to the carrying amount of assets is performed to determine the amount of any impairment . there are several methods that can be used to determine the estimated fair value of the ipr & d acquired in a business combination . we have used the `` income method , `` which applies a probability weighting that considers the risk of development and commercialization , to the estimated future net cash flows that are derived from projected sales revenues and estimated costs . these projections are based on factors such as relevant market size , pricing of similar products , and expected industry trends . the estimated future net cash flows are then discounted to the present value using an appropriate discount rate . these assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects , at which time the assets will be amortized over the remaining useful life or written off , as appropriate . factors that could trigger an impairment review include significant under-performance relative to historical or projected future operating results , significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends . if this evaluation indicates that the value of the intangible asset may be impaired , we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life . if this assessment indicates that the intangible asset is not recoverable , based on the estimated discounted future cash flows of the technology over the estimated useful life of the technology , we will reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period . any such impairment charge could be significant and could have a material adverse effect on our reported financial results . as of december 31 , 2016 , the company 's intangible assets had a carrying amount of zero . 80 stock-based compensation stock-based compensation cost for restricted stock units ( rsus ) is measured based on the closing fair market value of our common stock on the date of grant . stock-based compensation cost for stock options and employee stock purchase plan rights is estimated at the grant date and offering date , respectively , based on the fair-value of our common stock using the black-scholes option pricing model . we amortize the fair value of the employee stock options on a straight-line basis over the requisite service period of the award , which is generally the vesting period . the measurement of nonemployee stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest , and the resulting change in value , if any , is recognized in our consolidated statements of operations during the period the related services are rendered . there is inherent uncertainty in these estimates and if different assumptions had been used , the fair value of the equity instruments issued to nonemployee consultants could have been significantly different . in future periods , our stock-based compensation expense is expected to change as a result of our existing unrecognized stock-based compensation still to be recognized and as we issue additional stock-based awards in order to attract and retain employees and nonemployee consultants . see note 11 , `` stock-based compensation plans `` in “ notes to consolidated financial statements ” in part ii , item 8 of this report for a description of our stock-based compensation plans and more information on the assumptions used to calculate the fair value of stock-based compensation . income taxes we are subject to income taxes in the united states and foreign jurisdictions , and we use estimates in determining our provisions for income taxes . we use the liability method of accounting for income taxes , whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income . recognition of deferred tax assets is appropriate when realization of such assets is more likely than not . we recognize a valuation allowance against our net deferred tax assets unless it is more likely than not that they will be realized . this assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction . we apply the provisions of financial accounting standards board ( fasb ) guidance on accounting for uncertainty in income taxes . we assess all material positions taken in any income tax return , including all significant uncertain positions , in all tax years that are still subject to assessment or challenge by relevant taxing authorities . assessing an uncertain tax position begins with the initial determination of the position 's sustainability and the tax benefit to be recognized is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement . as of each balance sheet date , unresolved uncertain tax positions must be reassessed , and we will determine whether ( i ) the factors underlying the sustainability assertion have changed and ( ii ) the amount of the recognized tax benefit is still appropriate . the recognition and measurement of tax benefits requires significant judgment . judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available . 81 embedded derivatives related to convertible notes embedded derivatives that are required to be bifurcated from the underlying debt instrument (
| liquidity and capital resources our principal sources of liquidity have historically been funds generated from operating activities , supplemented as needed by borrowings under our revolving credit facility . additionally , certain machinery and equipment are financed by non-cancelable operating leases . we believe that these sources of funds will be sufficient to support ongoing business requirements , including capital expenditures , through fiscal year 2021. at april 30 , 2020 , we had advances of $ 4.7 million and standby letters of credit aggregating $ 512,000 outstanding under our unsecured revolving credit facility . on june 19 , 2019 we entered into a security agreement pursuant to which we granted a security interest in substantially all of our assets to secure our obligations under the credit facility . see note 4 of the notes to consolidated financial statements included in item 8 of this annual report for additional information concerning our credit facility . we did not have any off balance sheet arrangements at april 30 , 2020. the following table summarizes the cash payment obligations for our lease arrangements as of april 30 , 2020 : payments due by period 12 ( $ in thousands ) replace_table_token_3_th operating activities provided cash of $ 4,161,000 in fiscal year 2020 , primarily from operations , and decreases in inventories of $ 1,876,000 and receivables of $ 4,833,000 , partially offset by decreases in accounts payable and accrued expenses of $ 2,016,000. operating activities provided cash of $ 2,490,000 in fiscal year 2019 , primarily from operating earnings , and an increase in accounts payable and other accrued expenses , partially offset by increases in inventories and deferred revenue .
| 0 |
73 financing in 2016 and 2015 , we completed multiple financings involving loans , convertible debt , non-convertible debt , mezzanine equity and equity offerings . in january 2015 , we closed a second installment of the $ 21.7 million in convertible notes from total under the total fuel agreements , as described in more detail in note 5 , `` debt `` in “ notes to consolidated financial statements ” included in this annual report on form 10-k , in the amount of $ 10.85 million . in july 2015 , we sold to certain purchasers 16,025,642 shares of our common stock at a price per share of $ 1.56 , for aggregate proceeds to us of $ 25 million . we also granted to the purchasers warrants exercisable at an exercise price of $ 0.01 per share for the purchase of an aggregate of 1,602,562 shares of our common stock . the exercisability of these warrants was subject to stockholder approval , which was obtained on september 17 , 2015. as of december 31 , 2016 , 160,255 of such warrants had been exercised . in october 2015 , we issued $ 57.6 million aggregate principal amount of 9.50 % convertible senior notes due 2019 to certain qualified institutional buyers , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in february 2016 , we issued to certain purchasers an aggregate of $ 20.0 million of unsecured promissory notes and warrants for the purchase , at an exercise price of $ 0.01 per share , of an aggregate of 2,857,142 shares of our common stock , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. the exercisability of these warrants was subject to stockholder approval , which was obtained on may 17 , 2016. as of december 31 , 2016 , all of such warrants remained outstanding and unexercised . in march 2016 , we sold to total one half of our ownership stake in tab in exchange for total cancelling $ 1.3 million of r & d notes and certain other indebtedness , as described in more detail under “ relationship with total ” above and in note 5 , “ debt ” and note 7 , “ joint ventures and noncontrolling interest ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in may 2016 , we sold and issued 4,385,964 shares of common stock to the bill & melinda gates foundation at a purchase price per share of $ 1.14 , as described in more detail in note 8 , “ significant agreements ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in may , september , october and december 2016 , we sold and issued $ 25.0 million in aggregate principal amount of convertible promissory notes to a private investor , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in june and october 2016 , we sold and issued $ 19.5 million in aggregate principal amount of secured promissory notes to foris ventures , llc , an entity affiliated with director john doerr of kleiner perkins caufield & byers , a current stockholder , and ginkgo , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. 74 in october 2016 , we entered into a credit agreement with guanfu holding co. , ltd. to make available to amyris an unsecured credit facility with an aggregate principal amount of up to $ 25.0 million , which amount was fully drawn on december 31 , 2016 , as described in more detail in note 5 , “ debt ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in december 2016 , we sold and issued a purchase money promissory note in the principal amount of $ 3.5 million to salisbury partners , llc in connection with our purchase of a production facility in leland , north carolina , as described in more detail in note 5 , “ debt ” and note 7 , `` joint ventures and noncontrolling interest `` in “ notes to consolidated financial statements ” included in this annual report on form 10-k. in december 2016 , we sold and issued a promissory note in the principal amount of $ 3.9 million to nikko chemicals co. , ltd. in connection with the formation of our neossance joint venture , as described in more detail in note 5 , “ debt ” and note 7 , “ joint ventures and noncontrolling interest ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k. see note 16 , “ subsequent events ” in “ notes to consolidated financial statements ” included in this annual report on form 10-k for details regarding financing transactions completed subsequent to december 31 , 2016. exchange ( debt conversion ) on july 29 , 2015 , we closed the `` exchange `` pursuant to that certain exchange agreement , dated as of july 26 , 2015 ( or the “ exchange agreement ” ) , among us , maxwell ( mauritius ) pte ltd ( “ temasek ” ) and total . story_separator_special_tag we make significant judgments in relation to the valuation of goodwill and intangible assets resulting from business combinations and asset acquisitions . goodwill and intangible assets with indefinite lives are assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review . when required , a comparison of fair value to the carrying amount of assets is performed to determine the amount of any impairment . there are several methods that can be used to determine the estimated fair value of the ipr & d acquired in a business combination . we have used the `` income method , `` which applies a probability weighting that considers the risk of development and commercialization , to the estimated future net cash flows that are derived from projected sales revenues and estimated costs . these projections are based on factors such as relevant market size , pricing of similar products , and expected industry trends . the estimated future net cash flows are then discounted to the present value using an appropriate discount rate . these assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects , at which time the assets will be amortized over the remaining useful life or written off , as appropriate . factors that could trigger an impairment review include significant under-performance relative to historical or projected future operating results , significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends . if this evaluation indicates that the value of the intangible asset may be impaired , we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life . if this assessment indicates that the intangible asset is not recoverable , based on the estimated discounted future cash flows of the technology over the estimated useful life of the technology , we will reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period . any such impairment charge could be significant and could have a material adverse effect on our reported financial results . as of december 31 , 2016 , the company 's intangible assets had a carrying amount of zero . 80 stock-based compensation stock-based compensation cost for restricted stock units ( rsus ) is measured based on the closing fair market value of our common stock on the date of grant . stock-based compensation cost for stock options and employee stock purchase plan rights is estimated at the grant date and offering date , respectively , based on the fair-value of our common stock using the black-scholes option pricing model . we amortize the fair value of the employee stock options on a straight-line basis over the requisite service period of the award , which is generally the vesting period . the measurement of nonemployee stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest , and the resulting change in value , if any , is recognized in our consolidated statements of operations during the period the related services are rendered . there is inherent uncertainty in these estimates and if different assumptions had been used , the fair value of the equity instruments issued to nonemployee consultants could have been significantly different . in future periods , our stock-based compensation expense is expected to change as a result of our existing unrecognized stock-based compensation still to be recognized and as we issue additional stock-based awards in order to attract and retain employees and nonemployee consultants . see note 11 , `` stock-based compensation plans `` in “ notes to consolidated financial statements ” in part ii , item 8 of this report for a description of our stock-based compensation plans and more information on the assumptions used to calculate the fair value of stock-based compensation . income taxes we are subject to income taxes in the united states and foreign jurisdictions , and we use estimates in determining our provisions for income taxes . we use the liability method of accounting for income taxes , whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income . recognition of deferred tax assets is appropriate when realization of such assets is more likely than not . we recognize a valuation allowance against our net deferred tax assets unless it is more likely than not that they will be realized . this assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction . we apply the provisions of financial accounting standards board ( fasb ) guidance on accounting for uncertainty in income taxes . we assess all material positions taken in any income tax return , including all significant uncertain positions , in all tax years that are still subject to assessment or challenge by relevant taxing authorities . assessing an uncertain tax position begins with the initial determination of the position 's sustainability and the tax benefit to be recognized is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement . as of each balance sheet date , unresolved uncertain tax positions must be reassessed , and we will determine whether ( i ) the factors underlying the sustainability assertion have changed and ( ii ) the amount of the recognized tax benefit is still appropriate . the recognition and measurement of tax benefits requires significant judgment . judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available . 81 embedded derivatives related to convertible notes embedded derivatives that are required to be bifurcated from the underlying debt instrument (
| cash flows from operating activities our primary uses of cash from operating activities are for costs related to production and sales of our products and personnel-related expenditures , offset by cash received from product sales , grants , collaborations and license fees . cash used in operating activities was $ 82.4 million , $ 85.1 million and $ 84.7 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . 98 net cash used in operating activities of $ 82.4 million for the year ended december 31 , 2016 was attributable to our net loss of $ 97.3 million , offset by net non-cash charges of $ 4.0 million and net change in our operating assets and liabilities of $ 10.9 million . net non-cash charges of $ 4.0 million for the year ended december 31 , 2016 consisted primarily of $ 14.4 million of amortization of debt discount and issuance costs , $ 11.4 million of depreciation and amortization expenses , $ 7.3 million of asset impairment charges , $ 7.3 million of stock-based compensation , $ 4.1 million of loss from extinguishment of debt , $ 0.9 million of loss on foreign currency exchange rates , partially offset by $ 41.4 million of gain from the change in the fair value of derivative instruments related to the embedded derivative liabilities associated with certain of our convertible promissory notes and currency interest rate swap derivative liability and $ 0.1 million of gain on disposition of property , plant and equipment . net change in operating assets and liabilities of $ 10.9 million for the year ended december 31 , 2016 primarily consisted of a $ 19.1 million increase in accounts payable and accrued other liabilities , a $ 5.7 million decrease in inventory and a $ 0.7 million increase in deferred revenue related to funds received under collaboration agreements , partially offset by a $ 5.7 million increase in prepaid expenses and other assets and deferred rent and a $ 8.9 million increase in accounts receivable and related party accounts receivable .
| 1 |
on january 31 , 2013 , the company completed the sale of substantially all of the assets of its grass technologies product group ( grass ) in order to focus on its existing core businesses . grass manufactured polysomnography and electroenecephalography systems for both clinical and research use along with the related accessories and proprietary electrodes . consequently , the company has classified the results of operations of its grass segment as discontinued operations for all periods presented . astro-med markets and sells its products and services globally through a diverse distribution structure of direct sales personnel , manufacturer 's representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets . our growth strategy centers on organic growth through product innovation made possible by research and development initiatives , as well as strategic acquisitions that fit into existing core businesses . research and development activities are funded and expensed by the company at approximately 6.2 % of annual sales for fiscal 2013. including research and development expenditures of the discontinued grass segment , the company 's , spending on research and development in 2013 was 8.0 % of sales ( excluding sales of the discontinued grass segment ) , a level that the company anticipates will continue in 2014. we also continue to invest in sales and marketing initiatives by expanding the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability notwithstanding today 's challenging economic environment . 15 results of operations the following table presents the net sales of each of the company 's segments , as well as the percentage of total sales and change from prior year . as previously noted , the company 's grass segment has been classified as a discontinued operation and therefore not presented in the table or discussion below . replace_table_token_3_th fiscal 2013 compared to fiscal 2012 astro-med 's sales in fiscal 2013 were $ 61,224,000 , representing a slight increase as compared to prior year sales of $ 60,724,000. domestic sales of $ 44,613,000 increased 2.4 % from the prior year sales of $ 43,570,000. international sales of $ 16,611,000 includes an unfavorable impact of $ 846,000 due to foreign exchange rates and reflects a 3.2 % decrease as compared to the prior year . hardware sales in fiscal 2013 were $ 25,169,000 , a 9.2 % increase as compared to prior year 's sales of $ 23,044,000 and represents 41.1 % of total sales as compared to 37.9 % of sales in the prior year . both product groups achieved growth in the current year , with t & m 's hardware sales up 5.0 % and quicklabel 's hardware sales up 17.2 % . the primary drivers of this increase relate to increases in t & m 's rugged and tmx product line sales and the increase in sales due to the introduction of quicklabel 's new kiaro ! product line . the increase in the current year 's hardware sales was tempered by lower sales of t & m 's recorder and data acquisition product lines and quicklabel 's vivo ! and zeo ! product lines . consumable sales in fiscal 2013 were $ 32,540,000 , representing a 3.8 % decrease as compared to prior year sales of $ 33,841,000. the key driver of the overall decrease in consumable sales for the current fiscal year was primarily traceable to the decline in label and tag sales in the quicklabel product group due to the january 2012 divestiture of the asheboro , north carolina facility , which contributed sales of approximately $ 4,100,000 in fiscal 2012. the decline in consumable product sales for the current year was tempered by an increase in sales of digital color printer supplies within the quicklabel product group , which were up 16.9 % over the prior year , as well as a slight increase in sales of quicklabel 's thermal transfer ribbon . service and other sales revenue in fiscal 2013 were $ 3,515,000 , a 8.4 % decrease compared to prior year sales of $ 3,839,000 due to lower repair and service revenue . the company achieved $ 23,728,000 in gross profit for fiscal 2013 and generated a gross profit margin of 38.8 % , an increase as compared to prior year 's gross profit margin of 36.3 % . the increase in gross profit margin for the current year is due to lower manufacturing costs and favorable product mix . operating expenses for the current year were $ 20,802,000 , representing a 1.2 % decrease from prior year 's operating expenses of $ 21,062,000. specifically , selling and marketing expenses decreased 2.9 % from prior year to $ 12,412,000 in fiscal 2013 , representing 20.3 % of sales , a slight decrease as compared to the prior year 's 21.0 % of sales . the decrease in selling and marketing was primarily the result of lower wages and benefits . general and administrative ( g & a ) expenses increased 15.4 % from prior year to $ 4,574,000 in fiscal 2013. the higher g & a expense was primarily due to an increase in wages and benefits for the current year , as well as an increase in professional fees spending as compared to the prior year . funding of research & development ( r & d ) in fiscal 2013 has decreased 11.7 % to $ 3,816,000. the decrease in r & d for fiscal 2013 is primarily due to the decrease in personnel costs and in prototype and outside research and development spending compared to the prior year . story_separator_special_tag as a result , significant judgment is required in determining the appropriate amounts to record and such judgments may prove to be incorrect in the future . we believe that our procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts . 20 inventories : inventories are stated at the lower of cost ( first-in , first-out ) or market . the company records provisions to write-down obsolete and excess inventory to its estimated net realizable value . the process for evaluating obsolete and excess inventory consists of analyzing the inventory supply on hand and estimating the net realizable value of the inventory based on historical experience , current business conditions and anticipated future sales . we believe that our procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to actual experience . income taxes : a valuation allowance is established when it is more-likely-than-not that all or a portion of deferred tax assets will not be realized . a review of all available positive and negative evidence must be considered , including our performance , the market environment in which we operate , length of carryforward periods , existing sales backlog and future sales projections . if actual factors and conditions differ materially from the estimates made by management , the actual realization of the net deferred tax assets or liabilities could vary materially from the amounts previously recorded . at january 31 , 2013 , the company has provided valuation allowances for future tax benefits resulting from certain r & d tax credits which could expire unused . the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions . although guidance on the accounting for uncertain income taxes prescribes the use of a recognition and measurement model , the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management . if the ultimate resolution of tax uncertainties is different from what we have estimated , our income tax expense could be materially impacted . long-lived assets and goodwill : the impairment of long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable . determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition . measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset . management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances , such as declines in sales , earnings or cash flows , or material adverse changes in the business climate , indicate that the carrying value of an asset might be impaired . during the fourth quarter of fiscal 2012 , we adopted new accounting guidance which simplifies goodwill impairment testing . under the new guidance , goodwill is first qualitatively assessed to determine whether further impairment testing is necessary . factors that management considers in this assessment include macroeconomic conditions , industry and market considerations , overall financial performance ( both current and projected ) , changes in management and strategy and changes in the composition or carrying amount of net assets . if this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount , a two step process is then performed . step one compares the fair value of the reporting unit with its carrying value , including goodwill . if the carrying amount exceeds the fair value of the reporting unit , step two is required to determine if there is an impairment of the goodwill . step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill . we estimate the fair value of our reporting units using the income approach based upon a discounted cash flow model . we believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit 's expected longterm operating cash flow performance . in addition , the company uses the market approach , which compares the reporting unit to publicly-traded companies and transactions involving similar business , to support the conclusions based upon the income approach . the income approach requires the use of many assumptions and estimates including future revenue , expenses , capital expenditures , and working capital , as well as discount factors and income tax rates . share-based compensation : share-based compensation expense is based on the estimated fair value of the share-based award when granted . we have estimated the fair value of each option on the date of grant using the black-scholes option-pricing model . our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility , employee exercise patterns ( expected life of the options ) , the risk free interest rate and the company 's dividend yield . the stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average 21 expected life of our options . management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors . in determining the expected life of the option grants , the company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed
| cash flows from operating activities our primary uses of cash from operating activities are for costs related to production and sales of our products and personnel-related expenditures , offset by cash received from product sales , grants , collaborations and license fees . cash used in operating activities was $ 82.4 million , $ 85.1 million and $ 84.7 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . 98 net cash used in operating activities of $ 82.4 million for the year ended december 31 , 2016 was attributable to our net loss of $ 97.3 million , offset by net non-cash charges of $ 4.0 million and net change in our operating assets and liabilities of $ 10.9 million . net non-cash charges of $ 4.0 million for the year ended december 31 , 2016 consisted primarily of $ 14.4 million of amortization of debt discount and issuance costs , $ 11.4 million of depreciation and amortization expenses , $ 7.3 million of asset impairment charges , $ 7.3 million of stock-based compensation , $ 4.1 million of loss from extinguishment of debt , $ 0.9 million of loss on foreign currency exchange rates , partially offset by $ 41.4 million of gain from the change in the fair value of derivative instruments related to the embedded derivative liabilities associated with certain of our convertible promissory notes and currency interest rate swap derivative liability and $ 0.1 million of gain on disposition of property , plant and equipment . net change in operating assets and liabilities of $ 10.9 million for the year ended december 31 , 2016 primarily consisted of a $ 19.1 million increase in accounts payable and accrued other liabilities , a $ 5.7 million decrease in inventory and a $ 0.7 million increase in deferred revenue related to funds received under collaboration agreements , partially offset by a $ 5.7 million increase in prepaid expenses and other assets and deferred rent and a $ 8.9 million increase in accounts receivable and related party accounts receivable .
| 0 |
on january 31 , 2013 , the company completed the sale of substantially all of the assets of its grass technologies product group ( grass ) in order to focus on its existing core businesses . grass manufactured polysomnography and electroenecephalography systems for both clinical and research use along with the related accessories and proprietary electrodes . consequently , the company has classified the results of operations of its grass segment as discontinued operations for all periods presented . astro-med markets and sells its products and services globally through a diverse distribution structure of direct sales personnel , manufacturer 's representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets . our growth strategy centers on organic growth through product innovation made possible by research and development initiatives , as well as strategic acquisitions that fit into existing core businesses . research and development activities are funded and expensed by the company at approximately 6.2 % of annual sales for fiscal 2013. including research and development expenditures of the discontinued grass segment , the company 's , spending on research and development in 2013 was 8.0 % of sales ( excluding sales of the discontinued grass segment ) , a level that the company anticipates will continue in 2014. we also continue to invest in sales and marketing initiatives by expanding the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability notwithstanding today 's challenging economic environment . 15 results of operations the following table presents the net sales of each of the company 's segments , as well as the percentage of total sales and change from prior year . as previously noted , the company 's grass segment has been classified as a discontinued operation and therefore not presented in the table or discussion below . replace_table_token_3_th fiscal 2013 compared to fiscal 2012 astro-med 's sales in fiscal 2013 were $ 61,224,000 , representing a slight increase as compared to prior year sales of $ 60,724,000. domestic sales of $ 44,613,000 increased 2.4 % from the prior year sales of $ 43,570,000. international sales of $ 16,611,000 includes an unfavorable impact of $ 846,000 due to foreign exchange rates and reflects a 3.2 % decrease as compared to the prior year . hardware sales in fiscal 2013 were $ 25,169,000 , a 9.2 % increase as compared to prior year 's sales of $ 23,044,000 and represents 41.1 % of total sales as compared to 37.9 % of sales in the prior year . both product groups achieved growth in the current year , with t & m 's hardware sales up 5.0 % and quicklabel 's hardware sales up 17.2 % . the primary drivers of this increase relate to increases in t & m 's rugged and tmx product line sales and the increase in sales due to the introduction of quicklabel 's new kiaro ! product line . the increase in the current year 's hardware sales was tempered by lower sales of t & m 's recorder and data acquisition product lines and quicklabel 's vivo ! and zeo ! product lines . consumable sales in fiscal 2013 were $ 32,540,000 , representing a 3.8 % decrease as compared to prior year sales of $ 33,841,000. the key driver of the overall decrease in consumable sales for the current fiscal year was primarily traceable to the decline in label and tag sales in the quicklabel product group due to the january 2012 divestiture of the asheboro , north carolina facility , which contributed sales of approximately $ 4,100,000 in fiscal 2012. the decline in consumable product sales for the current year was tempered by an increase in sales of digital color printer supplies within the quicklabel product group , which were up 16.9 % over the prior year , as well as a slight increase in sales of quicklabel 's thermal transfer ribbon . service and other sales revenue in fiscal 2013 were $ 3,515,000 , a 8.4 % decrease compared to prior year sales of $ 3,839,000 due to lower repair and service revenue . the company achieved $ 23,728,000 in gross profit for fiscal 2013 and generated a gross profit margin of 38.8 % , an increase as compared to prior year 's gross profit margin of 36.3 % . the increase in gross profit margin for the current year is due to lower manufacturing costs and favorable product mix . operating expenses for the current year were $ 20,802,000 , representing a 1.2 % decrease from prior year 's operating expenses of $ 21,062,000. specifically , selling and marketing expenses decreased 2.9 % from prior year to $ 12,412,000 in fiscal 2013 , representing 20.3 % of sales , a slight decrease as compared to the prior year 's 21.0 % of sales . the decrease in selling and marketing was primarily the result of lower wages and benefits . general and administrative ( g & a ) expenses increased 15.4 % from prior year to $ 4,574,000 in fiscal 2013. the higher g & a expense was primarily due to an increase in wages and benefits for the current year , as well as an increase in professional fees spending as compared to the prior year . funding of research & development ( r & d ) in fiscal 2013 has decreased 11.7 % to $ 3,816,000. the decrease in r & d for fiscal 2013 is primarily due to the decrease in personnel costs and in prototype and outside research and development spending compared to the prior year . story_separator_special_tag as a result , significant judgment is required in determining the appropriate amounts to record and such judgments may prove to be incorrect in the future . we believe that our procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts . 20 inventories : inventories are stated at the lower of cost ( first-in , first-out ) or market . the company records provisions to write-down obsolete and excess inventory to its estimated net realizable value . the process for evaluating obsolete and excess inventory consists of analyzing the inventory supply on hand and estimating the net realizable value of the inventory based on historical experience , current business conditions and anticipated future sales . we believe that our procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to actual experience . income taxes : a valuation allowance is established when it is more-likely-than-not that all or a portion of deferred tax assets will not be realized . a review of all available positive and negative evidence must be considered , including our performance , the market environment in which we operate , length of carryforward periods , existing sales backlog and future sales projections . if actual factors and conditions differ materially from the estimates made by management , the actual realization of the net deferred tax assets or liabilities could vary materially from the amounts previously recorded . at january 31 , 2013 , the company has provided valuation allowances for future tax benefits resulting from certain r & d tax credits which could expire unused . the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions . although guidance on the accounting for uncertain income taxes prescribes the use of a recognition and measurement model , the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management . if the ultimate resolution of tax uncertainties is different from what we have estimated , our income tax expense could be materially impacted . long-lived assets and goodwill : the impairment of long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable . determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition . measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset . management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances , such as declines in sales , earnings or cash flows , or material adverse changes in the business climate , indicate that the carrying value of an asset might be impaired . during the fourth quarter of fiscal 2012 , we adopted new accounting guidance which simplifies goodwill impairment testing . under the new guidance , goodwill is first qualitatively assessed to determine whether further impairment testing is necessary . factors that management considers in this assessment include macroeconomic conditions , industry and market considerations , overall financial performance ( both current and projected ) , changes in management and strategy and changes in the composition or carrying amount of net assets . if this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount , a two step process is then performed . step one compares the fair value of the reporting unit with its carrying value , including goodwill . if the carrying amount exceeds the fair value of the reporting unit , step two is required to determine if there is an impairment of the goodwill . step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill . we estimate the fair value of our reporting units using the income approach based upon a discounted cash flow model . we believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit 's expected longterm operating cash flow performance . in addition , the company uses the market approach , which compares the reporting unit to publicly-traded companies and transactions involving similar business , to support the conclusions based upon the income approach . the income approach requires the use of many assumptions and estimates including future revenue , expenses , capital expenditures , and working capital , as well as discount factors and income tax rates . share-based compensation : share-based compensation expense is based on the estimated fair value of the share-based award when granted . we have estimated the fair value of each option on the date of grant using the black-scholes option-pricing model . our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility , employee exercise patterns ( expected life of the options ) , the risk free interest rate and the company 's dividend yield . the stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average 21 expected life of our options . management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors . in determining the expected life of the option grants , the company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed
| liquidity and capital resources the company expects to finance its future working capital needs , capital expenditures and acquisition requirements through internal funds and believes that cash provided by operations will be sufficient to meet our operating and capital needs for at least the next twelve months . to the extent our capital and liquidity requirements are not satisfied internally , we may utilize a $ 5.0 million revolving bank line of credit , all of which is currently available . borrowings under this line of credit bear interest at either a fluctuating rate equal to 75 basis points below the base rate , as defined in the agreement , or at a fixed rate equal to 150 basis points above libor . astro-med 's statements of cash flows for the two years ended january 31 , 2013 and 2012 are included on page 36. net cash flows provided by operating activities was $ 3,863,000 in the current year compared to net cash provided by operating activities of $ 5,472,000 in the previous year . the decrease in net cash flow from operations for the current year is attributed to increased working capital requirements , as both the accounts receivable and inventory balances increased during the current year and accounts payable and accrued expenses decreased in the current year as compared to prior year . the accounts receivable collection cycle was 51 days sales outstanding for both january 31 , 2013 and 2012. inventory days on hand increased to 109 days at the end of the current fiscal year from 105 days at prior year end . net cash flow provided by investing activities for fiscal 2013 was $ 18,466,000 , which included cash proceeds of $ 16,800,000 from the sale of the assets of company 's grass technologies product group . the increase in cash proceeds was slightly offset by cash used for capital expenditures of approximately $ 849,000 , including $ 327,000 for information technology , $ 161,000 for tools and dies , $ 156,000 for land and building improvements , $ 123,000 for machinery and equipment and $ 82,000 for furniture and fixtures and other capital expenditures .
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we perform all of our avise ® tests in our approximately 8,000 square foot clinical laboratory , which is certified by clia and accredited by cap , and located in vista , california . our laboratory is certified for performance of high-complexity testing by cms in accordance with clia . we are approved to offer our products in all 50 states . our clinical laboratory reports all avise ® testing product results within five business days . in the fourth quarter of 2020 , we completed the build-out of approximately 2,000 additional square feet to our clinical laboratory . 77 we market our avise ® testing products using our specialized salesforce . unlike many diagnostic salesforces that are trained only to understand the comparative benefits of their tests , the specialized backgrounds of our salesforce coupled with our comprehensive training enables our sales representatives to interpret results from our de-identified patient test reports and provide unique insights in a highly tailored discussion with rheumatologists . our integrated testing and therapeutics strategy results in a unique opportunity to promote and sell targeted therapies in patient focused sales calls with rheumatologists , including those with whom we have a longstanding relationship and history using our portfolio of testing products . reimbursement for our testing services comes from several sources , including commercial third-party payors , such as insurance companies and health maintenance organizations , government payors , such as medicare , and patients . reimbursement rates vary by product and payor . we continue to focus on expanding coverage among existing contracted rheumatologists and to achieve coverage with commercial payors , laboratory benefit managers and evidence review organizations . since inception we have devoted substantially all our efforts developing and marketing products for the diagnosis , prognosis and monitoring of autoimmune diseases . although our revenue has increased sequentially year over year , we have never been profitable and , as of december 31 , 2020 we had an accumulated deficit of $ 181.3 million . we incurred net losses of $ 16.7 million and $ 12.0 million for the years ended december 31 , 2020 and 2019 , respectively . we expect to continue to incur operating losses in the near term as our operating expenses will increase to support the growth of our business , as well as additional costs associated with being a public company . we have funded our operations primarily through equity and debt financings and revenue from sales of our products . through the date of our initial public offering ( ipo ) in september 2019 , our operations were financed primarily from sales of our common and redeemable convertible preferred stock and borrowings under various debt financings . in september 2019 , we completed our ipo of 4,140,000 shares of our common stock at a price to the public of $ 14.00 per share , including the exercise in full by the underwriters of their option to purchase 540,000 additional shares of our common stock . including the option exercise , the aggregate net proceeds to us from the offering was approximately $ 50.4 million , net of underwriting discounts , commissions and other offering expenses , for aggregate expenses of approximately $ 7.5 million . as of december 31 , 2020 , we had $ 57.4 million of cash and cash equivalents . impact of covid-19 the current covid-19 worldwide pandemic has presented substantial public health challenges and is affecting our employees , patients , physicians and other healthcare providers , communities and business operations , as well as the u.s. and global economies and financial markets . international and u.s. governmental authorities in impacted regions are taking actions in an effort to slow the spread of covid-19 , including issuing varying forms of `` stay-at-home `` orders , restricting business functions outside of one 's home , restricting gatherings , restricting travel , and mandating social distancing and face coverings . certain jurisdictions have begun re-opening only to return to restrictions due to increases in new covid-19 cases . even in areas where `` stay-at-home `` restrictions have been lifted and the number of covid-19 cases have declined , many individuals remain cautious about resuming activities such as preventative-care medical visits . as a result of covid-19 related limitations and reordering of priorities across the u.s. healthcare system , a reduction in patient flow occurred and our test volumes began to decrease in the second half of march 2020. we experienced an avise ® ctd volume decrease of approximately 5 % in the year ended december 31 , 2020 as compared to 2019. by the end of the third quarter of 2020 , the number of avise ® ctd tests delivered substantially recovered to pre-covid-19 avise ® ctd tests reported in the first quarter of 2020 , and in the fourth quarter of 2020 , the number of avise ® ctd delivered exceeded our pre-covid-19 avise ® ctd tests reported in the first quarter of 2020. for the three months ended december 31 , 2020 as compared to the same period in 2019 , we experienced a avise ® ctd volume increase of approximately 5 % . however , the continued spread of covid-19 may adversely affect testing volumes in future periods , the extent of which is highly uncertain . in addition , we believe there are several other important factors that have impacted , and that we expect will impact our operating performance and results of operations , including shutdowns of our facilities and operations as well as those of our suppliers and courier services , disruptions to the supply chain of material needed for our tests , our sales and commercialization activities and our ability to receive specimens and perform or deliver the results from our tests , delays in reimbursement and coverage decisions from medicare and third-party payors and in interactions with regulatory authorities , as well as our inability to achieve volume-based pricing discounts with our key suppliers story_separator_special_tag as a result , our costs of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each month 's billings . assuming future testing volumes are not negatively impacted by the spread of covid-19 , we expect that our costs of revenue will increase in absolute dollars as the number of tests we perform increases . however , we expect that the cost per test will decrease over time due to volume discounts on materials and shipping costs and other volume efficiencies we may gain as the number of tests we perform increases . as discussed above , the continued spread of covid-19 may adversely affect testing volumes which may result in an increase in cost per test due to our inability to realize volume efficiencies . selling , general and administrative expenses selling , general and administrative expenses consist of personnel costs , including stock-based compensation expense , direct marketing expenses , accounting and legal expenses , consulting costs , and allocated overhead including rent , information technology , depreciation and utilities . we expect that our selling , general and administrative expenses will increase in absolute dollars in 2021 as compared to 2020 , as we continue to evaluate the reach and frequency of our sales and sales support functions , expected additions to headcount and increases for personnel costs , including stock-based compensation . research and development expenses research and development expenses include costs incurred to develop our technology , testing products and product candidates , collect clinical specimens and conduct clinical studies to develop and support our testing products and product candidates . these costs consist of personnel costs , including stock-based compensation expense , materials , laboratory supplies , consulting costs , costs associated with setting up and conducting clinical studies and allocated overhead including rent and utilities . we expense all research and development costs in the periods in which they are incurred . we expect that our research and development expenses will increase in absolute dollars in 2021 as compared to 2020 , as we continue to invest in research and development activities related to our existing testing products and product candidates , expected additions to headcount and increases for personnel costs , including stock-based compensation . interest expense interest expense consists of cash and non-cash interest expense associated with our financing arrangements , including the borrowings under our amended loan agreement with innovatus . we expect interest expense to remain consistent in 2021 as compared to 2020 , and remain consistent thereafter until 2023. change in fair value of financial instruments prior to the completion of our ipo , we classified our outstanding warrants to purchase shares of our redeemable convertible preferred stock as liabilities on our balance sheets at their estimated fair value since the underlying redeemable convertible preferred stock was classified as temporary equity . at the end of each reporting period , changes in the estimated fair value during the period were recorded as a component of other income ( expense ) . 82 in connection with the completion of our ipo in september 2019 , all outstanding warrants to purchase shares of our redeemable convertible preferred stock either terminated or were converted into warrants to purchase shares of our common stock and accordingly , will no longer be subject to measurement . other income , net other income , net , consists primarily of interest income earned on our cash and cash equivalents and an amount received under the cares act . income tax benefit ( expense ) income taxes include federal and state income taxes in the united states . results of operations comparison of the years ended december 31 , 2020 and 2019 : replace_table_token_3_th revenue revenue increased $ 1.6 million , or 3.9 % , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , primarily due to an increase in revenue to approximately $ 5.1 million from the co-promotion of simponi ® for the year ended december 31 , 2020 compared to approximately $ 1.5 million for the year ended december 31 , 2019. the increase in revenue was partially offset by a decrease in the number of diagnostic tests delivered due in part to impacts of the covid-19 pandemic , coupled with a decrease in average reimbursement per avise ® ctd test . the number of avise ® ctd tests , which accounted for 70 % of revenue for the year ended december 31 , 2020 , decreased to 100,450 tests delivered in the year ended december 31 , 2020 compared to 105,370 tests delivered in the same 2019 period . the number of avise ® ctd tests increased to 28,601 for the three months ended december 31 , 2020 compared to 27,133 tests delivered in the same 2019 period . the adoption of the avise ® ctd test by rheumatologists for the year ended december 31 , 2020 increased to 2,500 ordering healthcare providers as compared to 2,389 ordering healthcare providers in the same 2019 period . the number of ordering healthcare providers decreased to 1,690 for the three months ended december 31 , 2020 compared to 1,707 in the same 2019 period . costs of revenue costs of revenue decreased $ 2.2 million , or 12.0 % , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. this decrease was primarily due to decreased direct costs such as materials and 83 supplies associated with the decrease in test volume and decreased royalty costs associated with the expiration of a royalty on our cb-caps technology for the year ended december 31 , 2020 compared to the same 2019 period . selling , general and administrative expenses selling , general and administrative expenses increased $ 8.3 million , or 29.0 % , for the year ended december 31 , 2020 compared to the year ended december
| liquidity and capital resources the company expects to finance its future working capital needs , capital expenditures and acquisition requirements through internal funds and believes that cash provided by operations will be sufficient to meet our operating and capital needs for at least the next twelve months . to the extent our capital and liquidity requirements are not satisfied internally , we may utilize a $ 5.0 million revolving bank line of credit , all of which is currently available . borrowings under this line of credit bear interest at either a fluctuating rate equal to 75 basis points below the base rate , as defined in the agreement , or at a fixed rate equal to 150 basis points above libor . astro-med 's statements of cash flows for the two years ended january 31 , 2013 and 2012 are included on page 36. net cash flows provided by operating activities was $ 3,863,000 in the current year compared to net cash provided by operating activities of $ 5,472,000 in the previous year . the decrease in net cash flow from operations for the current year is attributed to increased working capital requirements , as both the accounts receivable and inventory balances increased during the current year and accounts payable and accrued expenses decreased in the current year as compared to prior year . the accounts receivable collection cycle was 51 days sales outstanding for both january 31 , 2013 and 2012. inventory days on hand increased to 109 days at the end of the current fiscal year from 105 days at prior year end . net cash flow provided by investing activities for fiscal 2013 was $ 18,466,000 , which included cash proceeds of $ 16,800,000 from the sale of the assets of company 's grass technologies product group . the increase in cash proceeds was slightly offset by cash used for capital expenditures of approximately $ 849,000 , including $ 327,000 for information technology , $ 161,000 for tools and dies , $ 156,000 for land and building improvements , $ 123,000 for machinery and equipment and $ 82,000 for furniture and fixtures and other capital expenditures .
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we perform all of our avise ® tests in our approximately 8,000 square foot clinical laboratory , which is certified by clia and accredited by cap , and located in vista , california . our laboratory is certified for performance of high-complexity testing by cms in accordance with clia . we are approved to offer our products in all 50 states . our clinical laboratory reports all avise ® testing product results within five business days . in the fourth quarter of 2020 , we completed the build-out of approximately 2,000 additional square feet to our clinical laboratory . 77 we market our avise ® testing products using our specialized salesforce . unlike many diagnostic salesforces that are trained only to understand the comparative benefits of their tests , the specialized backgrounds of our salesforce coupled with our comprehensive training enables our sales representatives to interpret results from our de-identified patient test reports and provide unique insights in a highly tailored discussion with rheumatologists . our integrated testing and therapeutics strategy results in a unique opportunity to promote and sell targeted therapies in patient focused sales calls with rheumatologists , including those with whom we have a longstanding relationship and history using our portfolio of testing products . reimbursement for our testing services comes from several sources , including commercial third-party payors , such as insurance companies and health maintenance organizations , government payors , such as medicare , and patients . reimbursement rates vary by product and payor . we continue to focus on expanding coverage among existing contracted rheumatologists and to achieve coverage with commercial payors , laboratory benefit managers and evidence review organizations . since inception we have devoted substantially all our efforts developing and marketing products for the diagnosis , prognosis and monitoring of autoimmune diseases . although our revenue has increased sequentially year over year , we have never been profitable and , as of december 31 , 2020 we had an accumulated deficit of $ 181.3 million . we incurred net losses of $ 16.7 million and $ 12.0 million for the years ended december 31 , 2020 and 2019 , respectively . we expect to continue to incur operating losses in the near term as our operating expenses will increase to support the growth of our business , as well as additional costs associated with being a public company . we have funded our operations primarily through equity and debt financings and revenue from sales of our products . through the date of our initial public offering ( ipo ) in september 2019 , our operations were financed primarily from sales of our common and redeemable convertible preferred stock and borrowings under various debt financings . in september 2019 , we completed our ipo of 4,140,000 shares of our common stock at a price to the public of $ 14.00 per share , including the exercise in full by the underwriters of their option to purchase 540,000 additional shares of our common stock . including the option exercise , the aggregate net proceeds to us from the offering was approximately $ 50.4 million , net of underwriting discounts , commissions and other offering expenses , for aggregate expenses of approximately $ 7.5 million . as of december 31 , 2020 , we had $ 57.4 million of cash and cash equivalents . impact of covid-19 the current covid-19 worldwide pandemic has presented substantial public health challenges and is affecting our employees , patients , physicians and other healthcare providers , communities and business operations , as well as the u.s. and global economies and financial markets . international and u.s. governmental authorities in impacted regions are taking actions in an effort to slow the spread of covid-19 , including issuing varying forms of `` stay-at-home `` orders , restricting business functions outside of one 's home , restricting gatherings , restricting travel , and mandating social distancing and face coverings . certain jurisdictions have begun re-opening only to return to restrictions due to increases in new covid-19 cases . even in areas where `` stay-at-home `` restrictions have been lifted and the number of covid-19 cases have declined , many individuals remain cautious about resuming activities such as preventative-care medical visits . as a result of covid-19 related limitations and reordering of priorities across the u.s. healthcare system , a reduction in patient flow occurred and our test volumes began to decrease in the second half of march 2020. we experienced an avise ® ctd volume decrease of approximately 5 % in the year ended december 31 , 2020 as compared to 2019. by the end of the third quarter of 2020 , the number of avise ® ctd tests delivered substantially recovered to pre-covid-19 avise ® ctd tests reported in the first quarter of 2020 , and in the fourth quarter of 2020 , the number of avise ® ctd delivered exceeded our pre-covid-19 avise ® ctd tests reported in the first quarter of 2020. for the three months ended december 31 , 2020 as compared to the same period in 2019 , we experienced a avise ® ctd volume increase of approximately 5 % . however , the continued spread of covid-19 may adversely affect testing volumes in future periods , the extent of which is highly uncertain . in addition , we believe there are several other important factors that have impacted , and that we expect will impact our operating performance and results of operations , including shutdowns of our facilities and operations as well as those of our suppliers and courier services , disruptions to the supply chain of material needed for our tests , our sales and commercialization activities and our ability to receive specimens and perform or deliver the results from our tests , delays in reimbursement and coverage decisions from medicare and third-party payors and in interactions with regulatory authorities , as well as our inability to achieve volume-based pricing discounts with our key suppliers story_separator_special_tag as a result , our costs of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each month 's billings . assuming future testing volumes are not negatively impacted by the spread of covid-19 , we expect that our costs of revenue will increase in absolute dollars as the number of tests we perform increases . however , we expect that the cost per test will decrease over time due to volume discounts on materials and shipping costs and other volume efficiencies we may gain as the number of tests we perform increases . as discussed above , the continued spread of covid-19 may adversely affect testing volumes which may result in an increase in cost per test due to our inability to realize volume efficiencies . selling , general and administrative expenses selling , general and administrative expenses consist of personnel costs , including stock-based compensation expense , direct marketing expenses , accounting and legal expenses , consulting costs , and allocated overhead including rent , information technology , depreciation and utilities . we expect that our selling , general and administrative expenses will increase in absolute dollars in 2021 as compared to 2020 , as we continue to evaluate the reach and frequency of our sales and sales support functions , expected additions to headcount and increases for personnel costs , including stock-based compensation . research and development expenses research and development expenses include costs incurred to develop our technology , testing products and product candidates , collect clinical specimens and conduct clinical studies to develop and support our testing products and product candidates . these costs consist of personnel costs , including stock-based compensation expense , materials , laboratory supplies , consulting costs , costs associated with setting up and conducting clinical studies and allocated overhead including rent and utilities . we expense all research and development costs in the periods in which they are incurred . we expect that our research and development expenses will increase in absolute dollars in 2021 as compared to 2020 , as we continue to invest in research and development activities related to our existing testing products and product candidates , expected additions to headcount and increases for personnel costs , including stock-based compensation . interest expense interest expense consists of cash and non-cash interest expense associated with our financing arrangements , including the borrowings under our amended loan agreement with innovatus . we expect interest expense to remain consistent in 2021 as compared to 2020 , and remain consistent thereafter until 2023. change in fair value of financial instruments prior to the completion of our ipo , we classified our outstanding warrants to purchase shares of our redeemable convertible preferred stock as liabilities on our balance sheets at their estimated fair value since the underlying redeemable convertible preferred stock was classified as temporary equity . at the end of each reporting period , changes in the estimated fair value during the period were recorded as a component of other income ( expense ) . 82 in connection with the completion of our ipo in september 2019 , all outstanding warrants to purchase shares of our redeemable convertible preferred stock either terminated or were converted into warrants to purchase shares of our common stock and accordingly , will no longer be subject to measurement . other income , net other income , net , consists primarily of interest income earned on our cash and cash equivalents and an amount received under the cares act . income tax benefit ( expense ) income taxes include federal and state income taxes in the united states . results of operations comparison of the years ended december 31 , 2020 and 2019 : replace_table_token_3_th revenue revenue increased $ 1.6 million , or 3.9 % , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 , primarily due to an increase in revenue to approximately $ 5.1 million from the co-promotion of simponi ® for the year ended december 31 , 2020 compared to approximately $ 1.5 million for the year ended december 31 , 2019. the increase in revenue was partially offset by a decrease in the number of diagnostic tests delivered due in part to impacts of the covid-19 pandemic , coupled with a decrease in average reimbursement per avise ® ctd test . the number of avise ® ctd tests , which accounted for 70 % of revenue for the year ended december 31 , 2020 , decreased to 100,450 tests delivered in the year ended december 31 , 2020 compared to 105,370 tests delivered in the same 2019 period . the number of avise ® ctd tests increased to 28,601 for the three months ended december 31 , 2020 compared to 27,133 tests delivered in the same 2019 period . the adoption of the avise ® ctd test by rheumatologists for the year ended december 31 , 2020 increased to 2,500 ordering healthcare providers as compared to 2,389 ordering healthcare providers in the same 2019 period . the number of ordering healthcare providers decreased to 1,690 for the three months ended december 31 , 2020 compared to 1,707 in the same 2019 period . costs of revenue costs of revenue decreased $ 2.2 million , or 12.0 % , for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. this decrease was primarily due to decreased direct costs such as materials and 83 supplies associated with the decrease in test volume and decreased royalty costs associated with the expiration of a royalty on our cb-caps technology for the year ended december 31 , 2020 compared to the same 2019 period . selling , general and administrative expenses selling , general and administrative expenses increased $ 8.3 million , or 29.0 % , for the year ended december 31 , 2020 compared to the year ended december
| liquidity and capital resources we have incurred net losses since our inception . for the years ended december 31 , 2020 and 2019 , we incurred a net loss of $ 16.7 million and $ 12.0 million , respectively , and we expect to incur additional losses and increased operating expenses in future periods . as of december 31 , 2020 , we had an accumulated deficit of $ 181.3 million . to date , we have generated only limited revenue , and we may never achieve revenue sufficient to offset our expenses . through the date of our ipo in september 2019 , our operations were financed primarily from sales of our common and redeemable convertible preferred stock and borrowings under various debt financings . in september 2019 , we completed our ipo of 4,140,000 shares of its common stock at a price to the public of $ 14.00 per share , including the exercise in full by the underwriters of their option to purchase 540,000 additional shares of our common stock . including the option exercise , the aggregate net proceeds to us from the offering was approximately $ 50.4 million , net of underwriting discounts , commissions and other offering expenses , for aggregate expenses of approximately $ 7.5 million . as of december 31 , 2020 , we had $ 57.4 million of cash and cash equivalents . cash in excess of immediate requirements is invested in accordance with our investment policy , primarily with a view to liquidity and capital preservation . currently , our funds are held in cash and money market funds . 84 in september 2017 , we entered into the loan and security agreement with innovatus under which we immediately drew down $ 20.0 million . in december 2018 , we borrowed an additional $ 5.0 million under the loan agreement . in november 2019 , we amended the loan and security agreement with innovatus , which we collectively refer to as the amended loan agreement .
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the shelf registration statement was automatically effective upon filing and superseded and replaced our previous shelf registration statement declared effective on april 14 , 2015 , which was due to expire on april 14 , 2018 . 39 2017 strategic transactions during 2017 , we completed the following strategic transactions that had an impact and will continue to have an impact on our results of operations : acquisition of blue tree systems limited on october 2 , 2017 , we purchased all of the issued share capital of blue tree for an aggregate consideration of ( i ) $ 34.3 million in cash ; ( ii ) issuance of 191,022 shares of our common stock , valued at $ 10.47 per share , which reflected our common stock closing price one business day prior to the closing date ; and ( iii ) additional consideration of up to $ 5.8 million , subject to certain operational milestones . the blue tree acquisition solidified our transportation product portfolio by adding truck in-cab and refrigerated fleet vehicle solutions to our cargo solution . for additional information regarding the blue tree acquisition , refer to “ note 3 — acquisitions ” in our audited consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. acquisition of inthinc , inc. on june 9 , 2017 , we completed the acquisition of substantially all of the assets of inthinc for an aggregate consideration of ( i ) $ 34.2 million in cash ; ( ii ) issuance of 76,796 shares of our common stock , valued at $ 9.95 per share ; and ( iii ) additional consideration of up to $ 25.0 million , subject to certain operational milestones . the acquisition of inthinc allows us to offer fleet management and driver safety solutions to enterprises and industrial companies worldwide , who operate large commercial vehicle fleets . for additional information regarding the inthinc acquisition , refer to “ note 3 — acquisitions ” in our audited consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. senior secured notes on april 10 , 2017 , we issued $ 250.0 million aggregate principal amount of 8.0 % senior secured notes due 2024. the senior secured notes were issued pursuant to an indenture , dated as of april 10 , 2017 , among us , the guarantors and u.s. bank national association , as trustee and collateral agent . the senior secured notes are unconditionally guaranteed on a senior secured basis by the guarantors and are secured on a first priority basis by ( i ) pledges of capital stock of certain of our directly- and indirectly-owned subsidiaries ; and ( ii ) substantially all of our and our guarantors ' other property and assets , to the extent a first priority security interest is able to be granted or perfected therein , and subject , in all cases , to certain specified exceptions , and an intercreditor agreement with the collateral agent for our revolving credit facility described below . interest payments are due on the senior secured notes semi-annually in arrears on april 1 and october 1 , beginning october 1 , 2017. on april 10 , 2017 , a portion of the proceeds of the issuance of the senior secured notes was used to repay in full our outstanding obligations under , and to terminate our $ 150.0 million outstanding secured credit facilities incurred pursuant to the credit agreement entered into on september 30 , 2014 , resulting in an early payment fee of $ 1.5 million and an additional expense associated with the remaining unamortized debt issuance cost of $ 2.4 million . revolving credit facility on december 18 , 2017 , we and certain of our subsidiaries entered into a revolving credit agreement with jpmorgan chase , as administrative agent and collateral agent . the revolving credit agreement provides for a revolving credit facility in an aggregate principal amount of up to $ 25.0 million for working capital and general corporate purposes and matures on december 18 , 2022. the revolving credit facility will bear interest at an alternative base rate or an adjusted libor , plus an applicable margin of 1.50 % in the case of alternative base rate loans and 2.50 % in the case of adjusted libor loans . the revolving credit facility is secured by a first priority security interest in substantially all of our and our subsidiaries ' assets under a security agreement among the company , the applicable subsidiaries and jpmorgan chase , subject to an intercreditor agreement with the indenture trustee for the senior secured notes . the revolving credit facility has no scheduled principal amortization until the maturity date . subject to the terms set forth in the revolving credit agreement , we may borrow , repay and reborrow amounts under the revolving credit facility at any time prior to the maturity date . 40 revenues we derive service revenues primarily from monthly fees for industrial iot connectivity services that consist of subscriber-based and recurring monthly usage fees for each subscriber communicator or sim activated for use on our satellite network , as well as other satellite networks and cellular wireless networks that we resell to our customers ( i.e . , our mcps , mcas and direct customers ) . usage fees are generally based upon the data transmitted by a customer and the overall number of subscriber communicators and or sims activated by each customer and whether we provide services through our value-added portal . service revenues are recognized on an accrual basis , as services are rendered , or on a cash basis , if collection from the customer is not reasonably assured at the time the service is provided . story_separator_special_tag acquisition-related and integration costs year ended december 31 , change ( in thousands ) 2018 2017 dollars % acquisition-related and integration costs $ 1,624 $ 3,315 $ ( 1,691 ) ( 51.0 ) % acquisition-related and integration costs include professional services expenses and identifiable integration costs directly attributable to our acquisitions . the decrease in acquisition-related and integration costs reflected lower acquisition and integration activity in the 2018 period compared to the prior year period . other income ( expense ) other income ( expense ) is comprised primarily of interest expense , foreign exchange gains and losses , interest income from our cash and cash equivalents , which can consist of u.s. treasuries , interest bearing instruments , and our previously held investments in marketable securities consisting of u.s. government and agency obligations , corporate obligations and fdic-insured certificates of deposit classified as held to maturity and interest income related to capital leases . replace_table_token_13_th the decrease in other expense for the year ended december 31 , 2018 , compared to the prior year , was primarily due to the loss on extinguishment of our secured credit facilities with macquarie caf llc incurred in the quarter ended june 30 , 2017 and an increase in interest income mainly attributable to our lease receivable associated with customer product financing arrangements , offset , in part , by increased interest expense as a result of higher outstanding principal balances and higher interest rates associated with our senior secured notes issued on april 10 , 2017. we believe our foreign exchange exposure is limited as a majority of our revenue is collected in u.s. dollars . income taxes in 2018 , we recorded income taxes of $ 4.7 million , which primarily included foreign income taxes of $ 4.0 million from income generated by our international operations and $ 0.7 million of income tax benefit related to amortization of tax goodwill generated from acquisitions . in 2017 , we recorded income taxes of $ ( 0.4 ) million , which primarily included foreign income taxes of $ 1.7 million from income generated by our international operations and $ ( 2.1 ) million of income tax benefit related to the impact of the tax cuts and jobs act of 2017 on the amortization of tax goodwill generated from our acquisitions . net loss for the year ended december 31 , 2018 , we had a net loss of $ 25.9 million compared to a net loss of $ 61.2 million for the year ended december 31 , 2017. the 2018 period included a full year of increased interest expense arising from our senior secured notes issued in april 2017 and increased sg & a and product development costs , while the 2017 period included the $ 31.2 million satellite impairment loss and the $ 3.9 million loss on extinguishment of debt related to our secured credit facilities . noncontrolling interests noncontrolling interests relate to earnings and losses attributable to noncontrolling shareholders . 47 net loss attributable to orbcomm inc. for the year ended december 31 , 2018 , we had a net loss attributable to our company of $ 26.2 million , compared to a net loss of $ 61.3 million for the year ended december 31 , 2017. for both of the years ended december 31 , 2018 and 2017 , the net loss attributable to our common stockholders considers dividends of less than $ 0.1 million , paid in shares of the series a convertible preferred stock . story_separator_special_tag interest payments on our debt facilities and fund growth initiatives and capital expenditures . on april 10 , 2017 , we issued $ 250.0 million aggregate principal amount of 8.0 % senior secured notes due 2024. the senior secured notes were issued pursuant to an indenture , dated as of april 10 , 2017 , among us , the guarantors and u.s. bank national association , as trustee and collateral agent . the senior secured notes are unconditionally guaranteed on a senior secured basis by the guarantors , and are secured on a first priority basis by ( i ) pledges of capital stock of certain of our directly- and indirectly-owned subsidiaries ; and ( ii ) substantially all of our and our guarantors ' other property and assets , to the extent a first priority security interest is able to be granted or perfected therein , and subject , in all cases , to certain specified exceptions , and an intercreditor agreement with the collateral agent for our revolving credit facility described below . interest payments are due on the senior secured notes semi-annually in arrears on april 1 and october 1 , beginning october 1 , 2017. we have the option to redeem some or all of the senior secured notes at any time on or after april 1 , 2020 , at redemption prices set forth in the indenture plus accrued and unpaid interest , if any , to the date of redemption . we also have the option to redeem some or all of the senior secured notes at any time before april 1 , 2020 at a redemption price of 100 % of the principal amount of the senior secured notes to be redeemed , plus a “ make-whole ” premium and accrued and unpaid interest , if any , to the date of redemption . in addition , at any time before april 1 , 2020 , we may redeem up to 35 % of the aggregate principal amount of the senior secured notes to be redeemed , plus accrued and unpaid interest , if any , to the date of redemption , with the proceeds from certain equity issuances . the indenture contains covenants that , among other things , limit us and our restricted subsidiaries ' ability to : ( i ) incur or guarantee additional indebtedness ; ( ii ) pay dividends , make other distributions or repurchase or redeem capital stock ;
| liquidity and capital resources we have incurred net losses since our inception . for the years ended december 31 , 2020 and 2019 , we incurred a net loss of $ 16.7 million and $ 12.0 million , respectively , and we expect to incur additional losses and increased operating expenses in future periods . as of december 31 , 2020 , we had an accumulated deficit of $ 181.3 million . to date , we have generated only limited revenue , and we may never achieve revenue sufficient to offset our expenses . through the date of our ipo in september 2019 , our operations were financed primarily from sales of our common and redeemable convertible preferred stock and borrowings under various debt financings . in september 2019 , we completed our ipo of 4,140,000 shares of its common stock at a price to the public of $ 14.00 per share , including the exercise in full by the underwriters of their option to purchase 540,000 additional shares of our common stock . including the option exercise , the aggregate net proceeds to us from the offering was approximately $ 50.4 million , net of underwriting discounts , commissions and other offering expenses , for aggregate expenses of approximately $ 7.5 million . as of december 31 , 2020 , we had $ 57.4 million of cash and cash equivalents . cash in excess of immediate requirements is invested in accordance with our investment policy , primarily with a view to liquidity and capital preservation . currently , our funds are held in cash and money market funds . 84 in september 2017 , we entered into the loan and security agreement with innovatus under which we immediately drew down $ 20.0 million . in december 2018 , we borrowed an additional $ 5.0 million under the loan agreement . in november 2019 , we amended the loan and security agreement with innovatus , which we collectively refer to as the amended loan agreement .
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the shelf registration statement was automatically effective upon filing and superseded and replaced our previous shelf registration statement declared effective on april 14 , 2015 , which was due to expire on april 14 , 2018 . 39 2017 strategic transactions during 2017 , we completed the following strategic transactions that had an impact and will continue to have an impact on our results of operations : acquisition of blue tree systems limited on october 2 , 2017 , we purchased all of the issued share capital of blue tree for an aggregate consideration of ( i ) $ 34.3 million in cash ; ( ii ) issuance of 191,022 shares of our common stock , valued at $ 10.47 per share , which reflected our common stock closing price one business day prior to the closing date ; and ( iii ) additional consideration of up to $ 5.8 million , subject to certain operational milestones . the blue tree acquisition solidified our transportation product portfolio by adding truck in-cab and refrigerated fleet vehicle solutions to our cargo solution . for additional information regarding the blue tree acquisition , refer to “ note 3 — acquisitions ” in our audited consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. acquisition of inthinc , inc. on june 9 , 2017 , we completed the acquisition of substantially all of the assets of inthinc for an aggregate consideration of ( i ) $ 34.2 million in cash ; ( ii ) issuance of 76,796 shares of our common stock , valued at $ 9.95 per share ; and ( iii ) additional consideration of up to $ 25.0 million , subject to certain operational milestones . the acquisition of inthinc allows us to offer fleet management and driver safety solutions to enterprises and industrial companies worldwide , who operate large commercial vehicle fleets . for additional information regarding the inthinc acquisition , refer to “ note 3 — acquisitions ” in our audited consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. senior secured notes on april 10 , 2017 , we issued $ 250.0 million aggregate principal amount of 8.0 % senior secured notes due 2024. the senior secured notes were issued pursuant to an indenture , dated as of april 10 , 2017 , among us , the guarantors and u.s. bank national association , as trustee and collateral agent . the senior secured notes are unconditionally guaranteed on a senior secured basis by the guarantors and are secured on a first priority basis by ( i ) pledges of capital stock of certain of our directly- and indirectly-owned subsidiaries ; and ( ii ) substantially all of our and our guarantors ' other property and assets , to the extent a first priority security interest is able to be granted or perfected therein , and subject , in all cases , to certain specified exceptions , and an intercreditor agreement with the collateral agent for our revolving credit facility described below . interest payments are due on the senior secured notes semi-annually in arrears on april 1 and october 1 , beginning october 1 , 2017. on april 10 , 2017 , a portion of the proceeds of the issuance of the senior secured notes was used to repay in full our outstanding obligations under , and to terminate our $ 150.0 million outstanding secured credit facilities incurred pursuant to the credit agreement entered into on september 30 , 2014 , resulting in an early payment fee of $ 1.5 million and an additional expense associated with the remaining unamortized debt issuance cost of $ 2.4 million . revolving credit facility on december 18 , 2017 , we and certain of our subsidiaries entered into a revolving credit agreement with jpmorgan chase , as administrative agent and collateral agent . the revolving credit agreement provides for a revolving credit facility in an aggregate principal amount of up to $ 25.0 million for working capital and general corporate purposes and matures on december 18 , 2022. the revolving credit facility will bear interest at an alternative base rate or an adjusted libor , plus an applicable margin of 1.50 % in the case of alternative base rate loans and 2.50 % in the case of adjusted libor loans . the revolving credit facility is secured by a first priority security interest in substantially all of our and our subsidiaries ' assets under a security agreement among the company , the applicable subsidiaries and jpmorgan chase , subject to an intercreditor agreement with the indenture trustee for the senior secured notes . the revolving credit facility has no scheduled principal amortization until the maturity date . subject to the terms set forth in the revolving credit agreement , we may borrow , repay and reborrow amounts under the revolving credit facility at any time prior to the maturity date . 40 revenues we derive service revenues primarily from monthly fees for industrial iot connectivity services that consist of subscriber-based and recurring monthly usage fees for each subscriber communicator or sim activated for use on our satellite network , as well as other satellite networks and cellular wireless networks that we resell to our customers ( i.e . , our mcps , mcas and direct customers ) . usage fees are generally based upon the data transmitted by a customer and the overall number of subscriber communicators and or sims activated by each customer and whether we provide services through our value-added portal . service revenues are recognized on an accrual basis , as services are rendered , or on a cash basis , if collection from the customer is not reasonably assured at the time the service is provided . story_separator_special_tag acquisition-related and integration costs year ended december 31 , change ( in thousands ) 2018 2017 dollars % acquisition-related and integration costs $ 1,624 $ 3,315 $ ( 1,691 ) ( 51.0 ) % acquisition-related and integration costs include professional services expenses and identifiable integration costs directly attributable to our acquisitions . the decrease in acquisition-related and integration costs reflected lower acquisition and integration activity in the 2018 period compared to the prior year period . other income ( expense ) other income ( expense ) is comprised primarily of interest expense , foreign exchange gains and losses , interest income from our cash and cash equivalents , which can consist of u.s. treasuries , interest bearing instruments , and our previously held investments in marketable securities consisting of u.s. government and agency obligations , corporate obligations and fdic-insured certificates of deposit classified as held to maturity and interest income related to capital leases . replace_table_token_13_th the decrease in other expense for the year ended december 31 , 2018 , compared to the prior year , was primarily due to the loss on extinguishment of our secured credit facilities with macquarie caf llc incurred in the quarter ended june 30 , 2017 and an increase in interest income mainly attributable to our lease receivable associated with customer product financing arrangements , offset , in part , by increased interest expense as a result of higher outstanding principal balances and higher interest rates associated with our senior secured notes issued on april 10 , 2017. we believe our foreign exchange exposure is limited as a majority of our revenue is collected in u.s. dollars . income taxes in 2018 , we recorded income taxes of $ 4.7 million , which primarily included foreign income taxes of $ 4.0 million from income generated by our international operations and $ 0.7 million of income tax benefit related to amortization of tax goodwill generated from acquisitions . in 2017 , we recorded income taxes of $ ( 0.4 ) million , which primarily included foreign income taxes of $ 1.7 million from income generated by our international operations and $ ( 2.1 ) million of income tax benefit related to the impact of the tax cuts and jobs act of 2017 on the amortization of tax goodwill generated from our acquisitions . net loss for the year ended december 31 , 2018 , we had a net loss of $ 25.9 million compared to a net loss of $ 61.2 million for the year ended december 31 , 2017. the 2018 period included a full year of increased interest expense arising from our senior secured notes issued in april 2017 and increased sg & a and product development costs , while the 2017 period included the $ 31.2 million satellite impairment loss and the $ 3.9 million loss on extinguishment of debt related to our secured credit facilities . noncontrolling interests noncontrolling interests relate to earnings and losses attributable to noncontrolling shareholders . 47 net loss attributable to orbcomm inc. for the year ended december 31 , 2018 , we had a net loss attributable to our company of $ 26.2 million , compared to a net loss of $ 61.3 million for the year ended december 31 , 2017. for both of the years ended december 31 , 2018 and 2017 , the net loss attributable to our common stockholders considers dividends of less than $ 0.1 million , paid in shares of the series a convertible preferred stock . story_separator_special_tag interest payments on our debt facilities and fund growth initiatives and capital expenditures . on april 10 , 2017 , we issued $ 250.0 million aggregate principal amount of 8.0 % senior secured notes due 2024. the senior secured notes were issued pursuant to an indenture , dated as of april 10 , 2017 , among us , the guarantors and u.s. bank national association , as trustee and collateral agent . the senior secured notes are unconditionally guaranteed on a senior secured basis by the guarantors , and are secured on a first priority basis by ( i ) pledges of capital stock of certain of our directly- and indirectly-owned subsidiaries ; and ( ii ) substantially all of our and our guarantors ' other property and assets , to the extent a first priority security interest is able to be granted or perfected therein , and subject , in all cases , to certain specified exceptions , and an intercreditor agreement with the collateral agent for our revolving credit facility described below . interest payments are due on the senior secured notes semi-annually in arrears on april 1 and october 1 , beginning october 1 , 2017. we have the option to redeem some or all of the senior secured notes at any time on or after april 1 , 2020 , at redemption prices set forth in the indenture plus accrued and unpaid interest , if any , to the date of redemption . we also have the option to redeem some or all of the senior secured notes at any time before april 1 , 2020 at a redemption price of 100 % of the principal amount of the senior secured notes to be redeemed , plus a “ make-whole ” premium and accrued and unpaid interest , if any , to the date of redemption . in addition , at any time before april 1 , 2020 , we may redeem up to 35 % of the aggregate principal amount of the senior secured notes to be redeemed , plus accrued and unpaid interest , if any , to the date of redemption , with the proceeds from certain equity issuances . the indenture contains covenants that , among other things , limit us and our restricted subsidiaries ' ability to : ( i ) incur or guarantee additional indebtedness ; ( ii ) pay dividends , make other distributions or repurchase or redeem capital stock ;
| liquidity and capital resources overview our liquidity requirements arise from our working capital needs , our obligations to make scheduled payments of interest on our indebtedness and our need to fund capital expenditures to support our current operations and to facilitate growth and expansion . we have financed our operations and expansion with cash flows from operating activities , sales of our common stock through public offerings and private placements of debt . at december 31 , 2019 , we had an accumulated deficit of $ 210.9 million . our primary sources of liquidity consist of cash and cash equivalents totaling $ 54.3 million and an unused revolving credit facility under the revolving credit agreement , as described below , available for use for working capital and general business purposes , which we believe will be sufficient to provide working capital , make interest payments and make capital expenditures to support operations and facilitate growth and expansion for the next twelve months . operating activities cash provided by our operating activities in 2019 was $ 30.1 million resulting from a net loss of $ 18.1 million and cash used by working capital of $ 10.3 million , offset by non-cash items including $ 50.7 million for depreciation and amortization and $ 6.2 million for stock-based compensation . working capital activities primarily consisted of an increase in accounts receivable of $ 5.2 million related to timing of collections and an increase of $ 5.6 million in inventories .
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million or 6.1 % , to $ 20.8 million from $ 19.6 million for the year ended december 31 , 2011. this increase is primarily related to an increase in shipments in calendar year 2012. in the product revenue category , there were 1,136 fuel cell systems shipped for the year ended december 31 , 2012 as compared to 984 fuel cell systems shipped for the year ended december 31 , 2011. service revenue : service revenue generally includes revenue from our service and maintenance contracts , hydrogen contracts , spare parts , and leased units . service revenue for the year ended december 31 , 2013 increased $ 3.1 million or 84.2 % , to $ 6.7 million from $ 3.6 million for the year ended december 31 , 2012. the increase is primarily related to new gencare service contracts placed by existing customers during 2013 . 27 service revenue for the year ended december 31 , 2012 decreased $ 16,000 or 0.4 % , to $ 3.6 million from $ 3.6 million for the year ended december 31 , 2011. the decrease is primarily related to a decline in spare part sales , partly offset by new service contracts placed by existing customers during 2012. research and development contract revenue . research and development contract revenue primarily relates to cost reimbursement research and development contracts associated with the development of pem fuel cell technology . we generally share in the cost of these programs with our cost-sharing percentages generally ranging from 30 % to 50 % of total project costs . revenue from time and material contracts is recognized on the basis of hours expended plus other reimbursable contract costs incurred during the period . we expect to continue certain research and development contract work that is related to our current product development efforts . research and development contract revenue for the year ended december 31 , 2013 decreased $ 0.2 million , or 12.0 % , to $ 1.5 million from $ 1.7 million for the year ended december 31 , 2012. the decrease is primarily related to a reduced effort on three funded projects that are complete or near completion , partially offset by the start of a new project . research and development contract revenue for the year ended december 31 , 2012 decreased $ 2.2 million , or 56.2 % , to $ 1.7 million from $ 3.9 million for the year ended december 31 , 2011. the decrease is primarily related to fewer active contracts during 2012. cost of product revenue . cost of product revenue includes direct material and labor costs , warranty cost , and an allocation of overhead costs that relate to the manufacture of gendrive products . cost of product revenue for the year ended december 31 , 2013 decreased $ 5.0 million , or 19.5 % , to $ 20.4 million from $ 25.4 million for the year ended december 31 , 2012. the decrease in the cost of product revenue was primarily related to a decline in the number of units shipped in 2013 compared to 2012. during the year ended december 31 , 2013 , in the cost of product revenue category , we shipped 918 fuel cell systems to end customers as compared to 1,136 fuel cell systems shipped during the year ended december , 2012. cost of product revenue for the year ended december 31 , 2012 increased $ 2.8 million , or 12.1 % , to $ 25.4 million from $ 22.6 million for the year ended december 31 , 2011. the increase in the cost of product revenue was primarily related to the increase in the number of units shipped in 2012 compared to 2011. during the year ended december 31 , 2012 , in the cost of product and service revenue category , we shipped 1,136 fuel cell systems to end customers as compared to 984 fuel cell systems shipped during the year ended december , 2011. cost of service revenue . cost of service revenue includes the labor and material costs incurred for our product service and maintenance contracts , our hydrogen contracts , replacement parts , rental units , and leased units . in addition , cost of service revenue also includes allocation of overhead costs that relate to the servicing of our gendrive products . cost of service revenue for the year ended december 31 , 2013 increased $ 2.6 million , or 21.3 % , to $ 14.9 million from $ 12.3 million for the year ended december 31 , 2012. the increase in the cost of service revenue was primarily related to a higher number of gencare service contracts in 2013 ( including service personnel to maintain these contracts ) which was offset by additional expenses for unanticipated warranty claims arising from gendrive component quality issues that were recorded during the year ended december 31 , 2012. cost of service revenue for the year ended december 31 , 2012 increased $ 4.3 million , or 53.0 % , to $ 12.3 million from $ 8.0 million for the year ended december 31 , 2011. the increase in the cost of service revenue was primarily related to additional expenses for unanticipated warranty claims arising from gendrive component quality issues that were recorded during the year ended december 31 , 2012 , coupled with a higher number of gencare service contracts in 2012 ( including service personnel to maintain these contracts ) . cost of research and development contract revenue . cost of research and development contract revenue includes costs associated with research and development contracts including : cash and non-cash compensation and benefits for engineering and related support staff , fees paid to outside suppliers for subcontracted components and services , fees paid to consultants for services provided , materials and supplies used and other directly allocable general overhead costs allocated to specific research and development contracts . story_separator_special_tag selling prices will be analyzed on a more frequent basis if a significant change in the company 's business necessitates a more timely analysis or if the company experiences significant variances in its selling prices . once relative selling prices are determined , the company proportionately allocates the sale consideration to each element of the arrangement . the allocated sales consideration related to fuel cell systems and equipment , spare parts , and hydrogen is recognized as revenue at shipment if title and risk of loss have passed to the customer , there is persuasive evidence of an arrangement , the sales price is fixed or determinable , collection of the related receivable is reasonably assured , and customer acceptance criteria , if any , have been successfully demonstrated . the allocated sales consideration related to installation , service , maintenance , and hydrogen delivery infrastructure is generally recognized as revenue when completed or on a straight-line basis over the term of the contract , as appropriate . the company does not include a right of return on its products other than rights related to warranty provisions that permit repair or replacement of defective goods . the company accrues for anticipated warranty costs at the same time that revenue is recognized for the related product . the company has also sold extended warranty contracts that generally provide for a five to ten year warranty from the date of product installation . these types of contacts are accounted for as a separate deliverable , and accordingly , revenue generated from these transactions is deferred and recognized in income over the warranty period generally on a straight-line basis . additionally , the company may enter into annual service and maintenance contracts that are billed monthly . revenue generated from these transactions is recognized in income on a straight-line basis over the term of the contract . contract accounting is used for research and development contract revenue , which primarily relates to cost reimbursement research and development contracts associated with the development of pem fuel cell technology . the company generally shares in the cost of these programs with cost sharing percentages generally ranging from 30 % to 50 % of total project costs . revenue from time and material contracts is recognized on the basis of hours expended plus other reimbursable contract costs incurred during the period . all allowable work performed through the end of each calendar quarter is billed , subject to limitations in the respective contracts . product warranty reserve : our gendrive products are generally sold with a one to two-year product warranty that commences on the product installation date . we currently estimate the costs of satisfying warranty claims based on an analysis of past experience and provide for future claims in the period the revenue is recognized . the company 's product and service warranty reserve as of december 31 , 2013 is approximately $ 1.6 million and is included in product warranty reserve in the consolidated balance sheets . included in this balance is approximately $ 1.2 million related to specific gendrive component quality issues that were identified during the year ended december 31 , 2012 . 34 in addition to the standard product warranty , we have entered into certain contracts with customers that include extended warranty and maintenance terms of five to ten years from the date of installation . revenue generated from these transactions is deferred and recognized in income over the warranty period . the fair value of the extended warranty and maintenance deliverable has been estimated using the projected cash outflows to meet the obligations in the related contract . projected cash outflows have been determined using estimated product run hours , failure rates and other assumptions based on the company 's historical experience . valuation of long-lived assets : we assess the impairment of long-lived assets , including identifiable intangible assets , whenever events or changes in circumstances indicate that the carrying value may not be recoverable . factors we consider important that could trigger an impairment review include , but are not limited to , the following : significant underperformance relative to expected historical or projected future operating results ; significant changes in the manner of our use of the acquired assets or the strategy for our overall business ; significant negative industry or economic trends ; significant decline in our stock price for a sustained period ; and our market capitalization relative to net book value . when we determine that the carrying value of long-lived assets , including identifiable intangible assets , may not be recoverable based upon the existence of one or more of the above indicators of impairment , we would measure any impairment based upon the provisions of fasb asc no . 350-35-30-14 , intangibles - goodwill and other , and fasb asc no . 360-10-35-15 , impairment or disposal of long-lived assets , as appropriate . any resulting impairment loss could have a material adverse impact on our financial condition and results of operations . stock based compensation : we recognize stock-based compensation expense associated with the vesting of share based instruments in the consolidated statements of operations . determining the amount of stock-based compensation to be recorded requires us to develop estimates to be used in calculating the grant-date fair value of stock options . we calculate the grant-date fair values using the black-scholes valuation model . the black-scholes model requires us to make estimates of the following assumptions : expected volatility—the estimated stock price volatility was derived based upon the company 's actual stock prices over an historical period equal to the expected life of the options , which represents the company 's best estimate of expected volatility . expected option life—the company 's estimate of an expected option life was calculated in accordance with the simplified method for calculating the expected term assumption . the simplified method is a calculation based on the contractual life and vesting terms of
| liquidity and capital resources overview our liquidity requirements arise from our working capital needs , our obligations to make scheduled payments of interest on our indebtedness and our need to fund capital expenditures to support our current operations and to facilitate growth and expansion . we have financed our operations and expansion with cash flows from operating activities , sales of our common stock through public offerings and private placements of debt . at december 31 , 2019 , we had an accumulated deficit of $ 210.9 million . our primary sources of liquidity consist of cash and cash equivalents totaling $ 54.3 million and an unused revolving credit facility under the revolving credit agreement , as described below , available for use for working capital and general business purposes , which we believe will be sufficient to provide working capital , make interest payments and make capital expenditures to support operations and facilitate growth and expansion for the next twelve months . operating activities cash provided by our operating activities in 2019 was $ 30.1 million resulting from a net loss of $ 18.1 million and cash used by working capital of $ 10.3 million , offset by non-cash items including $ 50.7 million for depreciation and amortization and $ 6.2 million for stock-based compensation . working capital activities primarily consisted of an increase in accounts receivable of $ 5.2 million related to timing of collections and an increase of $ 5.6 million in inventories .
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million or 6.1 % , to $ 20.8 million from $ 19.6 million for the year ended december 31 , 2011. this increase is primarily related to an increase in shipments in calendar year 2012. in the product revenue category , there were 1,136 fuel cell systems shipped for the year ended december 31 , 2012 as compared to 984 fuel cell systems shipped for the year ended december 31 , 2011. service revenue : service revenue generally includes revenue from our service and maintenance contracts , hydrogen contracts , spare parts , and leased units . service revenue for the year ended december 31 , 2013 increased $ 3.1 million or 84.2 % , to $ 6.7 million from $ 3.6 million for the year ended december 31 , 2012. the increase is primarily related to new gencare service contracts placed by existing customers during 2013 . 27 service revenue for the year ended december 31 , 2012 decreased $ 16,000 or 0.4 % , to $ 3.6 million from $ 3.6 million for the year ended december 31 , 2011. the decrease is primarily related to a decline in spare part sales , partly offset by new service contracts placed by existing customers during 2012. research and development contract revenue . research and development contract revenue primarily relates to cost reimbursement research and development contracts associated with the development of pem fuel cell technology . we generally share in the cost of these programs with our cost-sharing percentages generally ranging from 30 % to 50 % of total project costs . revenue from time and material contracts is recognized on the basis of hours expended plus other reimbursable contract costs incurred during the period . we expect to continue certain research and development contract work that is related to our current product development efforts . research and development contract revenue for the year ended december 31 , 2013 decreased $ 0.2 million , or 12.0 % , to $ 1.5 million from $ 1.7 million for the year ended december 31 , 2012. the decrease is primarily related to a reduced effort on three funded projects that are complete or near completion , partially offset by the start of a new project . research and development contract revenue for the year ended december 31 , 2012 decreased $ 2.2 million , or 56.2 % , to $ 1.7 million from $ 3.9 million for the year ended december 31 , 2011. the decrease is primarily related to fewer active contracts during 2012. cost of product revenue . cost of product revenue includes direct material and labor costs , warranty cost , and an allocation of overhead costs that relate to the manufacture of gendrive products . cost of product revenue for the year ended december 31 , 2013 decreased $ 5.0 million , or 19.5 % , to $ 20.4 million from $ 25.4 million for the year ended december 31 , 2012. the decrease in the cost of product revenue was primarily related to a decline in the number of units shipped in 2013 compared to 2012. during the year ended december 31 , 2013 , in the cost of product revenue category , we shipped 918 fuel cell systems to end customers as compared to 1,136 fuel cell systems shipped during the year ended december , 2012. cost of product revenue for the year ended december 31 , 2012 increased $ 2.8 million , or 12.1 % , to $ 25.4 million from $ 22.6 million for the year ended december 31 , 2011. the increase in the cost of product revenue was primarily related to the increase in the number of units shipped in 2012 compared to 2011. during the year ended december 31 , 2012 , in the cost of product and service revenue category , we shipped 1,136 fuel cell systems to end customers as compared to 984 fuel cell systems shipped during the year ended december , 2011. cost of service revenue . cost of service revenue includes the labor and material costs incurred for our product service and maintenance contracts , our hydrogen contracts , replacement parts , rental units , and leased units . in addition , cost of service revenue also includes allocation of overhead costs that relate to the servicing of our gendrive products . cost of service revenue for the year ended december 31 , 2013 increased $ 2.6 million , or 21.3 % , to $ 14.9 million from $ 12.3 million for the year ended december 31 , 2012. the increase in the cost of service revenue was primarily related to a higher number of gencare service contracts in 2013 ( including service personnel to maintain these contracts ) which was offset by additional expenses for unanticipated warranty claims arising from gendrive component quality issues that were recorded during the year ended december 31 , 2012. cost of service revenue for the year ended december 31 , 2012 increased $ 4.3 million , or 53.0 % , to $ 12.3 million from $ 8.0 million for the year ended december 31 , 2011. the increase in the cost of service revenue was primarily related to additional expenses for unanticipated warranty claims arising from gendrive component quality issues that were recorded during the year ended december 31 , 2012 , coupled with a higher number of gencare service contracts in 2012 ( including service personnel to maintain these contracts ) . cost of research and development contract revenue . cost of research and development contract revenue includes costs associated with research and development contracts including : cash and non-cash compensation and benefits for engineering and related support staff , fees paid to outside suppliers for subcontracted components and services , fees paid to consultants for services provided , materials and supplies used and other directly allocable general overhead costs allocated to specific research and development contracts . story_separator_special_tag selling prices will be analyzed on a more frequent basis if a significant change in the company 's business necessitates a more timely analysis or if the company experiences significant variances in its selling prices . once relative selling prices are determined , the company proportionately allocates the sale consideration to each element of the arrangement . the allocated sales consideration related to fuel cell systems and equipment , spare parts , and hydrogen is recognized as revenue at shipment if title and risk of loss have passed to the customer , there is persuasive evidence of an arrangement , the sales price is fixed or determinable , collection of the related receivable is reasonably assured , and customer acceptance criteria , if any , have been successfully demonstrated . the allocated sales consideration related to installation , service , maintenance , and hydrogen delivery infrastructure is generally recognized as revenue when completed or on a straight-line basis over the term of the contract , as appropriate . the company does not include a right of return on its products other than rights related to warranty provisions that permit repair or replacement of defective goods . the company accrues for anticipated warranty costs at the same time that revenue is recognized for the related product . the company has also sold extended warranty contracts that generally provide for a five to ten year warranty from the date of product installation . these types of contacts are accounted for as a separate deliverable , and accordingly , revenue generated from these transactions is deferred and recognized in income over the warranty period generally on a straight-line basis . additionally , the company may enter into annual service and maintenance contracts that are billed monthly . revenue generated from these transactions is recognized in income on a straight-line basis over the term of the contract . contract accounting is used for research and development contract revenue , which primarily relates to cost reimbursement research and development contracts associated with the development of pem fuel cell technology . the company generally shares in the cost of these programs with cost sharing percentages generally ranging from 30 % to 50 % of total project costs . revenue from time and material contracts is recognized on the basis of hours expended plus other reimbursable contract costs incurred during the period . all allowable work performed through the end of each calendar quarter is billed , subject to limitations in the respective contracts . product warranty reserve : our gendrive products are generally sold with a one to two-year product warranty that commences on the product installation date . we currently estimate the costs of satisfying warranty claims based on an analysis of past experience and provide for future claims in the period the revenue is recognized . the company 's product and service warranty reserve as of december 31 , 2013 is approximately $ 1.6 million and is included in product warranty reserve in the consolidated balance sheets . included in this balance is approximately $ 1.2 million related to specific gendrive component quality issues that were identified during the year ended december 31 , 2012 . 34 in addition to the standard product warranty , we have entered into certain contracts with customers that include extended warranty and maintenance terms of five to ten years from the date of installation . revenue generated from these transactions is deferred and recognized in income over the warranty period . the fair value of the extended warranty and maintenance deliverable has been estimated using the projected cash outflows to meet the obligations in the related contract . projected cash outflows have been determined using estimated product run hours , failure rates and other assumptions based on the company 's historical experience . valuation of long-lived assets : we assess the impairment of long-lived assets , including identifiable intangible assets , whenever events or changes in circumstances indicate that the carrying value may not be recoverable . factors we consider important that could trigger an impairment review include , but are not limited to , the following : significant underperformance relative to expected historical or projected future operating results ; significant changes in the manner of our use of the acquired assets or the strategy for our overall business ; significant negative industry or economic trends ; significant decline in our stock price for a sustained period ; and our market capitalization relative to net book value . when we determine that the carrying value of long-lived assets , including identifiable intangible assets , may not be recoverable based upon the existence of one or more of the above indicators of impairment , we would measure any impairment based upon the provisions of fasb asc no . 350-35-30-14 , intangibles - goodwill and other , and fasb asc no . 360-10-35-15 , impairment or disposal of long-lived assets , as appropriate . any resulting impairment loss could have a material adverse impact on our financial condition and results of operations . stock based compensation : we recognize stock-based compensation expense associated with the vesting of share based instruments in the consolidated statements of operations . determining the amount of stock-based compensation to be recorded requires us to develop estimates to be used in calculating the grant-date fair value of stock options . we calculate the grant-date fair values using the black-scholes valuation model . the black-scholes model requires us to make estimates of the following assumptions : expected volatility—the estimated stock price volatility was derived based upon the company 's actual stock prices over an historical period equal to the expected life of the options , which represents the company 's best estimate of expected volatility . expected option life—the company 's estimate of an expected option life was calculated in accordance with the simplified method for calculating the expected term assumption . the simplified method is a calculation based on the contractual life and vesting terms of
| liquidity and capital resources our cash requirements relate primarily to working capital needed to operate and grow our business , including funding operating expenses , growth in inventory to support both shipments of new units and servicing the installed base , funding the growth in our genkey “ turn-key ” solution which also includes the installation of our customer 's hydrogen infrastructure as well as delivery of the hydrogen molecule , and continued development and expansion of our products . our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors , including the timing and quantity of product orders and shipments ; the timing and amount of our operating expenses ; the timing and costs of working capital needs ; the timing and costs of building a sales base ; the timing and costs of developing marketing and distribution channels ; the timing and costs of product service requirements ; the timing and costs of hiring and training product staff ; the extent to which our products gain market acceptance ; the timing and costs of product development and introductions ; the extent of our ongoing and any new research and development programs ; and changes in our strategy or our planned activities . if we are unable to fund our operations without additional external financing and therefore can not sustain future operations , we may be required to delay , reduce and or cease our operations and or seek bankruptcy protection . we have experienced and continue to experience negative cash flows from operations and net losses . the company incurred net losses attributable to common shareholders of $ 62.7 million , $ 31.9 million and $ 27.5 million for the years ended december 31 , 2013 , 2012 and 2011 , respectively , and has an accumulated deficit of $ 849.4 million at december 31 , 2013. substantially all of our accumulated deficit been incurred in connection with our operating expenses , research and development expenses and from general and administrative costs associated with our operations .
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during the volatile economic environment , which we believe began in the third quarter of 2007 , we have been relying on our deep industry , credit and financial structuring experience , coupled with our strengths as value-oriented , distressed investors , to deploy a significant amount of new capital . as examples of this , from the beginning of the third quarter of 2007 and through december 31 , 2011 , we have deployed approximately $ 28.5 billion of gross invested capital across our private equity and certain capital markets funds , focused on control , distressed and buyout investments , leveraged loan portfolios and mezzanine , non-control distressed and non-performing loans . in addition , from the beginning of the fourth quarter of 2007 through december 31 , 2011 , the funds managed by apollo have acquired approximately $ 15.6 billion in face value of distressed debt at discounts to par value and purchased approximately $ 37.4 billion in face value of leveraged senior loans at discounts to par value from financial institutions . since we purchased these leveraged loan portfolios from highly motivated sellers , we were able to secure , in certain cases , attractive long-term , low cost financing . in addition to deploying capital in new investments , we have been depending on our over 20 years of experience to enhance value in the current investment portfolio of the funds to which we serve as an investment manager . we have been relying on our restructuring and capital markets experience to work proactively with our funds ' portfolio company management teams to generate cost and working capital savings , reduce capital expenditures , and optimize capital structures through several means such as debt exchange offers and the purchase of portfolio company debt at discounts to par value . for example , as of december 31 , 2011 , fund vi and its underlying portfolio companies purchased or retired approximately $ 19.4 billion in face value of debt and captured approximately $ 9.6 billion of discount to par value of debt in portfolio companies such as ceva logistics , caesars entertainment , realogy and momentive performance materials . in certain situations , such as ceva logistics , funds managed by apollo are the largest owner of the total outstanding debt of the portfolio company . in addition to the attractive return profile associated with these portfolio company debt purchases , we believe that building positions as senior creditors within the existing portfolio companies is strategic to the existing equity ownership positions . additionally , the portfolio companies of fund vi have implemented approximately $ 3.1 billion of cost savings programs on an aggregate basis from the date fund vi invested in them through december 31 , 2011 , which we believe will positively impact their operating profitability . regardless of the market or economic environment at any given time , we rely on our contrarian , value-oriented approach to consistently invest capital on behalf of our investors throughout economic cycles by focusing on opportunities that we believe are often overlooked by other investors . we believe that our expertise in capital markets , focus on nine core industry sectors and investment experience allow us to respond quickly to changing environments . for example , in our private equity business , our private equity funds have had success investing in buyouts and credit opportunities during both expansionary and recessionary economic periods . market considerations our revenues consist of the following : management fees , which are calculated based upon any of net asset value , gross assets , adjusted costs of all unrealized portfolio investments , capital commitments , adjusted assets , invested capital or stockholders ' equity , each as defined in the applicable management agreement of the unconsolidated funds ; advisory and transaction fees relating to the investments our funds make , or individual monitoring agreements with individual portfolio companies of the private equity funds and capital markets funds as well as advisory services provided to a capital markets fund ; and carried interest with respect to our private equity funds and our capital markets funds . our ability to grow our revenues depends in part on our ability to attract new capital and investors , which in turn depends on our ability to appropriately invest our funds ' capital , and on the conditions in the financial 77 markets , including the availability and cost of leverage , and economic conditions in the united states , western europe , asia , and to some extent , elsewhere in the world . the market factors that impact this include the following : the strength of the alternative investment management industry , including the amount of capital invested and withdrawn from alternative investments . allocations of capital to the alternative investment sector are dependent , in part , on the strength of the economy and the returns available from other investments relative to returns from alternative investments . our share of this capital is dependent on the strength of our performance relative to the performance of our competitors . the capital we attract and our returns are drivers of our assets under management , which , in turn , drive the fees we earn . in light of the current volatile conditions in the financial markets , our funds ' returns may be lower than they have been historically and fundraising efforts may be more challenging . the strength and liquidity of the u.s. and relevant global equity markets generally , and the initial public offering market specifically . the strength of these markets affects the value of , and our ability to successfully exit , our equity positions in our private equity portfolio companies in a timely manner . the strength and liquidity of the u.s. and relevant global debt markets . story_separator_special_tag management fees are normally based on net asset value , gross assets , adjusted par asset value , adjusted cost of all unrealized portfolio investments , capital commitments , adjusted assets , stockholders ' equity , invested capital or capital contributions , each as defined in the applicable management agreement . monitoring fees for aum purposes are based on the total value of certain structured portfolio vehicle investments , which normally include leverage , less any portion of such total value that is already considered in fee-generating aum . non-fee generating aum consists of assets that do not produce management fees or monitoring fees . these assets generally consist of the following : ( a ) fair value above invested capital for those funds that earn management fees based on invested capital , ( b ) net asset values related to general partner and co-investment ownership , ( c ) unused credit facilities , ( d ) available commitments on those funds that generate management fees on invested capital , ( e ) structured portfolio vehicle investments that do not generate monitoring fees and ( f ) the difference between gross assets and net asset value for those funds that earn management fees based on net asset value . we use non-fee generating aum combined with fee-generating aum as a performance measurement of our investment activities , as well as to monitor fund size in relation to professional resource and infrastructure needs . non-fee generating aum includes assets on which we could earn carried interest income . 82 the table below displays fee-generating and non-fee generating aum by segment as of december 31 , 2011 , 2010 and 2009. the changes in market conditions , additional funds raised and acquisitions have had significant impacts to our aum : replace_table_token_4_th during the year ended december 31 , 2011 , our total fee-generating aum increased primarily due to acquisitions in our capital markets segment , as well as increases in subscriptions across our three segments . the fee-generating aum of our capital markets funds increased primarily due to acquisitions in 2011 by athene and agm 's gulf stream acquisition , as well as increased subscriptions . the fee-generating aum of our real estate segment increased due to net segment transfers from other segments , subscriptions and increases in leverage , partially offset by losses and distributions . the fee-generating aum of our private equity funds increased due to subscriptions , partially offset by distributions . when the fair value of an investment exceeds invested capital , we are normally entitled to carried interest income on the difference between the fair value once realized and invested capital after also considering certain expenses and preferred return amounts , as specified in the respective partnership agreements ; however , we do not earn management fees on such excess . as a result of the growth in both the size and number of funds that we manage , we have experienced an increase in our management fees and advisory and transaction fees . to support this growth , we have also experienced an increase in operating expenses , resulting from hiring additional personnel , opening new offices to expand our geographical reach and incurring additional professional fees . with respect to our private equity funds and certain of our capital markets and real estate funds , we charge management fees on the amount of committed or invested capital and we generally are entitled to realized carried interest on the realized gains on the dispositions investments . certain funds may have current fair values below invested capital , however , the management fee would still be computed on the invested capital for such funds . with respect to ari and amtg , we receive management fees on stockholders equity as defined in its management agreement . in addition , our fee-generating aum reflects leverage vehicles that generate monitoring fees on value in excess of fund commitments . as of december 31 , 2011 , our total fee-generating aum is comprised of approximately 88 % of assets that earn management fees and the remaining balance of assets earn monitoring fees . 83 the company 's entire fee-generating aum is subject to management or monitoring fees . the components of fee-generating aum by segment as of december 31 , 2011 and 2010 are presented below : replace_table_token_5_th ( 1 ) monitoring fees are normally based on the total value of certain special purpose vehicle investments , which includes leverage , less any portion of such total value that is already considered for fee-generating aum . monitoring fees are typically calculated using a 0.5 % annual rate . ( 2 ) the weighted average remaining life of the private equity funds excluding permanent capital vehicles at december 31 , 2011 is 65 months . ( 3 ) the fee-generating aum for the capital markets funds has no concentration across the investment strategies . ( 4 ) the fee-generating aum for our real estate entities is based on an adjusted equity amount as specified by the respective management agreements . replace_table_token_6_th ( 1 ) monitoring fees are normally based on the total value of certain special purpose vehicle investments , which includes leverage , less any portion of such total value that is already considered for fee-generating aum . monitoring fees are typically calculated using a 0.5 % annual rate . ( 2 ) the weighted average remaining life of the private equity funds excluding permanent capital vehicles at december 31 , 2010 is 76 months . ( 3 ) the fee-generating aum for the capital markets funds has no concentration across the investment strategies . 84 aum as of december 31 , 2011 , 2010 and 2009 was as follows : replace_table_token_7_th the following table presents total assets under management and fee generating assets under management amounts for our private equity segment by strategy : replace_table_token_8_th the following table presents total assets
| liquidity and capital resources our cash requirements relate primarily to working capital needed to operate and grow our business , including funding operating expenses , growth in inventory to support both shipments of new units and servicing the installed base , funding the growth in our genkey “ turn-key ” solution which also includes the installation of our customer 's hydrogen infrastructure as well as delivery of the hydrogen molecule , and continued development and expansion of our products . our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors , including the timing and quantity of product orders and shipments ; the timing and amount of our operating expenses ; the timing and costs of working capital needs ; the timing and costs of building a sales base ; the timing and costs of developing marketing and distribution channels ; the timing and costs of product service requirements ; the timing and costs of hiring and training product staff ; the extent to which our products gain market acceptance ; the timing and costs of product development and introductions ; the extent of our ongoing and any new research and development programs ; and changes in our strategy or our planned activities . if we are unable to fund our operations without additional external financing and therefore can not sustain future operations , we may be required to delay , reduce and or cease our operations and or seek bankruptcy protection . we have experienced and continue to experience negative cash flows from operations and net losses . the company incurred net losses attributable to common shareholders of $ 62.7 million , $ 31.9 million and $ 27.5 million for the years ended december 31 , 2013 , 2012 and 2011 , respectively , and has an accumulated deficit of $ 849.4 million at december 31 , 2013. substantially all of our accumulated deficit been incurred in connection with our operating expenses , research and development expenses and from general and administrative costs associated with our operations .
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during the volatile economic environment , which we believe began in the third quarter of 2007 , we have been relying on our deep industry , credit and financial structuring experience , coupled with our strengths as value-oriented , distressed investors , to deploy a significant amount of new capital . as examples of this , from the beginning of the third quarter of 2007 and through december 31 , 2011 , we have deployed approximately $ 28.5 billion of gross invested capital across our private equity and certain capital markets funds , focused on control , distressed and buyout investments , leveraged loan portfolios and mezzanine , non-control distressed and non-performing loans . in addition , from the beginning of the fourth quarter of 2007 through december 31 , 2011 , the funds managed by apollo have acquired approximately $ 15.6 billion in face value of distressed debt at discounts to par value and purchased approximately $ 37.4 billion in face value of leveraged senior loans at discounts to par value from financial institutions . since we purchased these leveraged loan portfolios from highly motivated sellers , we were able to secure , in certain cases , attractive long-term , low cost financing . in addition to deploying capital in new investments , we have been depending on our over 20 years of experience to enhance value in the current investment portfolio of the funds to which we serve as an investment manager . we have been relying on our restructuring and capital markets experience to work proactively with our funds ' portfolio company management teams to generate cost and working capital savings , reduce capital expenditures , and optimize capital structures through several means such as debt exchange offers and the purchase of portfolio company debt at discounts to par value . for example , as of december 31 , 2011 , fund vi and its underlying portfolio companies purchased or retired approximately $ 19.4 billion in face value of debt and captured approximately $ 9.6 billion of discount to par value of debt in portfolio companies such as ceva logistics , caesars entertainment , realogy and momentive performance materials . in certain situations , such as ceva logistics , funds managed by apollo are the largest owner of the total outstanding debt of the portfolio company . in addition to the attractive return profile associated with these portfolio company debt purchases , we believe that building positions as senior creditors within the existing portfolio companies is strategic to the existing equity ownership positions . additionally , the portfolio companies of fund vi have implemented approximately $ 3.1 billion of cost savings programs on an aggregate basis from the date fund vi invested in them through december 31 , 2011 , which we believe will positively impact their operating profitability . regardless of the market or economic environment at any given time , we rely on our contrarian , value-oriented approach to consistently invest capital on behalf of our investors throughout economic cycles by focusing on opportunities that we believe are often overlooked by other investors . we believe that our expertise in capital markets , focus on nine core industry sectors and investment experience allow us to respond quickly to changing environments . for example , in our private equity business , our private equity funds have had success investing in buyouts and credit opportunities during both expansionary and recessionary economic periods . market considerations our revenues consist of the following : management fees , which are calculated based upon any of net asset value , gross assets , adjusted costs of all unrealized portfolio investments , capital commitments , adjusted assets , invested capital or stockholders ' equity , each as defined in the applicable management agreement of the unconsolidated funds ; advisory and transaction fees relating to the investments our funds make , or individual monitoring agreements with individual portfolio companies of the private equity funds and capital markets funds as well as advisory services provided to a capital markets fund ; and carried interest with respect to our private equity funds and our capital markets funds . our ability to grow our revenues depends in part on our ability to attract new capital and investors , which in turn depends on our ability to appropriately invest our funds ' capital , and on the conditions in the financial 77 markets , including the availability and cost of leverage , and economic conditions in the united states , western europe , asia , and to some extent , elsewhere in the world . the market factors that impact this include the following : the strength of the alternative investment management industry , including the amount of capital invested and withdrawn from alternative investments . allocations of capital to the alternative investment sector are dependent , in part , on the strength of the economy and the returns available from other investments relative to returns from alternative investments . our share of this capital is dependent on the strength of our performance relative to the performance of our competitors . the capital we attract and our returns are drivers of our assets under management , which , in turn , drive the fees we earn . in light of the current volatile conditions in the financial markets , our funds ' returns may be lower than they have been historically and fundraising efforts may be more challenging . the strength and liquidity of the u.s. and relevant global equity markets generally , and the initial public offering market specifically . the strength of these markets affects the value of , and our ability to successfully exit , our equity positions in our private equity portfolio companies in a timely manner . the strength and liquidity of the u.s. and relevant global debt markets . story_separator_special_tag management fees are normally based on net asset value , gross assets , adjusted par asset value , adjusted cost of all unrealized portfolio investments , capital commitments , adjusted assets , stockholders ' equity , invested capital or capital contributions , each as defined in the applicable management agreement . monitoring fees for aum purposes are based on the total value of certain structured portfolio vehicle investments , which normally include leverage , less any portion of such total value that is already considered in fee-generating aum . non-fee generating aum consists of assets that do not produce management fees or monitoring fees . these assets generally consist of the following : ( a ) fair value above invested capital for those funds that earn management fees based on invested capital , ( b ) net asset values related to general partner and co-investment ownership , ( c ) unused credit facilities , ( d ) available commitments on those funds that generate management fees on invested capital , ( e ) structured portfolio vehicle investments that do not generate monitoring fees and ( f ) the difference between gross assets and net asset value for those funds that earn management fees based on net asset value . we use non-fee generating aum combined with fee-generating aum as a performance measurement of our investment activities , as well as to monitor fund size in relation to professional resource and infrastructure needs . non-fee generating aum includes assets on which we could earn carried interest income . 82 the table below displays fee-generating and non-fee generating aum by segment as of december 31 , 2011 , 2010 and 2009. the changes in market conditions , additional funds raised and acquisitions have had significant impacts to our aum : replace_table_token_4_th during the year ended december 31 , 2011 , our total fee-generating aum increased primarily due to acquisitions in our capital markets segment , as well as increases in subscriptions across our three segments . the fee-generating aum of our capital markets funds increased primarily due to acquisitions in 2011 by athene and agm 's gulf stream acquisition , as well as increased subscriptions . the fee-generating aum of our real estate segment increased due to net segment transfers from other segments , subscriptions and increases in leverage , partially offset by losses and distributions . the fee-generating aum of our private equity funds increased due to subscriptions , partially offset by distributions . when the fair value of an investment exceeds invested capital , we are normally entitled to carried interest income on the difference between the fair value once realized and invested capital after also considering certain expenses and preferred return amounts , as specified in the respective partnership agreements ; however , we do not earn management fees on such excess . as a result of the growth in both the size and number of funds that we manage , we have experienced an increase in our management fees and advisory and transaction fees . to support this growth , we have also experienced an increase in operating expenses , resulting from hiring additional personnel , opening new offices to expand our geographical reach and incurring additional professional fees . with respect to our private equity funds and certain of our capital markets and real estate funds , we charge management fees on the amount of committed or invested capital and we generally are entitled to realized carried interest on the realized gains on the dispositions investments . certain funds may have current fair values below invested capital , however , the management fee would still be computed on the invested capital for such funds . with respect to ari and amtg , we receive management fees on stockholders equity as defined in its management agreement . in addition , our fee-generating aum reflects leverage vehicles that generate monitoring fees on value in excess of fund commitments . as of december 31 , 2011 , our total fee-generating aum is comprised of approximately 88 % of assets that earn management fees and the remaining balance of assets earn monitoring fees . 83 the company 's entire fee-generating aum is subject to management or monitoring fees . the components of fee-generating aum by segment as of december 31 , 2011 and 2010 are presented below : replace_table_token_5_th ( 1 ) monitoring fees are normally based on the total value of certain special purpose vehicle investments , which includes leverage , less any portion of such total value that is already considered for fee-generating aum . monitoring fees are typically calculated using a 0.5 % annual rate . ( 2 ) the weighted average remaining life of the private equity funds excluding permanent capital vehicles at december 31 , 2011 is 65 months . ( 3 ) the fee-generating aum for the capital markets funds has no concentration across the investment strategies . ( 4 ) the fee-generating aum for our real estate entities is based on an adjusted equity amount as specified by the respective management agreements . replace_table_token_6_th ( 1 ) monitoring fees are normally based on the total value of certain special purpose vehicle investments , which includes leverage , less any portion of such total value that is already considered for fee-generating aum . monitoring fees are typically calculated using a 0.5 % annual rate . ( 2 ) the weighted average remaining life of the private equity funds excluding permanent capital vehicles at december 31 , 2010 is 76 months . ( 3 ) the fee-generating aum for the capital markets funds has no concentration across the investment strategies . 84 aum as of december 31 , 2011 , 2010 and 2009 was as follows : replace_table_token_7_th the following table presents total assets under management and fee generating assets under management amounts for our private equity segment by strategy : replace_table_token_8_th the following table presents total assets
| liquidity and capital resources historical although we have managed our historical liquidity needs by looking at deconsolidated cash flows , our historical consolidated statement of cash flows reflects the cash flows of apollo , as well as those of our consolidated apollo funds . the primary cash flow activities of apollo are : generating cash flow from operations ; making investments in apollo funds ; meeting financing needs through credit agreements ; and distributing cash flow to equity holders and non-controlling interests . primary cash flow activities of the consolidated apollo funds are : raising capital from their investors , which have been reflected historically as non-controlling interests of the consolidated subsidiaries in our financial statements ; using capital to make investments ; generating cash flow from operations through distributions , interest and the realization of investments ; and distributing cash flow to investors . 129 while primarily met by cash flows generated through fee income and carried interest income received , working capital needs have also been met ( to a limited extent ) through borrowings as follows : replace_table_token_36_th ( 1 ) includes the effect of interest rate swaps . we determine whether to make capital commitments to our private equity funds in excess of our minimum required amounts based on a variety of factors , including estimates regarding our liquidity resources over the estimated time period during which commitments will have to be funded , estimates regarding the amounts of capital that may be appropriate for other funds that we are in the process of raising or are considering raising , and our general working capital requirements . we have made one or more distributions to our managing partners and contributing partners , representing all of the undistributed earnings generated by the businesses contributed to the apollo operating group prior to the private offering transactions .
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, 2020 and excludes three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . for more information regarding our properties classified as held for sale and our two unconsolidated joint ventures , see note 3 to the notes to consolidated financial statements included in part iv , item 15 of this annual report on form 10-k. occupancy data for our properties as of december 31 , 2020 and 2019 was as follows ( square feet in thousands ) : replace_table_token_3_th ( 1 ) based on properties we owned on december 31 , 2020 and 2019 , respectively . ( 2 ) based on properties we owned continuously since january 1 , 2019 ; excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . ( 3 ) includes one leasable land parcel . ( 4 ) subject to changes when space is remeasured or reconfigured for tenants . ( 5 ) percent leased includes ( i ) space being fitted out for tenant occupancy pursuant to our lease agreements , if any , and ( ii ) space which is leased , but is not occupied or is being offered for sublease by tenants , if any , as of the measurement date . the average effective rental rate per square foot for our properties for the years ended december 31 , 2020 and 2019 are as follows : replace_table_token_4_th ( 1 ) average effective rental rate per square foot represents total rental income during the period specified divided by the average rentable square feet leased during the period specified . ( 2 ) based on properties we owned on december 31 , 2020 and 2019 , respectively . ( 3 ) based on properties we owned continuously since january 1 , 2019 ; excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . during the year ended december 31 , 2020 , changes in rentable square feet leased and available for lease at our properties were as follows ( square feet in thousands ) : replace_table_token_5_th ( 1 ) based on leases entered during the year ended december 31 , 2020 . ( 2 ) rentable square feet are subject to changes when space is remeasured or reconfigured for tenants . 49 leases at our properties totaling approximately 2,334,000 rentable square feet expired during the year ended december 31 , 2020. during the year ended december 31 , 2020 , we entered leases totaling approximately 1,965,000 rentable square feet , including lease renewals of approximately 1,691,000 rentable square feet and new leases of approximately 274,000 rentable square feet . the weighted ( by rentable square feet ) average rents were 6.9 % above prior rents for the same space and the weighted ( by rentable square feet ) average lease term for new and renewal leases entered during the year ended december 31 , 2020 was 7.3 years . during the year ended december 31 , 2020 , commitments made for expenditures , such as tenant improvements and leasing costs , in connection with leasing space at our properties were as follows ( square feet in thousands ) : replace_table_token_6_th ( 1 ) includes commitments made for leasing expenditures and concessions , such as tenant improvements , leasing commissions , tenant reimbursements and free rent . during the year ended december 31 , 2020 , changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the year ended december 31 , 2020 , when compared to prior effective rental rates per square foot in effect for the same space ( and excluding space acquired vacant ) , were as follows ( square feet in thousands ) : replace_table_token_7_th ( 1 ) effective rental rate includes contractual base rents from our tenants pursuant to our lease agreements , plus straight line rent adjustments and estimated expense reimbursements to be paid to us , and excluding lease value amortization . during the years ended december 31 , 2020 and 2019 , amounts capitalized at our properties for lease related costs , building improvements and development , redevelopment and other activities were as follows : replace_table_token_8_th ( 1 ) lease related costs generally include capital expenditures used to improve tenants ' space or amounts paid directly to tenants to improve their space and leasing related costs , such as brokerage commissions and other tenant inducements . ( 2 ) building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets . ( 3 ) development , redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue . as of december 31 , 2020 , we have estimated unspent leasing related obligations of $ 51,913 , of which we expect to spend $ 19,179 over the next 12 months . 50 as of december 31 , 2020 , we had leases at our properties totaling approximately 3,657,000 rentable square feet that were scheduled to expire during 2021. as of february 18 , 2021 , we expect tenants with leases totaling approximately 2,614,000 rentable square feet that are scheduled to expire through december 31 , 2021 , to not renew their leases upon expiration and we can not be sure as to whether other tenants will renew their leases upon expiration . story_separator_special_tag 55 results of operations ( amounts in thousands , except per share amounts ) year ended december 31 , 2020 , compared to year ended december 31 , 2019 replace_table_token_11_th n/m - not meaningful ( 1 ) comparable properties consists of 177 properties we owned on december 31 , 2020 and which we owned continuously since january 1 , 2019 and excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . ( 2 ) our definition of net operating income , or noi , and our reconciliation of net income to noi are included below under the heading “ non-gaap financial measures . ” references to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended december 31 , 2020 , compared to the year ended december 31 , 2019. for a comparison of consolidated results for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , see 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 fiscal year ended december 31 , 2019 . 56 rental income . the decrease in rental income reflects decreases in rental income of $ 74,411 as a result of property disposition activities , $ 10,078 related to comparable properties and $ 6,204 related to a property undergoing significant redevelopment that became vacant in september 2019 , offset by an increase in rental income of $ 208 related to acquired properties . the decrease in rental income for comparable properties is primarily due to reductions in occupied space at certain of our properties in 2020 , certain below market lease intangibles becoming fully amortized , termination fee revenue totaling $ 1,543 recorded at certain of our comparable properties in 2019 , reductions in reimbursement income due to reductions in expenses that are reimbursable to us by our tenants as a result of the covid-19 pandemic and resulting decrease in space utilization , and decreased parking revenue at certain of our comparable properties due to lower parking activity resulting from the covid-19 pandemic . rental income includes non-cash straight line rent adjustments totaling $ 16,079 in 2020 and $ 27,507 in 2019 , and amortization of acquired leases and assumed lease obligations totaling ( $ 5,440 ) in 2020 and ( $ 2,710 ) in 2019. real estate taxes . the decrease in real estate taxes reflects a decrease in real estate taxes of $ 7,765 as a result of property disposition activities , a decrease of $ 803 for a property undergoing significant redevelopment and a decrease of $ 80 for comparable properties , offset by increases in real estate taxes of $ 50 for acquired properties . real estate taxes for comparable properties declined primarily due to the effect of lower real estate tax valuation assessments resulting from successful real estate tax appeals at certain of our properties since january 1 , 2019. utility expenses . the decrease in utility expenses reflects a decrease in utility expenses of $ 4,796 as a result of property disposition activities and a decrease in utility expenses for comparable properties of $ 4,188 , offset by an increase in utility expenses for a property undergoing significant redevelopment of $ 66. utility expenses for comparable properties declined primarily due to a decrease in electricity and water usage resulting from cost savings initiatives implemented by our manager , rmr llc , in response to decreased space utilization at our properties as a result of the covid-19 pandemic , as well as the implementation of real time energy management programs at certain of our properties in 2020. other operating expenses . other operating expenses consist of salaries and benefit costs of property level personnel , repairs and maintenance expense , cleaning expense , other direct costs of operating our properties and property management fees . the decrease in other operating expenses reflects a decrease of $ 13,448 as a result of property disposition activities , a decrease of $ 1,720 for comparable properties and a decrease of $ 436 related to a property undergoing significant redevelopment , offset by an increase in other operating expenses related to acquired properties of $ 126. other operating expenses for comparable properties declined primarily due to lower net cleaning costs resulting from cost savings initiatives implemented by our manager , rmr llc , in response to decreased space utilization at our properties as a result of the covid-19 pandemic , which were partially offset by an increase in cleaning costs related to more frequent cleaning and sanitizing practices at our properties to help mitigate the spread of covid-19 , lower snow removal costs and lower parking garage maintenance costs due to lower parking activity at certain of our properties resulting from the covid-19 pandemic , partially offset by higher insurance costs in 2020. depreciation and amortization . the decrease in depreciation and amortization primarily reflects a decrease of $ 23,092 as a result of property disposition activities , a decrease for comparable properties of $ 12,891 and a decrease related to a property undergoing significant redevelopment of $ 2,567 , offset by an increase related to acquired properties of $ 231. depreciation and amortization for comparable properties and the property undergoing significant redevelopment declined due to certain leasing related assets becoming fully depreciated in 2020 , partially offset by depreciation and amortization of improvements made to certain of our properties during 2019 and 2020. loss on impairment of real estate . we recorded a $ 2,954 loss on impairment of real estate in 2020 to reduce the carrying value of four properties to their estimated fair value less costs to sell . we recorded a $ 22,255 loss on impairment of real estate
| liquidity and capital resources historical although we have managed our historical liquidity needs by looking at deconsolidated cash flows , our historical consolidated statement of cash flows reflects the cash flows of apollo , as well as those of our consolidated apollo funds . the primary cash flow activities of apollo are : generating cash flow from operations ; making investments in apollo funds ; meeting financing needs through credit agreements ; and distributing cash flow to equity holders and non-controlling interests . primary cash flow activities of the consolidated apollo funds are : raising capital from their investors , which have been reflected historically as non-controlling interests of the consolidated subsidiaries in our financial statements ; using capital to make investments ; generating cash flow from operations through distributions , interest and the realization of investments ; and distributing cash flow to investors . 129 while primarily met by cash flows generated through fee income and carried interest income received , working capital needs have also been met ( to a limited extent ) through borrowings as follows : replace_table_token_36_th ( 1 ) includes the effect of interest rate swaps . we determine whether to make capital commitments to our private equity funds in excess of our minimum required amounts based on a variety of factors , including estimates regarding our liquidity resources over the estimated time period during which commitments will have to be funded , estimates regarding the amounts of capital that may be appropriate for other funds that we are in the process of raising or are considering raising , and our general working capital requirements . we have made one or more distributions to our managing partners and contributing partners , representing all of the undistributed earnings generated by the businesses contributed to the apollo operating group prior to the private offering transactions .
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, 2020 and excludes three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . for more information regarding our properties classified as held for sale and our two unconsolidated joint ventures , see note 3 to the notes to consolidated financial statements included in part iv , item 15 of this annual report on form 10-k. occupancy data for our properties as of december 31 , 2020 and 2019 was as follows ( square feet in thousands ) : replace_table_token_3_th ( 1 ) based on properties we owned on december 31 , 2020 and 2019 , respectively . ( 2 ) based on properties we owned continuously since january 1 , 2019 ; excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . ( 3 ) includes one leasable land parcel . ( 4 ) subject to changes when space is remeasured or reconfigured for tenants . ( 5 ) percent leased includes ( i ) space being fitted out for tenant occupancy pursuant to our lease agreements , if any , and ( ii ) space which is leased , but is not occupied or is being offered for sublease by tenants , if any , as of the measurement date . the average effective rental rate per square foot for our properties for the years ended december 31 , 2020 and 2019 are as follows : replace_table_token_4_th ( 1 ) average effective rental rate per square foot represents total rental income during the period specified divided by the average rentable square feet leased during the period specified . ( 2 ) based on properties we owned on december 31 , 2020 and 2019 , respectively . ( 3 ) based on properties we owned continuously since january 1 , 2019 ; excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . during the year ended december 31 , 2020 , changes in rentable square feet leased and available for lease at our properties were as follows ( square feet in thousands ) : replace_table_token_5_th ( 1 ) based on leases entered during the year ended december 31 , 2020 . ( 2 ) rentable square feet are subject to changes when space is remeasured or reconfigured for tenants . 49 leases at our properties totaling approximately 2,334,000 rentable square feet expired during the year ended december 31 , 2020. during the year ended december 31 , 2020 , we entered leases totaling approximately 1,965,000 rentable square feet , including lease renewals of approximately 1,691,000 rentable square feet and new leases of approximately 274,000 rentable square feet . the weighted ( by rentable square feet ) average rents were 6.9 % above prior rents for the same space and the weighted ( by rentable square feet ) average lease term for new and renewal leases entered during the year ended december 31 , 2020 was 7.3 years . during the year ended december 31 , 2020 , commitments made for expenditures , such as tenant improvements and leasing costs , in connection with leasing space at our properties were as follows ( square feet in thousands ) : replace_table_token_6_th ( 1 ) includes commitments made for leasing expenditures and concessions , such as tenant improvements , leasing commissions , tenant reimbursements and free rent . during the year ended december 31 , 2020 , changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the year ended december 31 , 2020 , when compared to prior effective rental rates per square foot in effect for the same space ( and excluding space acquired vacant ) , were as follows ( square feet in thousands ) : replace_table_token_7_th ( 1 ) effective rental rate includes contractual base rents from our tenants pursuant to our lease agreements , plus straight line rent adjustments and estimated expense reimbursements to be paid to us , and excluding lease value amortization . during the years ended december 31 , 2020 and 2019 , amounts capitalized at our properties for lease related costs , building improvements and development , redevelopment and other activities were as follows : replace_table_token_8_th ( 1 ) lease related costs generally include capital expenditures used to improve tenants ' space or amounts paid directly to tenants to improve their space and leasing related costs , such as brokerage commissions and other tenant inducements . ( 2 ) building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets . ( 3 ) development , redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue . as of december 31 , 2020 , we have estimated unspent leasing related obligations of $ 51,913 , of which we expect to spend $ 19,179 over the next 12 months . 50 as of december 31 , 2020 , we had leases at our properties totaling approximately 3,657,000 rentable square feet that were scheduled to expire during 2021. as of february 18 , 2021 , we expect tenants with leases totaling approximately 2,614,000 rentable square feet that are scheduled to expire through december 31 , 2021 , to not renew their leases upon expiration and we can not be sure as to whether other tenants will renew their leases upon expiration . story_separator_special_tag 55 results of operations ( amounts in thousands , except per share amounts ) year ended december 31 , 2020 , compared to year ended december 31 , 2019 replace_table_token_11_th n/m - not meaningful ( 1 ) comparable properties consists of 177 properties we owned on december 31 , 2020 and which we owned continuously since january 1 , 2019 and excludes properties classified as held for sale , properties undergoing significant redevelopment , if any , and three properties owned by two unconsolidated joint ventures in which we own 51 % and 50 % interests . ( 2 ) our definition of net operating income , or noi , and our reconciliation of net income to noi are included below under the heading “ non-gaap financial measures . ” references to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended december 31 , 2020 , compared to the year ended december 31 , 2019. for a comparison of consolidated results for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , see 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 fiscal year ended december 31 , 2019 . 56 rental income . the decrease in rental income reflects decreases in rental income of $ 74,411 as a result of property disposition activities , $ 10,078 related to comparable properties and $ 6,204 related to a property undergoing significant redevelopment that became vacant in september 2019 , offset by an increase in rental income of $ 208 related to acquired properties . the decrease in rental income for comparable properties is primarily due to reductions in occupied space at certain of our properties in 2020 , certain below market lease intangibles becoming fully amortized , termination fee revenue totaling $ 1,543 recorded at certain of our comparable properties in 2019 , reductions in reimbursement income due to reductions in expenses that are reimbursable to us by our tenants as a result of the covid-19 pandemic and resulting decrease in space utilization , and decreased parking revenue at certain of our comparable properties due to lower parking activity resulting from the covid-19 pandemic . rental income includes non-cash straight line rent adjustments totaling $ 16,079 in 2020 and $ 27,507 in 2019 , and amortization of acquired leases and assumed lease obligations totaling ( $ 5,440 ) in 2020 and ( $ 2,710 ) in 2019. real estate taxes . the decrease in real estate taxes reflects a decrease in real estate taxes of $ 7,765 as a result of property disposition activities , a decrease of $ 803 for a property undergoing significant redevelopment and a decrease of $ 80 for comparable properties , offset by increases in real estate taxes of $ 50 for acquired properties . real estate taxes for comparable properties declined primarily due to the effect of lower real estate tax valuation assessments resulting from successful real estate tax appeals at certain of our properties since january 1 , 2019. utility expenses . the decrease in utility expenses reflects a decrease in utility expenses of $ 4,796 as a result of property disposition activities and a decrease in utility expenses for comparable properties of $ 4,188 , offset by an increase in utility expenses for a property undergoing significant redevelopment of $ 66. utility expenses for comparable properties declined primarily due to a decrease in electricity and water usage resulting from cost savings initiatives implemented by our manager , rmr llc , in response to decreased space utilization at our properties as a result of the covid-19 pandemic , as well as the implementation of real time energy management programs at certain of our properties in 2020. other operating expenses . other operating expenses consist of salaries and benefit costs of property level personnel , repairs and maintenance expense , cleaning expense , other direct costs of operating our properties and property management fees . the decrease in other operating expenses reflects a decrease of $ 13,448 as a result of property disposition activities , a decrease of $ 1,720 for comparable properties and a decrease of $ 436 related to a property undergoing significant redevelopment , offset by an increase in other operating expenses related to acquired properties of $ 126. other operating expenses for comparable properties declined primarily due to lower net cleaning costs resulting from cost savings initiatives implemented by our manager , rmr llc , in response to decreased space utilization at our properties as a result of the covid-19 pandemic , which were partially offset by an increase in cleaning costs related to more frequent cleaning and sanitizing practices at our properties to help mitigate the spread of covid-19 , lower snow removal costs and lower parking garage maintenance costs due to lower parking activity at certain of our properties resulting from the covid-19 pandemic , partially offset by higher insurance costs in 2020. depreciation and amortization . the decrease in depreciation and amortization primarily reflects a decrease of $ 23,092 as a result of property disposition activities , a decrease for comparable properties of $ 12,891 and a decrease related to a property undergoing significant redevelopment of $ 2,567 , offset by an increase related to acquired properties of $ 231. depreciation and amortization for comparable properties and the property undergoing significant redevelopment declined due to certain leasing related assets becoming fully depreciated in 2020 , partially offset by depreciation and amortization of improvements made to certain of our properties during 2019 and 2020. loss on impairment of real estate . we recorded a $ 2,954 loss on impairment of real estate in 2020 to reduce the carrying value of four properties to their estimated fair value less costs to sell . we recorded a $ 22,255 loss on impairment of real estate
| liquidity and capital resources our operating liquidity and resources ( dollar amounts in thousands ) our principal sources of funds to meet operating and capital expenses , pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate from our properties , net proceeds from property sales and borrowings under our revolving credit facility . we believe that these sources of funds will be sufficient to meet our operating and capital expenses , pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter . our future cash flows from operating activities will depend primarily upon : our ability to collect rent from our tenants ; our ability to maintain or increase the occupancy of , and the rental rates at , our properties ; our ability to control operating and capital expenses at our properties ; our ability to successfully sell properties that we market for sale ; our ability to develop or redevelop properties to produce cash flows in excess of our cost of capital ; and our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating expenses and capital expenses . with $ 750,000 available under our revolving credit facility as of february 18 , 2021 and no significant debt maturities until 2022 , we believe that we are well positioned to weather the present disruptions facing the real estate industry and the economy generally . as a result of the covid-19 pandemic , we have received requests from some of our tenants for rent assistance .
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fiscal year 2015 is the 52-week period ended december 29 , 2015 ( `` fiscal 2015 `` ) . fiscal year 2014 is the 52-week period ended december 30 , 2014 ( `` fiscal 2014 `` ) . for fiscal 2016 , the company 's financial statements reflect the fifty-three weeks ended january 3 , 2017 ( successor ) . for fiscal 2015 , the company 's financial statements reflect the twenty-six weeks ended december 29 , 2015 ( successor ) and twenty-six weeks ended june 30 , 2015 ( predecessor ) . for fiscal 2014 , the company 's financial statements reflect the fifty-two weeks ended december 30 , 2014 ( predecessor ) . overview we are a nationwide operator and franchisor of restaurants featuring fresh and fast cuisine , including both mexican inspired and american classic dishes . as of january 3 , 2017 , we have 551 del taco restaurants , a majority of these in the pacific southwest . in each of our restaurants , our food is made to order in working kitchens . we serve our customers fresh and high-quality food typical of fast casual restaurants but with the speed , convenience and value associated with traditional quick service restaurants ( “ qsrs ” ) . with attributes of both a fast casual restaurant and a qsr — a combination we call qsr+ — we occupy a place in the restaurant market distinct from our competitors . with a menu designed to appeal to a wide variety of budgets and tastes and recently updated interior and exterior designs across most of our entire system , we believe that we are poised for growth , operating within the fastest growing segment of the restaurant industry , the limited service restaurant ( “ lsr ” ) segment . with an average system check of $ 7.13 during fiscal 2016 , we offer a compelling value proposition relative to both qsr and fast casual peers . 42 highlights and trends same store sales same store sales growth reflects the change in year-over-year sales for the same store base . we include a restaurant in the same store base in the accounting period following its 18 th full month of operations and exclude restaurant closures . same store sales growth for the 53rd week was calculated by comparing it to the “ like week ” in the prior year . the following table shows the same store sales growth for the fifty-three weeks ended january 3 , 2017 and the fifty-two weeks ended december 29 , 2015 and december 30 , 2014 , respectively : replace_table_token_9_th the increase in company-operated same store sales in the fifty-three weeks ended january 3 , 2017 was driven by an increase in average check size of 4.5 % and an increase in traffic of 0.2 % compared to the fifty-two weeks ended december 29 , 2015 . the increase in company-operated same store sales in the fifty-two weeks ended december 29 , 2015 was driven by an increase in average check size of 4.8 % and an increase in traffic of 1.6 % compared to the fifty-two weeks ended december 30 , 2014 . the increase in company-operated same store sales in the fifty-two weeks ended december 30 , 2014 was driven by an increase in average check size of 3.1 % and an increase in traffic of 2.2 % compared to the fifty-two weeks ended december 31 , 2013. restaurant development del taco restaurant counts at the end of the fifty-three weeks ended january 3 , 2017 and the fifty-two weeks ended december 29 , 2015 and december 30 , 2014 are as follows : replace_table_token_10_th since 2012 , we have focused on repositioning our brand , increasing brand awareness , re-imaging our restaurants , strengthening operational capabilities and refinancing indebtedness to build a foundation for future organic and new unit growth . new restaurant development is expected to contribute to our growth strategy . we plan to open an estimated 23 to 26 system-wide restaurants in fiscal 2017. from time to time , we and our franchisees may close restaurants . 43 restaurant re-imaging we and our franchisees commenced the ambience shake up ( asu ) re-imaging program in 2012 and , as of the date of this form 10-k , 96 % of our system restaurants feature our current image through a re-image or new prototype design , including all 310 restaurants that are company-operated . the asu remodeling program involved a use of cash and impacted net property and depreciation line items on the consolidated balance sheets and statements of comprehensive income ( loss ) , among others . the cost of the asu restaurant remodels varied depending on the scope of work required , but on average the company-operated investment was $ 45,000 per restaurant . we believe the asu remodeling program is an important element of our strategy that has led to higher system restaurant sales and a strengthened brand . key performance indicators in assessing the performance of our business , management utilizes a variety of financial and performance measures . these key measures include company restaurant sales , same store sales , company-operated average unit volumes , restaurant contribution and restaurant contribution margin , number of new restaurant openings , ebitda and adjusted ebitda . company restaurant sales company restaurant sales consists of sales of food and beverages in company-operated restaurants net of promotional allowances , employee meals and other discounts . company restaurant sales in any period is directly influenced by the number of operating weeks in such period , the number of open restaurants , same store sales and per restaurant sales . seasonal factors and the timing of holidays cause revenue to fluctuate from quarter to quarter . revenue per restaurant is typically lower in the first quarter due to reduced january traffic . story_separator_special_tag check size of 4.5 % and an increase in traffic of 0.2 % compared to the prior period . franchise revenue franchise revenue increased $ 1.7 million , or 11.8 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in franchise-operated same store sales of 4.9 % , a $ 0.3 million increase from the impact of the 53rd week and an increase in initial fees . franchise sublease income franchise sublease income remained substantially the same for both the fifty-three weeks ended january 3 , 2017 ( successor ) and the combined fifty-two week period ended december 29 , 2015 . 50 food and paper costs food and paper costs increased $ 3.4 million , or 2.9 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , consisting of a $ 3.1 million increase in food costs and a $ 0.3 million increase in paper costs . the increase in food and paper costs was primarily due to increased company restaurant sales including the 53rd week impact , partially offset by a decrease in commodity costs . as a percentage of company restaurant sales , food and paper costs were 27.7 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 28.6 % for the combined fifty-two weeks ended december 29 , 2015 . this percentage decrease resulted from modest menu price increases and reduced commodity costs during the fifty-three weeks ended january 3 , 2017 . labor and related expenses labor and related expenses increased $ 13.2 million , or 10.7 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to increased labor costs resulting from a california minimum wage increase on january 1 , 2016 , increased company restaurant sales from the 53rd week , increased workers compensation expense due to higher payments and reserves related to underlying claim activity and the impact from new paid sick leave requirements that began july 1 , 2015 in california . as a percentage of company restaurant sales , labor and related expenses were 31.3 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 30.1 % for the combined fifty-two weeks ended december 29 , 2015 . this percentage increase resulted primarily from the impact of the increased california minimum wage , increased workers compensation expense and new sick leave requirements discussed above , partially offset by the impact of modest menu price increases . occupancy and other operating expenses occupancy and other operating expenses were $ 88.9 million for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to $ 43.2 million for the twenty-six weeks ended december 29 , 2015 ( successor ) and $ 43.6 million for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . the increase during the fifty-three weeks ended january 3 , 2017 ( successor ) compared to the twenty-six weeks ended december 29 , 2015 ( successor ) and twenty-six weeks ended june 30 , 2015 ( predecessor ) was primarily due to an increase in operating expenses resulting from increased company restaurant sales from the 53rd week as well as increases in credit and debit card processing fees , partially offset by reductions in utilities and insurance expense . as a percentage of company restaurant sales , occupancy and other operating expenses were 20.5 % for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to 20.9 % for the twenty-six weeks ended december 29 , 2015 ( successor ) and 21.7 % for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . this overall reduction as a percent of company restaurant sales was primarily due to modest menu price increases and the same store sales increase which helped to leverage the fixed components of occupancy and other operating expenses , including a reduction in utilities , insurance and occupancy as a percent of company restaurant sales , partially offset by increased credit and debit card processing fees as a percent of company restaurant sales . general and administrative expenses general and administrative expenses increased $ 4.9 million , or 15.1 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in stock-based compensation , compensation and benefits expense , legal and professional expense , additional costs incurred as a public company and the impact of the 53rd week . general and administrative expenses as a percentage of total revenue were 8.2 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 7.6 % for the combined fifty-two weeks ended december 29 , 2015 and the increase as a percent of total revenue was due to the above mentioned cost increases partially offset by the increased revenues . depreciation and amortization depreciation and amortization was $ 23.1 million for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to $ 11.3 million for the twenty-six weeks ended december 29 , 2015 ( successor ) and $ 8.3 million for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . the increase is primarily due to the addition of new assets , the impact of the 53rd week and incremental depreciation and amortization expense resulting from adjusting property and equipment and identifiable intangible assets to fair value in acquisition accounting for the business combination on june 30 , 2015. as a percentage of total revenue , depreciation and amortization expense was 5.1 % for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to 5.2 % for the twenty-six weeks ended december 29 , 2015 ( successor ) and 4.0 % for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . 51 occupancy and other – franchise
| liquidity and capital resources our operating liquidity and resources ( dollar amounts in thousands ) our principal sources of funds to meet operating and capital expenses , pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate from our properties , net proceeds from property sales and borrowings under our revolving credit facility . we believe that these sources of funds will be sufficient to meet our operating and capital expenses , pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter . our future cash flows from operating activities will depend primarily upon : our ability to collect rent from our tenants ; our ability to maintain or increase the occupancy of , and the rental rates at , our properties ; our ability to control operating and capital expenses at our properties ; our ability to successfully sell properties that we market for sale ; our ability to develop or redevelop properties to produce cash flows in excess of our cost of capital ; and our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating expenses and capital expenses . with $ 750,000 available under our revolving credit facility as of february 18 , 2021 and no significant debt maturities until 2022 , we believe that we are well positioned to weather the present disruptions facing the real estate industry and the economy generally . as a result of the covid-19 pandemic , we have received requests from some of our tenants for rent assistance .
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fiscal year 2015 is the 52-week period ended december 29 , 2015 ( `` fiscal 2015 `` ) . fiscal year 2014 is the 52-week period ended december 30 , 2014 ( `` fiscal 2014 `` ) . for fiscal 2016 , the company 's financial statements reflect the fifty-three weeks ended january 3 , 2017 ( successor ) . for fiscal 2015 , the company 's financial statements reflect the twenty-six weeks ended december 29 , 2015 ( successor ) and twenty-six weeks ended june 30 , 2015 ( predecessor ) . for fiscal 2014 , the company 's financial statements reflect the fifty-two weeks ended december 30 , 2014 ( predecessor ) . overview we are a nationwide operator and franchisor of restaurants featuring fresh and fast cuisine , including both mexican inspired and american classic dishes . as of january 3 , 2017 , we have 551 del taco restaurants , a majority of these in the pacific southwest . in each of our restaurants , our food is made to order in working kitchens . we serve our customers fresh and high-quality food typical of fast casual restaurants but with the speed , convenience and value associated with traditional quick service restaurants ( “ qsrs ” ) . with attributes of both a fast casual restaurant and a qsr — a combination we call qsr+ — we occupy a place in the restaurant market distinct from our competitors . with a menu designed to appeal to a wide variety of budgets and tastes and recently updated interior and exterior designs across most of our entire system , we believe that we are poised for growth , operating within the fastest growing segment of the restaurant industry , the limited service restaurant ( “ lsr ” ) segment . with an average system check of $ 7.13 during fiscal 2016 , we offer a compelling value proposition relative to both qsr and fast casual peers . 42 highlights and trends same store sales same store sales growth reflects the change in year-over-year sales for the same store base . we include a restaurant in the same store base in the accounting period following its 18 th full month of operations and exclude restaurant closures . same store sales growth for the 53rd week was calculated by comparing it to the “ like week ” in the prior year . the following table shows the same store sales growth for the fifty-three weeks ended january 3 , 2017 and the fifty-two weeks ended december 29 , 2015 and december 30 , 2014 , respectively : replace_table_token_9_th the increase in company-operated same store sales in the fifty-three weeks ended january 3 , 2017 was driven by an increase in average check size of 4.5 % and an increase in traffic of 0.2 % compared to the fifty-two weeks ended december 29 , 2015 . the increase in company-operated same store sales in the fifty-two weeks ended december 29 , 2015 was driven by an increase in average check size of 4.8 % and an increase in traffic of 1.6 % compared to the fifty-two weeks ended december 30 , 2014 . the increase in company-operated same store sales in the fifty-two weeks ended december 30 , 2014 was driven by an increase in average check size of 3.1 % and an increase in traffic of 2.2 % compared to the fifty-two weeks ended december 31 , 2013. restaurant development del taco restaurant counts at the end of the fifty-three weeks ended january 3 , 2017 and the fifty-two weeks ended december 29 , 2015 and december 30 , 2014 are as follows : replace_table_token_10_th since 2012 , we have focused on repositioning our brand , increasing brand awareness , re-imaging our restaurants , strengthening operational capabilities and refinancing indebtedness to build a foundation for future organic and new unit growth . new restaurant development is expected to contribute to our growth strategy . we plan to open an estimated 23 to 26 system-wide restaurants in fiscal 2017. from time to time , we and our franchisees may close restaurants . 43 restaurant re-imaging we and our franchisees commenced the ambience shake up ( asu ) re-imaging program in 2012 and , as of the date of this form 10-k , 96 % of our system restaurants feature our current image through a re-image or new prototype design , including all 310 restaurants that are company-operated . the asu remodeling program involved a use of cash and impacted net property and depreciation line items on the consolidated balance sheets and statements of comprehensive income ( loss ) , among others . the cost of the asu restaurant remodels varied depending on the scope of work required , but on average the company-operated investment was $ 45,000 per restaurant . we believe the asu remodeling program is an important element of our strategy that has led to higher system restaurant sales and a strengthened brand . key performance indicators in assessing the performance of our business , management utilizes a variety of financial and performance measures . these key measures include company restaurant sales , same store sales , company-operated average unit volumes , restaurant contribution and restaurant contribution margin , number of new restaurant openings , ebitda and adjusted ebitda . company restaurant sales company restaurant sales consists of sales of food and beverages in company-operated restaurants net of promotional allowances , employee meals and other discounts . company restaurant sales in any period is directly influenced by the number of operating weeks in such period , the number of open restaurants , same store sales and per restaurant sales . seasonal factors and the timing of holidays cause revenue to fluctuate from quarter to quarter . revenue per restaurant is typically lower in the first quarter due to reduced january traffic . story_separator_special_tag check size of 4.5 % and an increase in traffic of 0.2 % compared to the prior period . franchise revenue franchise revenue increased $ 1.7 million , or 11.8 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in franchise-operated same store sales of 4.9 % , a $ 0.3 million increase from the impact of the 53rd week and an increase in initial fees . franchise sublease income franchise sublease income remained substantially the same for both the fifty-three weeks ended january 3 , 2017 ( successor ) and the combined fifty-two week period ended december 29 , 2015 . 50 food and paper costs food and paper costs increased $ 3.4 million , or 2.9 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , consisting of a $ 3.1 million increase in food costs and a $ 0.3 million increase in paper costs . the increase in food and paper costs was primarily due to increased company restaurant sales including the 53rd week impact , partially offset by a decrease in commodity costs . as a percentage of company restaurant sales , food and paper costs were 27.7 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 28.6 % for the combined fifty-two weeks ended december 29 , 2015 . this percentage decrease resulted from modest menu price increases and reduced commodity costs during the fifty-three weeks ended january 3 , 2017 . labor and related expenses labor and related expenses increased $ 13.2 million , or 10.7 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to increased labor costs resulting from a california minimum wage increase on january 1 , 2016 , increased company restaurant sales from the 53rd week , increased workers compensation expense due to higher payments and reserves related to underlying claim activity and the impact from new paid sick leave requirements that began july 1 , 2015 in california . as a percentage of company restaurant sales , labor and related expenses were 31.3 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 30.1 % for the combined fifty-two weeks ended december 29 , 2015 . this percentage increase resulted primarily from the impact of the increased california minimum wage , increased workers compensation expense and new sick leave requirements discussed above , partially offset by the impact of modest menu price increases . occupancy and other operating expenses occupancy and other operating expenses were $ 88.9 million for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to $ 43.2 million for the twenty-six weeks ended december 29 , 2015 ( successor ) and $ 43.6 million for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . the increase during the fifty-three weeks ended january 3 , 2017 ( successor ) compared to the twenty-six weeks ended december 29 , 2015 ( successor ) and twenty-six weeks ended june 30 , 2015 ( predecessor ) was primarily due to an increase in operating expenses resulting from increased company restaurant sales from the 53rd week as well as increases in credit and debit card processing fees , partially offset by reductions in utilities and insurance expense . as a percentage of company restaurant sales , occupancy and other operating expenses were 20.5 % for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to 20.9 % for the twenty-six weeks ended december 29 , 2015 ( successor ) and 21.7 % for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . this overall reduction as a percent of company restaurant sales was primarily due to modest menu price increases and the same store sales increase which helped to leverage the fixed components of occupancy and other operating expenses , including a reduction in utilities , insurance and occupancy as a percent of company restaurant sales , partially offset by increased credit and debit card processing fees as a percent of company restaurant sales . general and administrative expenses general and administrative expenses increased $ 4.9 million , or 15.1 % , for the fifty-three weeks ended january 3 , 2017 ( successor ) , primarily due to an increase in stock-based compensation , compensation and benefits expense , legal and professional expense , additional costs incurred as a public company and the impact of the 53rd week . general and administrative expenses as a percentage of total revenue were 8.2 % for the fifty-three weeks ended january 3 , 2017 ( successor ) , compared to 7.6 % for the combined fifty-two weeks ended december 29 , 2015 and the increase as a percent of total revenue was due to the above mentioned cost increases partially offset by the increased revenues . depreciation and amortization depreciation and amortization was $ 23.1 million for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to $ 11.3 million for the twenty-six weeks ended december 29 , 2015 ( successor ) and $ 8.3 million for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . the increase is primarily due to the addition of new assets , the impact of the 53rd week and incremental depreciation and amortization expense resulting from adjusting property and equipment and identifiable intangible assets to fair value in acquisition accounting for the business combination on june 30 , 2015. as a percentage of total revenue , depreciation and amortization expense was 5.1 % for the fifty-three weeks ended january 3 , 2017 ( successor ) compared to 5.2 % for the twenty-six weeks ended december 29 , 2015 ( successor ) and 4.0 % for the twenty-six weeks ended june 30 , 2015 ( predecessor ) . 51 occupancy and other – franchise
| cash flows provided by operating activities in the fifty-three weeks ended january 3 , 2017 ( successor ) , cash flows provided by operating activities were $ 57.5 million . the cash flows provided by operating activities resulted from net income of $ 20.9 million , non-cash adjustment for asset depreciation and amortization of $ 22.9 million , deferred income taxes of $ 10.7 million , stock-based compensation of $ 4.1 million , and other non-cash adjustments of $ 0.5 million , partially offset by the changes in net working capital requirements totaling $ 1.6 million . in the twenty-six weeks ended december 29 , 2015 ( successor ) , cash flows provided by operating activities were $ 17.1 million . the cash flows provided by operating activities resulted from net income of $ 2.7 million , non-cash adjustment for asset depreciation and amortization of $ 11.1 million , stock-based compensation of $ 1.5 million , debt modification costs of $ 0.1 million , and the changes in net working capital requirements totaling $ 1.7 million , which includes cash outflows of $ 4.3 million related to transaction expenses previously expensed by lac and not reported with dth 's predecessor consolidated statements of comprehensive income ( loss ) . in the twenty-six weeks ended june 30 , 2015 ( predecessor ) , cash flows provided by operating activities were $ 10.1 million .
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16-32237 . on september 28 , 2016 , the bankruptcy court entered the confirmation order , which approved and confirmed the plan . on the effective date , we satisfied the conditions to effectiveness set forth in the confirmation order and in the plan , and the plan therefore became effective in accordance with its terms and we emerged from bankruptcy . further information is set forth in note 2. emergence from voluntary reorganization under chapter 11 proceedings in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k. 42 fresh start accounting upon our emergence on the effective date , we adopted fresh start accounting as required by us gaap . we qualified for fresh start accounting because ( i ) the holders of existing voting shares of the pre-emergence debtor-in-possession received less than 50 % of the voting shares of the post-emergence successor entity and ( ii ) the reorganization value of our assets immediately prior to confirmation was less than the post-petition liabilities and allowed claims . as discussed in note 3. fresh start accounting in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k , we applied fresh start accounting as of october 21 , 2016. adopting fresh start accounting results in a new reporting entity for financial reporting purposes with no beginning retained earnings or deficit . the cancellation of all existing shares outstanding on the effective date and issuance of new shares in the reorganized company caused a related change of control under us gaap . as a result of the application of fresh start accounting , as well as the effects of the implementation of the plan , our consolidated financial statements on or after october 21 , 2016 , are not comparable with our consolidated financial statements prior to that date . stock listing our common stock was listed on the nyse on april 25 , 2012 through february 3 , 2016 under the symbol mpo . on february 3 , 2016 , our stock was delisted by the nyse and began trading on the otc pink market under the symbol mpoy through october 21 , 2016. on october 21 , 2016 , in connection with our emergence from chapter 11 , our existing common shares traded under the symbol mpoy were cancelled . on october 24 , 2016 , our newly issued shares of common stock in the reorganized equity were listed and began trading on the nyse mkt under the symbol mpo . on may 4 , 2017 , our common stock began trading on the nyse under the symbol mpo . results of operations oil , ngls and natural gas revenue oil , ngls and natural gas our revenues are derived from the sale of oil and natural gas production , as well as the sale of ngls that are extracted from our high btu content natural gas . our oil and natural gas revenues do not include the effects of derivatives and may vary significantly from period to period as a result of changes in production volumes or commodity prices . prices for oil , ngls and natural gas fluctuate widely and affect : · the amount of our cash flows available for capital expenditures ; · our ability to borrow and raise additional capital ; · the quantity of oil , ngls and natural gas we can economically produce ; and · our revenues and profitability . average market prices for oil and ngls have historically experienced significant volatility . for a description of factors that may impact future commodity prices , please read risk factorsrisks related to the oil and natural gas industry and our business . beginning january 1 , 2018 , financial accounting standards board ( fasb ) accounting standards update ( asu ) 2014-09 becomes effective for us . see critical accounting policies and estimates below as well as recent accounting pronouncements in note 4. summary of significant accounting policies in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k , for year ended december 31 , 2017 for further discussion of anticipated updates to our revenues under fasb accounting standards codification ( asc ) 606 . 43 the following table sets forth information regarding our oil , ngls and natural gas revenues for the year ended december 31 , 2017 , the successor period , the predecessor period and the year ended december 31 , 2015 ( in thousands ) : replace_table_token_15_th oil , ngls and natural gas pricing the following table sets forth information regarding average realized sales prices for the year ended december 31 , 2017 , the successor period , the predecessor period and the year ended december 31 , 2015 : replace_table_token_16_th crude oil prices the majority of our crude oil production is sold at prevailing market prices with an adjustment for transportation and quality . the market pricing for oil fluctuates in response to many factors that are outside of our control such as supply and demand fluctuations , pipeline and refinery outages , weather patterns and global events and economics . we currently utilize fixed price swaps , collars and three-way collars to manage the impact of changing crude prices . we did not have any open commodity derivative contract positions at december 31 , 2016 or 2015 . 44 as of december 31 , 2017 , we had the following oil derivative contracts that extend through december 2019 , which are summarized as follows : replace_table_token_17_th ( 1 ) positions shown represent open commodity derivative contract positions as of december 31 , 2017 . story_separator_special_tag after the 48-month incentive period ends , the tax rate on such wells increases to 7.0 % . the new 4.0 % tax rate on these wells went into effect on july 1 , 2017 and caused our average production tax rate to trend higher in 2017 compared to 2016 and 2015. additionally , in november 2017 , new legislation was signed into law in oklahoma that increased the 4 % tax rate to 7 % effective with december 2017 production . 51 successor period for the successor period , our severance and other tax expenses were $ 1.3 million or 2.7 % of sales . severance tax was $ 1.1 million or 2.3 % of sales during the successor period . predecessor period for the predecessor period , our severance and other tax expenses were $ 5.2 million or 2.8 % of sales . severance tax was $ 4.1 million or 2.2 % of sales during the predecessor period . year ended december 31 , 2015 for the year ended december 31 , 2015 , our severance and other tax expenses were $ 8.6 million or 2.7 % of sales . severance tax was $ 5.8 million or 1.8 % of sales during the year ended december 31 , 2015. depreciation , depletion and amortization ( dd & a ) under the full cost accounting method , we capitalize costs within a cost center and systematically expense those costs on a unit of production basis based on proved oil and natural gas reserve quantities . we calculate depletion on the following types of costs : ( i ) all capitalized costs , other than the cost of investments in unproved properties which remain to be evaluated , less accumulated amortization ; ( ii ) estimated future expenditures to be incurred in developing proved reserves ; and ( iii ) estimated dismantlement and abandonment costs , net of any associated salvage value . year ended december 31 , 2017 for the year ended december 31 , 2017 , our dd & a expenses were $ 65.8 million at a cost of $ 8.14 per boe . successor period for the successor period , our dd & a expenses were $ 13.0 million at a cost of $ 7.22 per boe . predecessor period for the predecessor period , our dd & a expenses were $ 62.3 million at a cost of $ 7.11 per boe . year ended december 31 , 2015 for the year ended december 31 , 2015 , our dd & a expenses were $ 198.6 million at a cost of $ 16.55 per boe . impairment of oil and gas properties under the full cost method of accounting , we are required to perform a full-cost ceiling test on a quarterly basis . the test establishes a limit ( ceiling ) on the book value of oil and gas properties . the capitalized costs of proved oil and gas properties , net of accumulated dd & a and the related deferred income taxes , may not exceed this ceiling. the ceiling limitation is equal to the sum of : ( i ) the present value of estimated future net revenues from the projected production of proved oil and gas reserves , excluding future cash outflows associated with settling asset retirement obligations accrued on the balance sheet , calculated using the average oil and natural gas sales price we received as of the first trading day of each month over the preceding twelve months ( such average price is held constant throughout the life of the properties ) and a discount factor of 10 % ; ( ii ) the cost of unproved and unevaluated properties excluded from the costs being amortized ; ( iii ) the lower of cost or estimated fair value of unproved properties included in the costs being amortized ; and ( iv ) related income tax effects . if capitalized costs exceed this ceiling , the excess is charged to impairment expense in the accompanying consolidated statements of operations . year ended december 31 , 2017 on november 1 , 2017 , david sambrooks was appointed president and chief executive officer of the company . upon david 's appointment , we began a strategic review of all areas of operations . this review was completed during the fourth quarter of 2017 and our strategy was refined to add further focus to optimizing free cash flows and keeping leverage to a minimum . as a result , in december of 2017 we decreased our current drilling activity from two drilling rigs to one drilling rig . further , the five-year development plan was revised from a two-rig program to a one rig program . this change in strategy ( reduced 5-year drilling activity ) led to a reduction in our undeveloped proved inventory under sec guidelines from 274 locations at year end 2016 to 139 locations at year end 2017. in addition , at year end 2017 our proved undeveloped type curve was revised downward by our third-party reserves engineering firm and capital costs assumptions were revised upward , 52 both as a result of recent drilling results . the revised type curve still generates attractive capital returns of 30.6 % irr at year-end 2017 sec pricing , and 39.1 % irr at december 31 , 2017 strip pricing . as a result of our focus on optimizing free cash flow , keeping leverage to a minimum and optimizing drilling returns , all proved undeveloped reserves included in the december 31 , 2017 reserve report are focused on infill drilling in the carmen and dacoma areas . all undeveloped locations not able to be drilled utilizing our anticipated five-year development schedule were excluded from the december 31 , 2017 reserve report but continue to meet the definition of a proved undeveloped location from an engineering standpoint . we recorded an impairment of oil and gas properties of $ 125.3 million primarily as a
| cash flows provided by operating activities in the fifty-three weeks ended january 3 , 2017 ( successor ) , cash flows provided by operating activities were $ 57.5 million . the cash flows provided by operating activities resulted from net income of $ 20.9 million , non-cash adjustment for asset depreciation and amortization of $ 22.9 million , deferred income taxes of $ 10.7 million , stock-based compensation of $ 4.1 million , and other non-cash adjustments of $ 0.5 million , partially offset by the changes in net working capital requirements totaling $ 1.6 million . in the twenty-six weeks ended december 29 , 2015 ( successor ) , cash flows provided by operating activities were $ 17.1 million . the cash flows provided by operating activities resulted from net income of $ 2.7 million , non-cash adjustment for asset depreciation and amortization of $ 11.1 million , stock-based compensation of $ 1.5 million , debt modification costs of $ 0.1 million , and the changes in net working capital requirements totaling $ 1.7 million , which includes cash outflows of $ 4.3 million related to transaction expenses previously expensed by lac and not reported with dth 's predecessor consolidated statements of comprehensive income ( loss ) . in the twenty-six weeks ended june 30 , 2015 ( predecessor ) , cash flows provided by operating activities were $ 10.1 million .
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16-32237 . on september 28 , 2016 , the bankruptcy court entered the confirmation order , which approved and confirmed the plan . on the effective date , we satisfied the conditions to effectiveness set forth in the confirmation order and in the plan , and the plan therefore became effective in accordance with its terms and we emerged from bankruptcy . further information is set forth in note 2. emergence from voluntary reorganization under chapter 11 proceedings in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k. 42 fresh start accounting upon our emergence on the effective date , we adopted fresh start accounting as required by us gaap . we qualified for fresh start accounting because ( i ) the holders of existing voting shares of the pre-emergence debtor-in-possession received less than 50 % of the voting shares of the post-emergence successor entity and ( ii ) the reorganization value of our assets immediately prior to confirmation was less than the post-petition liabilities and allowed claims . as discussed in note 3. fresh start accounting in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k , we applied fresh start accounting as of october 21 , 2016. adopting fresh start accounting results in a new reporting entity for financial reporting purposes with no beginning retained earnings or deficit . the cancellation of all existing shares outstanding on the effective date and issuance of new shares in the reorganized company caused a related change of control under us gaap . as a result of the application of fresh start accounting , as well as the effects of the implementation of the plan , our consolidated financial statements on or after october 21 , 2016 , are not comparable with our consolidated financial statements prior to that date . stock listing our common stock was listed on the nyse on april 25 , 2012 through february 3 , 2016 under the symbol mpo . on february 3 , 2016 , our stock was delisted by the nyse and began trading on the otc pink market under the symbol mpoy through october 21 , 2016. on october 21 , 2016 , in connection with our emergence from chapter 11 , our existing common shares traded under the symbol mpoy were cancelled . on october 24 , 2016 , our newly issued shares of common stock in the reorganized equity were listed and began trading on the nyse mkt under the symbol mpo . on may 4 , 2017 , our common stock began trading on the nyse under the symbol mpo . results of operations oil , ngls and natural gas revenue oil , ngls and natural gas our revenues are derived from the sale of oil and natural gas production , as well as the sale of ngls that are extracted from our high btu content natural gas . our oil and natural gas revenues do not include the effects of derivatives and may vary significantly from period to period as a result of changes in production volumes or commodity prices . prices for oil , ngls and natural gas fluctuate widely and affect : · the amount of our cash flows available for capital expenditures ; · our ability to borrow and raise additional capital ; · the quantity of oil , ngls and natural gas we can economically produce ; and · our revenues and profitability . average market prices for oil and ngls have historically experienced significant volatility . for a description of factors that may impact future commodity prices , please read risk factorsrisks related to the oil and natural gas industry and our business . beginning january 1 , 2018 , financial accounting standards board ( fasb ) accounting standards update ( asu ) 2014-09 becomes effective for us . see critical accounting policies and estimates below as well as recent accounting pronouncements in note 4. summary of significant accounting policies in the notes to the consolidated financial statements set forth in part iv , item 15 of this annual report on form 10-k , for year ended december 31 , 2017 for further discussion of anticipated updates to our revenues under fasb accounting standards codification ( asc ) 606 . 43 the following table sets forth information regarding our oil , ngls and natural gas revenues for the year ended december 31 , 2017 , the successor period , the predecessor period and the year ended december 31 , 2015 ( in thousands ) : replace_table_token_15_th oil , ngls and natural gas pricing the following table sets forth information regarding average realized sales prices for the year ended december 31 , 2017 , the successor period , the predecessor period and the year ended december 31 , 2015 : replace_table_token_16_th crude oil prices the majority of our crude oil production is sold at prevailing market prices with an adjustment for transportation and quality . the market pricing for oil fluctuates in response to many factors that are outside of our control such as supply and demand fluctuations , pipeline and refinery outages , weather patterns and global events and economics . we currently utilize fixed price swaps , collars and three-way collars to manage the impact of changing crude prices . we did not have any open commodity derivative contract positions at december 31 , 2016 or 2015 . 44 as of december 31 , 2017 , we had the following oil derivative contracts that extend through december 2019 , which are summarized as follows : replace_table_token_17_th ( 1 ) positions shown represent open commodity derivative contract positions as of december 31 , 2017 . story_separator_special_tag after the 48-month incentive period ends , the tax rate on such wells increases to 7.0 % . the new 4.0 % tax rate on these wells went into effect on july 1 , 2017 and caused our average production tax rate to trend higher in 2017 compared to 2016 and 2015. additionally , in november 2017 , new legislation was signed into law in oklahoma that increased the 4 % tax rate to 7 % effective with december 2017 production . 51 successor period for the successor period , our severance and other tax expenses were $ 1.3 million or 2.7 % of sales . severance tax was $ 1.1 million or 2.3 % of sales during the successor period . predecessor period for the predecessor period , our severance and other tax expenses were $ 5.2 million or 2.8 % of sales . severance tax was $ 4.1 million or 2.2 % of sales during the predecessor period . year ended december 31 , 2015 for the year ended december 31 , 2015 , our severance and other tax expenses were $ 8.6 million or 2.7 % of sales . severance tax was $ 5.8 million or 1.8 % of sales during the year ended december 31 , 2015. depreciation , depletion and amortization ( dd & a ) under the full cost accounting method , we capitalize costs within a cost center and systematically expense those costs on a unit of production basis based on proved oil and natural gas reserve quantities . we calculate depletion on the following types of costs : ( i ) all capitalized costs , other than the cost of investments in unproved properties which remain to be evaluated , less accumulated amortization ; ( ii ) estimated future expenditures to be incurred in developing proved reserves ; and ( iii ) estimated dismantlement and abandonment costs , net of any associated salvage value . year ended december 31 , 2017 for the year ended december 31 , 2017 , our dd & a expenses were $ 65.8 million at a cost of $ 8.14 per boe . successor period for the successor period , our dd & a expenses were $ 13.0 million at a cost of $ 7.22 per boe . predecessor period for the predecessor period , our dd & a expenses were $ 62.3 million at a cost of $ 7.11 per boe . year ended december 31 , 2015 for the year ended december 31 , 2015 , our dd & a expenses were $ 198.6 million at a cost of $ 16.55 per boe . impairment of oil and gas properties under the full cost method of accounting , we are required to perform a full-cost ceiling test on a quarterly basis . the test establishes a limit ( ceiling ) on the book value of oil and gas properties . the capitalized costs of proved oil and gas properties , net of accumulated dd & a and the related deferred income taxes , may not exceed this ceiling. the ceiling limitation is equal to the sum of : ( i ) the present value of estimated future net revenues from the projected production of proved oil and gas reserves , excluding future cash outflows associated with settling asset retirement obligations accrued on the balance sheet , calculated using the average oil and natural gas sales price we received as of the first trading day of each month over the preceding twelve months ( such average price is held constant throughout the life of the properties ) and a discount factor of 10 % ; ( ii ) the cost of unproved and unevaluated properties excluded from the costs being amortized ; ( iii ) the lower of cost or estimated fair value of unproved properties included in the costs being amortized ; and ( iv ) related income tax effects . if capitalized costs exceed this ceiling , the excess is charged to impairment expense in the accompanying consolidated statements of operations . year ended december 31 , 2017 on november 1 , 2017 , david sambrooks was appointed president and chief executive officer of the company . upon david 's appointment , we began a strategic review of all areas of operations . this review was completed during the fourth quarter of 2017 and our strategy was refined to add further focus to optimizing free cash flows and keeping leverage to a minimum . as a result , in december of 2017 we decreased our current drilling activity from two drilling rigs to one drilling rig . further , the five-year development plan was revised from a two-rig program to a one rig program . this change in strategy ( reduced 5-year drilling activity ) led to a reduction in our undeveloped proved inventory under sec guidelines from 274 locations at year end 2016 to 139 locations at year end 2017. in addition , at year end 2017 our proved undeveloped type curve was revised downward by our third-party reserves engineering firm and capital costs assumptions were revised upward , 52 both as a result of recent drilling results . the revised type curve still generates attractive capital returns of 30.6 % irr at year-end 2017 sec pricing , and 39.1 % irr at december 31 , 2017 strip pricing . as a result of our focus on optimizing free cash flow , keeping leverage to a minimum and optimizing drilling returns , all proved undeveloped reserves included in the december 31 , 2017 reserve report are focused on infill drilling in the carmen and dacoma areas . all undeveloped locations not able to be drilled utilizing our anticipated five-year development schedule were excluded from the december 31 , 2017 reserve report but continue to meet the definition of a proved undeveloped location from an engineering standpoint . we recorded an impairment of oil and gas properties of $ 125.3 million primarily as a
| debt restructuring costs and advisory fees debt restructuring costs and advisory fees include costs incurred for legal , financing and advisor costs associated with specific transactions , such as troubled debt restructuring , or costs incurred prior to the petition date . year ended december 31 , 2017 for the year ended december 31 , 2017 , we did not incur any debt restructuring costs and advisory fees . successor period for the successor period , we did not incur any debt restructuring costs and advisory fees . predecessor period for the predecessor period , we incurred $ 7.6 million of debt restructuring costs and advisory fees related to our bankruptcy and restructuring process prior to the petition date . year ended december 31 , 2015 during the 2015 period , we engaged various advisors to assist us in analyzing options to improve our financial flexibility and provide additional long-term liquidity . for the year ended december 31 , 2015 , we incurred approximately $ 36.1 million in fees associated with these advisors as well as issuance costs associated with the second lien notes offering and third lien notes exchange . 54 other other expense consists of , among other things , losses on disposal of , or market value adjustments to , field equipment inventory , penalties on early termination of drilling contracts and other miscellaneous expense items . year ended december 31 , 2017 for the year ended december 31 , 2017 , we did not incur any other expenses . successor period for the successor period , we did not incur any other expenses . predecessor period for the predecessor period , we did not incur any other expenses . year ended december 31 , 2015 for the year ended december 31 , 2015 , we incurred other expenses of $ 2.1 million related to the loss on disposal of , or market value adjustments to , field equipment inventory deemed no longer useful to current operations . other income/expense replace_table_token_22_th interest expense prior to the effective date , we had substantial long-term debt in the form of our 2020 senior notes , 2021 senior notes , second lien notes and third lien notes .
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the adjustment to the estimated reserves ceded resulted in a $ 73.3 million cumulative adjustment to the deferred gain , which reduced our losses and lae by the same amount during the fourth quarter of 2012 ( lpt reserve adjustment ) ; ( 2 ) an increase in the contingent commission receivable and the deferred gain under the lpt agreement that resulted in an $ 8.6 million cumulative adjustment , which reduced our losses and lae during the fourth quarter of 2012 ( lpt contingent commission adjustment ) ; and ( 3 ) guidance issued by the financial accounting standards board that , beginning in 2012 , changed the definition of policy acquisition costs which may be capitalized . our underwriting and other operating expenses increased $ 7.1 million during 2012 as a result of this change ( see note 5 in the notes to consolidated financial statements for additional information ) . a primary measure of our performance is our ability to increase stockholders ' equity , including the impact of the deferred gain , over the long-term . the following table shows our stockholders ' equity including the deferred gain , stockholders ' equity on a gaap basis , and number of common shares outstanding at december 31 : replace_table_token_19_th ( 1 ) stockholders ' equity including the deferred gain is a non-gaap measure that is defined as total stockholders ' equity plus the deferred gain , which we believe is an important supplemental measure of our capital position . our goal is to maintain our focus on disciplined underwriting and to continue to pursue profitable growth opportunities across market cycles ; however , we continue to be affected by persistently low investment yields and continuing high levels of unemployment nationally . we do not believe overall economic conditions will change significantly in the near-term . 30 the comparative components of net income are set forth in the following table . replace_table_token_20_th ( 1 ) any adjustment to the estimated reserves ceded under the lpt agreement results in a cumulative adjustment to the deferred gain , which is also included in losses and lae incurred in the consolidated statement of income and comprehensive income , such that the deferred gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the lpt agreement . ( see note 3 in the notes to our consolidated financial statements . ) ( 2 ) any adjustment to the contingent profit commission under the lpt agreement results in a cumulative adjustment to the deferred gain , which is also recognized in losses and lae incurred in the consolidated statement of income and comprehensive income , such that the deferred gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the lpt agreement . ( see note 3 in the notes to our consolidated financial statements . ) ( 3 ) we define net income before impact of the lpt agreement as net income before the impact of : ( a ) amortization of deferred gain ; ( b ) adjustments to lpt agreement ceded reserves ; and ( c ) adjustments to contingent commission receivable –lpt agreement . deferred gain reflects the unamortized gain from our lpt agreement . under gaap , this gain is deferred and is being amortized using the recovery method . amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the lpt agreement , except for the contingent profit commission , which is amortized through june 30 , 2024. the amortization is reflected in losses and lae . we periodically reevaluate the remaining direct reserves subject to the lpt agreement and the expected losses and lae subject to the contingent profit commission under the lpt agreement . our reevaluations result in corresponding adjustments , if needed , to reserves , ceded reserves , contingent commission receivable , and the deferred gain , with the net effect being an increase or decrease , as the case may be , to net income . net income before impact of the lpt agreement is not a measurement of financial performance under gaap , but rather reflects the difference in accounting treatment between statutory and gaap , and should not be considered in isolation or as an alternative to net income before income taxes or net income or any other measure of performance derived in accordance with gaap . we present net income before impact of the lpt agreement because we believe that it is an important supplemental measure of operating performance to be used by analysts , investors and other interested parties in evaluating us . the lpt agreement was a non-recurring transaction , under which the deferred gain does not effect our ongoing operations , and , consequently , we believe this presentation is useful in providing a meaningful understanding of our operating performance . in addition , we believe this non-gaap measure , as we have defined it , is helpful to our management in identifying trends in our performance because the excluded item has limited significance in our current and ongoing operations . net premiums earned net premiums earned were $ 501.5 million , $ 363.4 million , and $ 321.8 million for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the increase in net premiums earned over the past three years was primarily due to increasing policy count and rate increases . in 2011 , our net premiums earned were also impacted by a $ 14.9 million increase in the accrual for final audit premiums . changes in the accrual for final audit premium are driven by various factors , including general economic conditions such as unemployment and payroll trends . story_separator_special_tag the effective tax rate was ( 9.6 ) % , ( 4.5 ) % , and 5.3 % for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the decreased tax expense from 2010 through 2012 is primarily due to increases in tax exempt income as a percentage of pre-tax net income , which was 129.7 % , 121.4 % , and 86.6 % for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the increased tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2012 , compared to 2011 , was primarily due to the impact of the $ 73.3 million favorable lpt reserve adjustment and a $ 15.0 million increase to the lpt contingent profit commission in 2012. the increased tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2011 , compared to 2010 , was primarily due to a $ 21.0 million decrease in pre-tax income . liquidity and capital resources parent company operating cash and cash equivalents . we are a holding company and our ability to fund our operations is contingent upon existing capital and our insurance subsidiaries ' abilities to pay dividends up to the holding company . payment of dividends by our insurance subsidiaries is restricted by state insurance laws , including laws establishing minimum solvency and liquidity thresholds . we require cash to pay stockholder dividends , repurchase common stock , make interest and principal payments on our outstanding debt obligations , provide additional surplus to our insurance subsidiaries , and fund our operating expenses . in september 2012 , ehi made a cash capital contribution totaling $ 70 million to its operating subsidiaries to support future growth and maintain the subsidiaries ' financial strength ratings . based on reported capital , surplus , and dividends paid within the last 12 months , the maximum dividends that may be paid by eicn and epic in 2013 , without prior approval by the respective state insurance regulator , are $ 29.5 million and $ 20.6 million , respectively . the holding company had $ 85.2 million of cash and cash equivalents and fixed maturity securities maturing within the next 24 months at december 31 , 2012 . ten million dollars of our line of credit is payable on each of december 31 , 2013 and december 31 , 2014. we believe that the liquidity needs of the holding company over the next 24 months will be met with cash , maturing investments , and dividends from our insurance subsidiaries . share repurchases . in november 2010 , our board of directors authorized a share repurchase program for repurchases of up to $ 100 million of common stock from november 8 , 2010 through june 30 , 2012 ( the 2011 program ) . in november 2011 , the board of directors authorized a $ 100 million expansion of the 2011 program , to $ 200 million , and extended the repurchase authority 35 pursuant to the 2011 program through june 30 , 2013. repurchases under the 2011 program may be commenced or suspended from time-to-time without prior notice , and the 2011 program may be suspended or discontinued at any time . through december 31 , 2012 , we repurchased a total of 9,426,131 shares of common stock under the 2011 program at an average price of $ 15.79 per share , including commissions , for a total of $ 148.8 million . story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; color : # 000000 ; text-decoration : none ; `` > 2011 , respectively . these laws and regulations govern both the amount and type of fixed maturity security that is eligible for deposit . additionally , certain reinsurance contracts require company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we assumed . the fair value of securities held in trust for the benefit of ceding reinsurers was $ 35.0 million and $ 40.3 million at december 31 , 2012 and 2011 , respectively . 36 cash flows we monitor cash flows at both the consolidated and subsidiary levels . we use trend and variance analyses to project future cash needs , making adjustments to our forecasts as appropriate . the table below shows our net cash flows . replace_table_token_24_th operating activities . major components of net cash provided by operating activities in 2012 included net premiums received of $ 508.7 million , investment income received of $ 79.6 million , and amounts recovered from reinsurers of $ 38.2 million . these were partially offset by claims payments of $ 315.1 million , underwriting and other operating expenses paid of $ 116.8 million ( including premium taxes paid of $ 16.9 million ) , and commissions paid of $ 55.2 million . major components of net cash provided by operating activities in 2011 included net premiums received of $ 358.4 million , investment income received of $ 90.8 million , and amounts recovered from reinsurers of $ 46.1 million . these were partially offset by claims payments of $ 316.4 million , underwriting and other operating expenses paid of $ 93.7 million ( including $ 7.6 million of premium taxes paid ) , and commissions paid of $ 36.3 million . major components of net cash provided by operating activities in 2010 included net premiums received of $ 321.3 million and investment income received of $ 89.2 million , partially offset by claims payments of $ 263.2 ( net of reinsurance recoverables ) , and underwriting and other operating expenses paid of $ 91.5 million . investing activities . in 2012 , net cash used in investing activities was primarily related to the investment of premiums received and the reinvestment of funds from maturities and redemptions . the major sources of net cash
| debt restructuring costs and advisory fees debt restructuring costs and advisory fees include costs incurred for legal , financing and advisor costs associated with specific transactions , such as troubled debt restructuring , or costs incurred prior to the petition date . year ended december 31 , 2017 for the year ended december 31 , 2017 , we did not incur any debt restructuring costs and advisory fees . successor period for the successor period , we did not incur any debt restructuring costs and advisory fees . predecessor period for the predecessor period , we incurred $ 7.6 million of debt restructuring costs and advisory fees related to our bankruptcy and restructuring process prior to the petition date . year ended december 31 , 2015 during the 2015 period , we engaged various advisors to assist us in analyzing options to improve our financial flexibility and provide additional long-term liquidity . for the year ended december 31 , 2015 , we incurred approximately $ 36.1 million in fees associated with these advisors as well as issuance costs associated with the second lien notes offering and third lien notes exchange . 54 other other expense consists of , among other things , losses on disposal of , or market value adjustments to , field equipment inventory , penalties on early termination of drilling contracts and other miscellaneous expense items . year ended december 31 , 2017 for the year ended december 31 , 2017 , we did not incur any other expenses . successor period for the successor period , we did not incur any other expenses . predecessor period for the predecessor period , we did not incur any other expenses . year ended december 31 , 2015 for the year ended december 31 , 2015 , we incurred other expenses of $ 2.1 million related to the loss on disposal of , or market value adjustments to , field equipment inventory deemed no longer useful to current operations . other income/expense replace_table_token_22_th interest expense prior to the effective date , we had substantial long-term debt in the form of our 2020 senior notes , 2021 senior notes , second lien notes and third lien notes .
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the adjustment to the estimated reserves ceded resulted in a $ 73.3 million cumulative adjustment to the deferred gain , which reduced our losses and lae by the same amount during the fourth quarter of 2012 ( lpt reserve adjustment ) ; ( 2 ) an increase in the contingent commission receivable and the deferred gain under the lpt agreement that resulted in an $ 8.6 million cumulative adjustment , which reduced our losses and lae during the fourth quarter of 2012 ( lpt contingent commission adjustment ) ; and ( 3 ) guidance issued by the financial accounting standards board that , beginning in 2012 , changed the definition of policy acquisition costs which may be capitalized . our underwriting and other operating expenses increased $ 7.1 million during 2012 as a result of this change ( see note 5 in the notes to consolidated financial statements for additional information ) . a primary measure of our performance is our ability to increase stockholders ' equity , including the impact of the deferred gain , over the long-term . the following table shows our stockholders ' equity including the deferred gain , stockholders ' equity on a gaap basis , and number of common shares outstanding at december 31 : replace_table_token_19_th ( 1 ) stockholders ' equity including the deferred gain is a non-gaap measure that is defined as total stockholders ' equity plus the deferred gain , which we believe is an important supplemental measure of our capital position . our goal is to maintain our focus on disciplined underwriting and to continue to pursue profitable growth opportunities across market cycles ; however , we continue to be affected by persistently low investment yields and continuing high levels of unemployment nationally . we do not believe overall economic conditions will change significantly in the near-term . 30 the comparative components of net income are set forth in the following table . replace_table_token_20_th ( 1 ) any adjustment to the estimated reserves ceded under the lpt agreement results in a cumulative adjustment to the deferred gain , which is also included in losses and lae incurred in the consolidated statement of income and comprehensive income , such that the deferred gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the lpt agreement . ( see note 3 in the notes to our consolidated financial statements . ) ( 2 ) any adjustment to the contingent profit commission under the lpt agreement results in a cumulative adjustment to the deferred gain , which is also recognized in losses and lae incurred in the consolidated statement of income and comprehensive income , such that the deferred gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the lpt agreement . ( see note 3 in the notes to our consolidated financial statements . ) ( 3 ) we define net income before impact of the lpt agreement as net income before the impact of : ( a ) amortization of deferred gain ; ( b ) adjustments to lpt agreement ceded reserves ; and ( c ) adjustments to contingent commission receivable –lpt agreement . deferred gain reflects the unamortized gain from our lpt agreement . under gaap , this gain is deferred and is being amortized using the recovery method . amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the lpt agreement , except for the contingent profit commission , which is amortized through june 30 , 2024. the amortization is reflected in losses and lae . we periodically reevaluate the remaining direct reserves subject to the lpt agreement and the expected losses and lae subject to the contingent profit commission under the lpt agreement . our reevaluations result in corresponding adjustments , if needed , to reserves , ceded reserves , contingent commission receivable , and the deferred gain , with the net effect being an increase or decrease , as the case may be , to net income . net income before impact of the lpt agreement is not a measurement of financial performance under gaap , but rather reflects the difference in accounting treatment between statutory and gaap , and should not be considered in isolation or as an alternative to net income before income taxes or net income or any other measure of performance derived in accordance with gaap . we present net income before impact of the lpt agreement because we believe that it is an important supplemental measure of operating performance to be used by analysts , investors and other interested parties in evaluating us . the lpt agreement was a non-recurring transaction , under which the deferred gain does not effect our ongoing operations , and , consequently , we believe this presentation is useful in providing a meaningful understanding of our operating performance . in addition , we believe this non-gaap measure , as we have defined it , is helpful to our management in identifying trends in our performance because the excluded item has limited significance in our current and ongoing operations . net premiums earned net premiums earned were $ 501.5 million , $ 363.4 million , and $ 321.8 million for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the increase in net premiums earned over the past three years was primarily due to increasing policy count and rate increases . in 2011 , our net premiums earned were also impacted by a $ 14.9 million increase in the accrual for final audit premiums . changes in the accrual for final audit premium are driven by various factors , including general economic conditions such as unemployment and payroll trends . story_separator_special_tag the effective tax rate was ( 9.6 ) % , ( 4.5 ) % , and 5.3 % for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the decreased tax expense from 2010 through 2012 is primarily due to increases in tax exempt income as a percentage of pre-tax net income , which was 129.7 % , 121.4 % , and 86.6 % for the years ended december 31 , 2012 , 2011 , and 2010 , respectively . the increased tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2012 , compared to 2011 , was primarily due to the impact of the $ 73.3 million favorable lpt reserve adjustment and a $ 15.0 million increase to the lpt contingent profit commission in 2012. the increased tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2011 , compared to 2010 , was primarily due to a $ 21.0 million decrease in pre-tax income . liquidity and capital resources parent company operating cash and cash equivalents . we are a holding company and our ability to fund our operations is contingent upon existing capital and our insurance subsidiaries ' abilities to pay dividends up to the holding company . payment of dividends by our insurance subsidiaries is restricted by state insurance laws , including laws establishing minimum solvency and liquidity thresholds . we require cash to pay stockholder dividends , repurchase common stock , make interest and principal payments on our outstanding debt obligations , provide additional surplus to our insurance subsidiaries , and fund our operating expenses . in september 2012 , ehi made a cash capital contribution totaling $ 70 million to its operating subsidiaries to support future growth and maintain the subsidiaries ' financial strength ratings . based on reported capital , surplus , and dividends paid within the last 12 months , the maximum dividends that may be paid by eicn and epic in 2013 , without prior approval by the respective state insurance regulator , are $ 29.5 million and $ 20.6 million , respectively . the holding company had $ 85.2 million of cash and cash equivalents and fixed maturity securities maturing within the next 24 months at december 31 , 2012 . ten million dollars of our line of credit is payable on each of december 31 , 2013 and december 31 , 2014. we believe that the liquidity needs of the holding company over the next 24 months will be met with cash , maturing investments , and dividends from our insurance subsidiaries . share repurchases . in november 2010 , our board of directors authorized a share repurchase program for repurchases of up to $ 100 million of common stock from november 8 , 2010 through june 30 , 2012 ( the 2011 program ) . in november 2011 , the board of directors authorized a $ 100 million expansion of the 2011 program , to $ 200 million , and extended the repurchase authority 35 pursuant to the 2011 program through june 30 , 2013. repurchases under the 2011 program may be commenced or suspended from time-to-time without prior notice , and the 2011 program may be suspended or discontinued at any time . through december 31 , 2012 , we repurchased a total of 9,426,131 shares of common stock under the 2011 program at an average price of $ 15.79 per share , including commissions , for a total of $ 148.8 million . story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; color : # 000000 ; text-decoration : none ; `` > 2011 , respectively . these laws and regulations govern both the amount and type of fixed maturity security that is eligible for deposit . additionally , certain reinsurance contracts require company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we assumed . the fair value of securities held in trust for the benefit of ceding reinsurers was $ 35.0 million and $ 40.3 million at december 31 , 2012 and 2011 , respectively . 36 cash flows we monitor cash flows at both the consolidated and subsidiary levels . we use trend and variance analyses to project future cash needs , making adjustments to our forecasts as appropriate . the table below shows our net cash flows . replace_table_token_24_th operating activities . major components of net cash provided by operating activities in 2012 included net premiums received of $ 508.7 million , investment income received of $ 79.6 million , and amounts recovered from reinsurers of $ 38.2 million . these were partially offset by claims payments of $ 315.1 million , underwriting and other operating expenses paid of $ 116.8 million ( including premium taxes paid of $ 16.9 million ) , and commissions paid of $ 55.2 million . major components of net cash provided by operating activities in 2011 included net premiums received of $ 358.4 million , investment income received of $ 90.8 million , and amounts recovered from reinsurers of $ 46.1 million . these were partially offset by claims payments of $ 316.4 million , underwriting and other operating expenses paid of $ 93.7 million ( including $ 7.6 million of premium taxes paid ) , and commissions paid of $ 36.3 million . major components of net cash provided by operating activities in 2010 included net premiums received of $ 321.3 million and investment income received of $ 89.2 million , partially offset by claims payments of $ 263.2 ( net of reinsurance recoverables ) , and underwriting and other operating expenses paid of $ 91.5 million . investing activities . in 2012 , net cash used in investing activities was primarily related to the investment of premiums received and the reinvestment of funds from maturities and redemptions . the major sources of net cash
| outstanding debt . in december 2010 , we entered into the third amended and restated credit agreement with wells fargo ( amended credit facility ) under which we were provided with : ( a ) $ 100.0 million line of credit through december 31 , 2011 ; ( b ) $ 90.0 million line of credit from january 1 , 2012 through december 31 , 2012 ; ( c ) $ 80.0 million line of credit from january 1 , 2013 through december 31 , 2013 ; ( d ) $ 70 million line of credit from january 1 , 2014 through december 31 , 2014 ; and ( e ) $ 60 million line of credit from january 1 , 2015 through december 31 , 2015. amounts outstanding bear interest at a rate equal to , at our option : ( a ) a fluctuating rate of 1.75 % above prime rate or ( b ) a fixed rate that is 1.75 % above the libor rate then in effect . the amended credit facility is secured by fixed maturity securities and restricted cash and cash equivalents that had a fair value of $ 110.4 million and $ 126.7 million at december 31 , 2012 and 2011 , respectively . the amended credit facility contains customary non-financial covenants and requires us to maintain $ 5.0 million of cash and cash equivalents at all times at the holding company . we are currently in compliance with all applicable covenants . in accordance with the terms of the contract , we repaid $ 10.0 million of the line of credit provided by the amended credit facility on december 28 , 2012 .
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we , like other financial institutions , are subject to interest rate risk to the degree that our interest-earning assets reprice on a different basis than our interest-bearing liabilities . we also provide debt , mezzanine , and equity investment capital to companies in a variety of industries , consistent with our investment objectives . these investments may be venture capital style investments which may not be fully collateralized . medallion capital 's investments are typically in the form of secured debt instruments with fixed interest rates accompanied by an equity stake or warrants to purchase an equity interest for a nominal exercise price ( such warrants are included in equity investments on the consolidated balance sheets ) . interest income is earned on the debt instruments . we are a closed-end , non-diversified management investment company , organized as a delaware corporation , under the 1940 act . we have elected to be treated as a business development company , or bdc , under the 1940 act . during our tax year ended december 31 , 2016 , we did not qualify as a ric under subchapter m of the internal revenue code of 1986 , as amended , or the code , and therefore we became subject to taxation as a corporation under subchapter c of the code . we had in previous years qualified and elected to be treated for federal income tax purposes as a ric . as a ric , we generally did not have to pay corporate-level federal income taxes on any net ordinary income or capital gains that we distributed to our shareholders as dividends , if we met certain source-of-income and asset diversification requirements . medallion bank is not a ric and must pay corporate-level us federal and state income taxes . see note 5 for more information . 38 our wholly-owned portfolio company , medallion bank , is a bank regulated by the fdic and the utah department of financial institutions which originates taxicab medallion , commercial , and consumer loans , raises deposits , and conducts other banking activities . medallion bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit issued to its customers . to take advantage of this low cost of funds , we refer a portion of our taxicab medallion and commercial loans to medallion bank , which then originates these loans . however , the fdic restricts the amount of taxicab medallion loans that medallion bank may finance to three times tier 1 capital , or $ 469,383,000 as of december 31 , 2016. we earn referral fees for these activities . all of these servicing activities have been assigned to msc . as a non-investment company , medallion bank is not consolidated with the company . realized gains or losses on investments are recognized when the investments are sold or written off . the realized gains or losses represent the difference between the proceeds received from the disposition of portfolio assets , if any , and the cost of such portfolio assets . in addition , changes in unrealized appreciation or depreciation on investments are recorded and represent the net change in the estimated fair values of the portfolio assets at the end of the period as compared with their estimated fair values at the beginning of the period . generally , realized gains ( losses ) on investments and changes in unrealized appreciation ( depreciation ) on investments are inversely related . when an appreciated asset is sold to realize a gain , a decrease in the previously recorded unrealized appreciation occurs . conversely , when a loss previously recorded as unrealized depreciation is realized by the sale or other disposition of a depreciated portfolio asset , the reclassification of the loss from unrealized to realized causes a decrease in net unrealized depreciation and an increase in realized loss . our investment in medallion bank , as a wholly owned portfolio investment , is also subject to quarterly assessments of fair value . we conduct a thorough valuation analysis , and determine whether any factors give rise to a valuation different than recorded book value , including various regulatory restrictions that were established at medallion bank 's inception , by the fdic and state of utah , and also by additional marketplace restrictions , such as the ability to transfer industrial bank charters . because of these restrictions and other factors , our board of directors had previously determined that medallion bank had little value beyond its recorded book value . as a result of this valuation process , we had previously used medallion bank 's actual results of operations as the best estimate of changes in fair value , and recorded the results as a component of unrealized appreciation ( depreciation ) on investments . in the second quarter of 2015 , we first became aware of external interest in medallion bank and its portfolio assets at values in excess of their book value . expression of interest in medallion bank from both investment bankers and interested parties has continued through 2016. we incorporated these new factors in the medallion bank fair value analysis , and the board of directors determined that medallion bank had a fair value in excess of book value . in addition , in the third quarter of 2016 there was a court ruling involving a marketplace lender that the company believes heightens the interest of marketplace lenders to acquire or merge with utah industrial banks . we also engaged a valuation specialist to assist the board of directors in its determination of medallion bank 's fair value , and this appreciation of $ 15,500,000 was thereby recorded in 2015 , and additional appreciation of $ 128,918,000 was recorded in 2016 as a component of unrealized appreciation ( depreciation ) on investments , in addition to medallion bank 's actual results of operations . story_separator_special_tag 45 the following table presents the gain/loss experience on the investment portfolio for the years ended december 31 , 2016 , 2015 , and 2014. replace_table_token_15_th ( 1 ) includes $ 2,056 of gain recognized on the sale of the asset based lending portfolio . the table below summarizes pre-tax components of unrealized and realized gains and losses in the investment portfolio for the years ended december 31 , 2016 , 2015 , and 2014. replace_table_token_16_th 46 investment in medallion bank and other controlled subsidiaries investment in medallion bank and other controlled subsidiaries were 45 % , 26 % , and 26 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. the portfolio company investments primarily represent the wholly-owned unconsolidated subsidiaries of ours , substantially all of which is represented by our investment in medallion bank . in addition , to facilitate maintenance of medallion bank 's capital ratio requirement and to provide the necessary capital for continued growth , we periodically make capital contributions to medallion bank , including $ 3,000,000 in 2016 and $ 8,000,000 in 2015. separately , medallion bank declared dividends to us of $ 3,000,000 in 2016 , $ 18,000,000 in 2015 , and $ 15,000,000 in 2014. see note 3 of the consolidated financial statements for additional information about these investments . equity investments equity investments were 1 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. equity investments were 1 % , less than 1 % , and 1 % of our total managed portfolio at december 31 , 2016 , 2015 , and 2014. equity investments are comprised of common stock , warrants , preferred stock , and limited partnership interests . investment securities investment securities were 0 % , 8 % , and 0 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. investment securities were 2 % , 6 % , and 2 % of our total managed portfolio at december 31 , 2016 , 2015 , and 2014. the investment securities are primarily u.s. treasury bills and adjustable-rate mortgage-backed securities purchased by medallion bank to better utilize required cash liquidity . trend in interest expense our interest expense is driven by the interest rates payable on our short-term credit facilities with banks , bank certificates of deposit , fixed-rate , long-term debentures issued to the sba , and other short-term notes payable . we established a medallion lending relationship with dz bank in december 2008 that provided for growth in the portfolio at generally lower rates than under prior facilities . in addition , medallion bank began raising brokered bank certificates of deposit during 2004 , which were at our lowest borrowing costs . as a result of medallion bank raising funds through certificates of deposit as previously noted , we were able to transfer certain of our medallion loans and related assets to medallion bank allowing us and our subsidiaries to use cash generated through these transactions to retire debt with higher interest rates . in addition , medallion bank is able to bid on these deposits at a wide variety of maturity levels which allows for improved interest rate management strategies . our cost of funds is primarily driven by the rates paid on our various debt instruments and their relative mix , and changes in the levels of average borrowings outstanding . see note 4 to the consolidated financial statements for details on the terms of all outstanding debt . our debentures issued to the sba typically have terms of ten years . 47 we measure our borrowing costs as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period . the following table shows the average borrowings and related borrowing costs for the years ended december 31 , 2016 , 2015 , and 2014. our average balances increased during the year reflecting increased borrowing required to fund operating and investing activities and medallion bank 's average balances increased , reflecting the strong growth in the consumer loan portfolio . the increase in borrowing costs reflected the increase of interest rates and changes in our borrowing mix , and medallion bank 's lengthening of the maturity profile of its certificates of deposit . replace_table_token_17_th we will continue to seek sba funding through medallion capital to the extent it offers attractive rates . sba financing subjects its recipients to limits on the amount of secured bank debt they may incur . we use sba funding to fund loans that qualify under the sbia and sba regulations . we believe that financing operations primarily with short-term floating rate secured bank debt has generally decreased our interest expense , but has also increased our exposure to the risk of increases in market interest rates , which we mitigate with certain interest rate strategies . at december 31 , 2016 , 2015 , and 2014 , short-term adjustable rate debt constituted 59 % , 75 % , and 72 % of total debt , and was 16 % , 23 % , and 22 % on a fully managed basis including the borrowings of medallion bank . factors affecting net assets factors that affect our net assets include net realized gain or loss on investments and change in net unrealized appreciation or depreciation on investments . net realized gain or loss on investments is the difference between the proceeds derived upon sale or foreclosure of a loan or an equity investment and the cost basis of such loan or equity investment . change in net unrealized appreciation or depreciation on investments is the amount , if any , by which our estimate of the fair value of our investment portfolio is above or below the previously established fair value or the cost basis of the portfolio . under the 1940 act , our loan portfolio and other investments must be
| outstanding debt . in december 2010 , we entered into the third amended and restated credit agreement with wells fargo ( amended credit facility ) under which we were provided with : ( a ) $ 100.0 million line of credit through december 31 , 2011 ; ( b ) $ 90.0 million line of credit from january 1 , 2012 through december 31 , 2012 ; ( c ) $ 80.0 million line of credit from january 1 , 2013 through december 31 , 2013 ; ( d ) $ 70 million line of credit from january 1 , 2014 through december 31 , 2014 ; and ( e ) $ 60 million line of credit from january 1 , 2015 through december 31 , 2015. amounts outstanding bear interest at a rate equal to , at our option : ( a ) a fluctuating rate of 1.75 % above prime rate or ( b ) a fixed rate that is 1.75 % above the libor rate then in effect . the amended credit facility is secured by fixed maturity securities and restricted cash and cash equivalents that had a fair value of $ 110.4 million and $ 126.7 million at december 31 , 2012 and 2011 , respectively . the amended credit facility contains customary non-financial covenants and requires us to maintain $ 5.0 million of cash and cash equivalents at all times at the holding company . we are currently in compliance with all applicable covenants . in accordance with the terms of the contract , we repaid $ 10.0 million of the line of credit provided by the amended credit facility on december 28 , 2012 .
| 0 |
we , like other financial institutions , are subject to interest rate risk to the degree that our interest-earning assets reprice on a different basis than our interest-bearing liabilities . we also provide debt , mezzanine , and equity investment capital to companies in a variety of industries , consistent with our investment objectives . these investments may be venture capital style investments which may not be fully collateralized . medallion capital 's investments are typically in the form of secured debt instruments with fixed interest rates accompanied by an equity stake or warrants to purchase an equity interest for a nominal exercise price ( such warrants are included in equity investments on the consolidated balance sheets ) . interest income is earned on the debt instruments . we are a closed-end , non-diversified management investment company , organized as a delaware corporation , under the 1940 act . we have elected to be treated as a business development company , or bdc , under the 1940 act . during our tax year ended december 31 , 2016 , we did not qualify as a ric under subchapter m of the internal revenue code of 1986 , as amended , or the code , and therefore we became subject to taxation as a corporation under subchapter c of the code . we had in previous years qualified and elected to be treated for federal income tax purposes as a ric . as a ric , we generally did not have to pay corporate-level federal income taxes on any net ordinary income or capital gains that we distributed to our shareholders as dividends , if we met certain source-of-income and asset diversification requirements . medallion bank is not a ric and must pay corporate-level us federal and state income taxes . see note 5 for more information . 38 our wholly-owned portfolio company , medallion bank , is a bank regulated by the fdic and the utah department of financial institutions which originates taxicab medallion , commercial , and consumer loans , raises deposits , and conducts other banking activities . medallion bank generally provides us with our lowest cost of funds which it raises through bank certificates of deposit issued to its customers . to take advantage of this low cost of funds , we refer a portion of our taxicab medallion and commercial loans to medallion bank , which then originates these loans . however , the fdic restricts the amount of taxicab medallion loans that medallion bank may finance to three times tier 1 capital , or $ 469,383,000 as of december 31 , 2016. we earn referral fees for these activities . all of these servicing activities have been assigned to msc . as a non-investment company , medallion bank is not consolidated with the company . realized gains or losses on investments are recognized when the investments are sold or written off . the realized gains or losses represent the difference between the proceeds received from the disposition of portfolio assets , if any , and the cost of such portfolio assets . in addition , changes in unrealized appreciation or depreciation on investments are recorded and represent the net change in the estimated fair values of the portfolio assets at the end of the period as compared with their estimated fair values at the beginning of the period . generally , realized gains ( losses ) on investments and changes in unrealized appreciation ( depreciation ) on investments are inversely related . when an appreciated asset is sold to realize a gain , a decrease in the previously recorded unrealized appreciation occurs . conversely , when a loss previously recorded as unrealized depreciation is realized by the sale or other disposition of a depreciated portfolio asset , the reclassification of the loss from unrealized to realized causes a decrease in net unrealized depreciation and an increase in realized loss . our investment in medallion bank , as a wholly owned portfolio investment , is also subject to quarterly assessments of fair value . we conduct a thorough valuation analysis , and determine whether any factors give rise to a valuation different than recorded book value , including various regulatory restrictions that were established at medallion bank 's inception , by the fdic and state of utah , and also by additional marketplace restrictions , such as the ability to transfer industrial bank charters . because of these restrictions and other factors , our board of directors had previously determined that medallion bank had little value beyond its recorded book value . as a result of this valuation process , we had previously used medallion bank 's actual results of operations as the best estimate of changes in fair value , and recorded the results as a component of unrealized appreciation ( depreciation ) on investments . in the second quarter of 2015 , we first became aware of external interest in medallion bank and its portfolio assets at values in excess of their book value . expression of interest in medallion bank from both investment bankers and interested parties has continued through 2016. we incorporated these new factors in the medallion bank fair value analysis , and the board of directors determined that medallion bank had a fair value in excess of book value . in addition , in the third quarter of 2016 there was a court ruling involving a marketplace lender that the company believes heightens the interest of marketplace lenders to acquire or merge with utah industrial banks . we also engaged a valuation specialist to assist the board of directors in its determination of medallion bank 's fair value , and this appreciation of $ 15,500,000 was thereby recorded in 2015 , and additional appreciation of $ 128,918,000 was recorded in 2016 as a component of unrealized appreciation ( depreciation ) on investments , in addition to medallion bank 's actual results of operations . story_separator_special_tag 45 the following table presents the gain/loss experience on the investment portfolio for the years ended december 31 , 2016 , 2015 , and 2014. replace_table_token_15_th ( 1 ) includes $ 2,056 of gain recognized on the sale of the asset based lending portfolio . the table below summarizes pre-tax components of unrealized and realized gains and losses in the investment portfolio for the years ended december 31 , 2016 , 2015 , and 2014. replace_table_token_16_th 46 investment in medallion bank and other controlled subsidiaries investment in medallion bank and other controlled subsidiaries were 45 % , 26 % , and 26 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. the portfolio company investments primarily represent the wholly-owned unconsolidated subsidiaries of ours , substantially all of which is represented by our investment in medallion bank . in addition , to facilitate maintenance of medallion bank 's capital ratio requirement and to provide the necessary capital for continued growth , we periodically make capital contributions to medallion bank , including $ 3,000,000 in 2016 and $ 8,000,000 in 2015. separately , medallion bank declared dividends to us of $ 3,000,000 in 2016 , $ 18,000,000 in 2015 , and $ 15,000,000 in 2014. see note 3 of the consolidated financial statements for additional information about these investments . equity investments equity investments were 1 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. equity investments were 1 % , less than 1 % , and 1 % of our total managed portfolio at december 31 , 2016 , 2015 , and 2014. equity investments are comprised of common stock , warrants , preferred stock , and limited partnership interests . investment securities investment securities were 0 % , 8 % , and 0 % of our total portfolio at december 31 , 2016 , 2015 , and 2014. investment securities were 2 % , 6 % , and 2 % of our total managed portfolio at december 31 , 2016 , 2015 , and 2014. the investment securities are primarily u.s. treasury bills and adjustable-rate mortgage-backed securities purchased by medallion bank to better utilize required cash liquidity . trend in interest expense our interest expense is driven by the interest rates payable on our short-term credit facilities with banks , bank certificates of deposit , fixed-rate , long-term debentures issued to the sba , and other short-term notes payable . we established a medallion lending relationship with dz bank in december 2008 that provided for growth in the portfolio at generally lower rates than under prior facilities . in addition , medallion bank began raising brokered bank certificates of deposit during 2004 , which were at our lowest borrowing costs . as a result of medallion bank raising funds through certificates of deposit as previously noted , we were able to transfer certain of our medallion loans and related assets to medallion bank allowing us and our subsidiaries to use cash generated through these transactions to retire debt with higher interest rates . in addition , medallion bank is able to bid on these deposits at a wide variety of maturity levels which allows for improved interest rate management strategies . our cost of funds is primarily driven by the rates paid on our various debt instruments and their relative mix , and changes in the levels of average borrowings outstanding . see note 4 to the consolidated financial statements for details on the terms of all outstanding debt . our debentures issued to the sba typically have terms of ten years . 47 we measure our borrowing costs as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period . the following table shows the average borrowings and related borrowing costs for the years ended december 31 , 2016 , 2015 , and 2014. our average balances increased during the year reflecting increased borrowing required to fund operating and investing activities and medallion bank 's average balances increased , reflecting the strong growth in the consumer loan portfolio . the increase in borrowing costs reflected the increase of interest rates and changes in our borrowing mix , and medallion bank 's lengthening of the maturity profile of its certificates of deposit . replace_table_token_17_th we will continue to seek sba funding through medallion capital to the extent it offers attractive rates . sba financing subjects its recipients to limits on the amount of secured bank debt they may incur . we use sba funding to fund loans that qualify under the sbia and sba regulations . we believe that financing operations primarily with short-term floating rate secured bank debt has generally decreased our interest expense , but has also increased our exposure to the risk of increases in market interest rates , which we mitigate with certain interest rate strategies . at december 31 , 2016 , 2015 , and 2014 , short-term adjustable rate debt constituted 59 % , 75 % , and 72 % of total debt , and was 16 % , 23 % , and 22 % on a fully managed basis including the borrowings of medallion bank . factors affecting net assets factors that affect our net assets include net realized gain or loss on investments and change in net unrealized appreciation or depreciation on investments . net realized gain or loss on investments is the difference between the proceeds derived upon sale or foreclosure of a loan or an equity investment and the cost basis of such loan or equity investment . change in net unrealized appreciation or depreciation on investments is the amount , if any , by which our estimate of the fair value of our investment portfolio is above or below the previously established fair value or the cost basis of the portfolio . under the 1940 act , our loan portfolio and other investments must be
| liquidity and capital resources our sources of liquidity are with a variety of local and regional banking institutions , unfunded commitments to sell debentures to the sba , loan amortization and prepayments , private issuances of debt securities , participations or sales of loans to third parties , the disposition of other assets of the company , and dividends from medallion bank . as a ric , we were required to distribute at least 90 % of our investment company taxable income ; consequently , we primarily relied upon external sources of funds to finance growth . however , for the year ended december 31 , 2016 , we did not qualify for the ric election , and therefore became subject to taxation as a corporation under subchapter c of the code . there were $ 5,500,000 of unfunded commitments from the sba , $ 3,500,000 of which would be issued without further capital contribution from us . additionally , medallion bank , our wholly-owned , unconsolidated portfolio company has access to independent sources of funds for our business originated there , primarily through brokered certificates of deposit . medallion bank has $ 25,000,000 available under fed funds lines with several commercial banks . in addition , medallion bank is allowed to retain all earnings in the business to fund future growth . the components of our debt were as follows at december 31 , 2016. see note 4 to the consolidated financial statements on page f-20 for details of the contractual terms of our borrowings . replace_table_token_19_th ( 1 ) weighted average contractual rate as of december 31 , 2016 . 54 our contractual obligations expire on or mature at various dates through september 2037. the following table shows all contractual obligations at december 31 , 2016. replace_table_token_20_th most of our borrowing relationships have maturity dates during 2017. we have been in active and ongoing discussions with each of these lenders and have extended each of the facilities as they matured except as set forth in the following paragraph . the lenders have worked with us to extend and change the terms of the borrowing agreements .
| 1 |
we are pursuing an integrated therapeutic and diagnostic , or rx/dx , strategy , where we anticipate pairing each of our product candidates with biomarker-based companion diagnostics that are designed to identify the patients who are most likely to benefit from the precisely targeted drugs we develop . our current development plans focus on two product candidates : entrectinib , formerly called rxdx-101 , a tyrosine kinase inhibitor directed to the trk family tyrosine kinase receptors ( trka , trkb and trkc ) , ros1 and alk proteins , which is in two phase i/ii clinical studies in molecularly defined patient populations for the treatment of solid tumors ; and rxdx-103 , a development program targeting the cell division cycle 7-related , or cdc7 , protein kinase . 50 we acquired exclusive global development and marketing rights to entrectinib under a license agreement with nerviano medical sciences s.r.l . , or nms , that became effective in november 2013 , and we acquired exclusive global development and marketing rights to rxdx-103 under a license agreement with nms that became effective in august 2014. we are also pursuing our spark discovery-stage programs , directed to emerging oncology targets . since inception , our operations have focused on organizing and staffing our company , business planning , raising capital , assembling our core capabilities in genetic and epigenetic based biomarker and drug target discovery , identifying potential product candidates and developing such candidates . our product candidate development operations include preparing , managing and conducting preclinical and clinical studies and trials , preparing regulatory submissions relating to those product candidates and establishing and managing relationships with third parties in connection with all of those activities . we expect that in the future our operations may also , if regulatory approval is obtained , include pursuing the commercialization of our product candidates . financial operations overview revenue to date , we have not generated any material revenue from product sales or otherwise . in the future , we expect that we will seek to generate revenue primarily from product sales , but may also seek to generate revenue from research funding , milestone payments and royalties on future product sales in connection with any out-license or other strategic relationships we may establish . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our drug and biomarker discovery efforts and the development of our product candidates , which include : license fees ; expenses incurred under agreements with third parties , including consultants and advisors we engage for research-related services and any contract research organizations , or cros , that we may engage in connection with conducting preclinical and clinical activities on our behalf ; employee-related expenses , including salaries , benefits and stock-based compensation expense ; the cost of laboratory supplies ; and facilities , depreciation , and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance and other operating costs . research and development costs are expensed as incurred . nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized . the capitalized amounts are expensed as the related goods are delivered or the services are performed . we have not yet begun tracking our internal and external research and development costs on a program-by-program basis . as such , we do not have historical research and development expenditures by program and we use our employee and infrastructure resources across multiple research and development programs . the following table sets forth our research and development expenses for the periods presented : replace_table_token_2_th research and development activities are central to our business model . our research and development programs that we expect will be our focus in the immediate future consist of the development of entrectinib and rxdx-103 , and drug discovery activities for the development of our spark discovery programs . all of those research and development programs are in the early stage , and since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials , we expect research and development costs relating to each of those programs to increase significantly for the foreseeable future . however , the successful 51 development of any of those product candidates , or any others we may seek to pursue , is highly uncertain . as such , at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates , or whether any of these product candidates will reach successful commercialization . we are also unable to predict when , if ever , any net cash inflows will commence from any of the product candidates we currently or may in the future pursue . this lack of predictability is due to the numerous risks and uncertainties associated with developing medicines , many of which , such as our ability to obtain approvals to market and sell those medicines from the fda and other applicable regulatory authorities , are beyond our control , including the uncertainty of : establishing an appropriate safety profile with toxicology studies adequate to submit to the fda in an investigational new drug application , or ind , or comparable applications to foreign regulatory authorities ; successful enrollment in and adequate design and completion of clinical trials ; receipt of marketing approvals from applicable regulatory authorities , including the fda and comparable foreign authorities ; establishing commercial manufacturing capabilities or , more likely , seeking to establish arrangements with third-party manufacturers ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; launching commercial story_separator_special_tag our future capital requirements will depend on many factors , including : the scope , progress , results and costs of drug discovery , preclinical development , laboratory testing and clinical trials for our product candidates ; the scope , progress , results and costs of companion diagnostic development for our product candidates ; the achievement of development milestones that trigger payments due to our licensing partners ; the extent to which we acquire or in-license other medicines , biomarkers and or 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 ( to the extent that such sales , marketing , manufacturing and distribution are not the responsibility of collaborators with whom we may engage ) ; 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 57 our ability to establish and maintain development , manufacturing or commercial collaborations on favorable terms , if at all . identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming , expensive and uncertain process that takes years to complete , and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales . in addition , our product candidates , if approved , may not achieve commercial success . our commercial revenues , if any , will be derived from sales of medicines that we do not expect to be commercially available for many years , if at all . accordingly , we will likely need to continue to rely on additional financing to achieve our business objectives . adequate additional financing may not be available to us on acceptable terms , or 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 offerings , debt financings , collaborations , strategic alliances and licensing arrangements . any or all of those sources of funding may not be available when needed on acceptable terms or at all . except for our conditional option to acquire a second loan tranche of $ 10 million from svb , we do not have any committed external source of additional funds . to the extent that additional capital is raised through the sale of equity or convertible debt securities , the ownership interest of existing equityholders will be diluted . also , the terms of any additional equity securities that may be issued in the future may include liquidation or other preferences that adversely affect the rights of common stockholders . debt financing may not be available when needed and may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . if we raise funds through collaborations , strategic alliances or licensing arrangements with third parties , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or product candidates or to grant licenses on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings or relationships with third parties when needed or on acceptable terms , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we might otherwise prefer to develop and market ourselves . failure to obtain adequate financing could eventually adversely affect our ability to operate as a going concern . off-balance sheet arrangements we did not have during the periods presented , and we do not currently have , any off-balance sheet arrangements , as defined under applicable sec rules . item 8. financial statements and supplementary data our consolidated financial statements and the reports of our independent registered public accounting firm are included in this report on pages f-1 through f-23 . item 9. changes in and disagreements with accountants on accounting and financial disclosure none . item 9a . controls and procedures conclusions regarding the effectiveness of disclosure controls and procedures we maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our exchange act reports is recorded , processed , summarized and reported within the timelines specified in the sec 's rules and forms , and that such information is accumulated and communicated to our management , including our chief executive officer and chief financial officer , as appropriate , to allow timely decisions regarding required disclosure . in designing and evaluating the disclosure controls and procedures , management recognized that any controls and procedures , no matter how well designed and operated , can only provide reasonable assurance of achieving the desired control objectives , and in reaching a reasonable level of assurance , management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures . as required by rule 13a-15 ( b ) under the exchange act , we carried out an evaluation , under the supervision and with the participation of our management , including our chief executive officer and chief financial officer , of the effectiveness of the design and operation of our disclosure controls and procedures , as of the end of the period covered by this report . based on the foregoing , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of december 31 , 2014
| liquidity and capital resources our sources of liquidity are with a variety of local and regional banking institutions , unfunded commitments to sell debentures to the sba , loan amortization and prepayments , private issuances of debt securities , participations or sales of loans to third parties , the disposition of other assets of the company , and dividends from medallion bank . as a ric , we were required to distribute at least 90 % of our investment company taxable income ; consequently , we primarily relied upon external sources of funds to finance growth . however , for the year ended december 31 , 2016 , we did not qualify for the ric election , and therefore became subject to taxation as a corporation under subchapter c of the code . there were $ 5,500,000 of unfunded commitments from the sba , $ 3,500,000 of which would be issued without further capital contribution from us . additionally , medallion bank , our wholly-owned , unconsolidated portfolio company has access to independent sources of funds for our business originated there , primarily through brokered certificates of deposit . medallion bank has $ 25,000,000 available under fed funds lines with several commercial banks . in addition , medallion bank is allowed to retain all earnings in the business to fund future growth . the components of our debt were as follows at december 31 , 2016. see note 4 to the consolidated financial statements on page f-20 for details of the contractual terms of our borrowings . replace_table_token_19_th ( 1 ) weighted average contractual rate as of december 31 , 2016 . 54 our contractual obligations expire on or mature at various dates through september 2037. the following table shows all contractual obligations at december 31 , 2016. replace_table_token_20_th most of our borrowing relationships have maturity dates during 2017. we have been in active and ongoing discussions with each of these lenders and have extended each of the facilities as they matured except as set forth in the following paragraph . the lenders have worked with us to extend and change the terms of the borrowing agreements .
| 0 |
we are pursuing an integrated therapeutic and diagnostic , or rx/dx , strategy , where we anticipate pairing each of our product candidates with biomarker-based companion diagnostics that are designed to identify the patients who are most likely to benefit from the precisely targeted drugs we develop . our current development plans focus on two product candidates : entrectinib , formerly called rxdx-101 , a tyrosine kinase inhibitor directed to the trk family tyrosine kinase receptors ( trka , trkb and trkc ) , ros1 and alk proteins , which is in two phase i/ii clinical studies in molecularly defined patient populations for the treatment of solid tumors ; and rxdx-103 , a development program targeting the cell division cycle 7-related , or cdc7 , protein kinase . 50 we acquired exclusive global development and marketing rights to entrectinib under a license agreement with nerviano medical sciences s.r.l . , or nms , that became effective in november 2013 , and we acquired exclusive global development and marketing rights to rxdx-103 under a license agreement with nms that became effective in august 2014. we are also pursuing our spark discovery-stage programs , directed to emerging oncology targets . since inception , our operations have focused on organizing and staffing our company , business planning , raising capital , assembling our core capabilities in genetic and epigenetic based biomarker and drug target discovery , identifying potential product candidates and developing such candidates . our product candidate development operations include preparing , managing and conducting preclinical and clinical studies and trials , preparing regulatory submissions relating to those product candidates and establishing and managing relationships with third parties in connection with all of those activities . we expect that in the future our operations may also , if regulatory approval is obtained , include pursuing the commercialization of our product candidates . financial operations overview revenue to date , we have not generated any material revenue from product sales or otherwise . in the future , we expect that we will seek to generate revenue primarily from product sales , but may also seek to generate revenue from research funding , milestone payments and royalties on future product sales in connection with any out-license or other strategic relationships we may establish . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our drug and biomarker discovery efforts and the development of our product candidates , which include : license fees ; expenses incurred under agreements with third parties , including consultants and advisors we engage for research-related services and any contract research organizations , or cros , that we may engage in connection with conducting preclinical and clinical activities on our behalf ; employee-related expenses , including salaries , benefits and stock-based compensation expense ; the cost of laboratory supplies ; and facilities , depreciation , and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance and other operating costs . research and development costs are expensed as incurred . nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized . the capitalized amounts are expensed as the related goods are delivered or the services are performed . we have not yet begun tracking our internal and external research and development costs on a program-by-program basis . as such , we do not have historical research and development expenditures by program and we use our employee and infrastructure resources across multiple research and development programs . the following table sets forth our research and development expenses for the periods presented : replace_table_token_2_th research and development activities are central to our business model . our research and development programs that we expect will be our focus in the immediate future consist of the development of entrectinib and rxdx-103 , and drug discovery activities for the development of our spark discovery programs . all of those research and development programs are in the early stage , and since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials , we expect research and development costs relating to each of those programs to increase significantly for the foreseeable future . however , the successful 51 development of any of those product candidates , or any others we may seek to pursue , is highly uncertain . as such , at this time , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates , or whether any of these product candidates will reach successful commercialization . we are also unable to predict when , if ever , any net cash inflows will commence from any of the product candidates we currently or may in the future pursue . this lack of predictability is due to the numerous risks and uncertainties associated with developing medicines , many of which , such as our ability to obtain approvals to market and sell those medicines from the fda and other applicable regulatory authorities , are beyond our control , including the uncertainty of : establishing an appropriate safety profile with toxicology studies adequate to submit to the fda in an investigational new drug application , or ind , or comparable applications to foreign regulatory authorities ; successful enrollment in and adequate design and completion of clinical trials ; receipt of marketing approvals from applicable regulatory authorities , including the fda and comparable foreign authorities ; establishing commercial manufacturing capabilities or , more likely , seeking to establish arrangements with third-party manufacturers ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; launching commercial story_separator_special_tag our future capital requirements will depend on many factors , including : the scope , progress , results and costs of drug discovery , preclinical development , laboratory testing and clinical trials for our product candidates ; the scope , progress , results and costs of companion diagnostic development for our product candidates ; the achievement of development milestones that trigger payments due to our licensing partners ; the extent to which we acquire or in-license other medicines , biomarkers and or 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 ( to the extent that such sales , marketing , manufacturing and distribution are not the responsibility of collaborators with whom we may engage ) ; 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 57 our ability to establish and maintain development , manufacturing or commercial collaborations on favorable terms , if at all . identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming , expensive and uncertain process that takes years to complete , and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales . in addition , our product candidates , if approved , may not achieve commercial success . our commercial revenues , if any , will be derived from sales of medicines that we do not expect to be commercially available for many years , if at all . accordingly , we will likely need to continue to rely on additional financing to achieve our business objectives . adequate additional financing may not be available to us on acceptable terms , or 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 offerings , debt financings , collaborations , strategic alliances and licensing arrangements . any or all of those sources of funding may not be available when needed on acceptable terms or at all . except for our conditional option to acquire a second loan tranche of $ 10 million from svb , we do not have any committed external source of additional funds . to the extent that additional capital is raised through the sale of equity or convertible debt securities , the ownership interest of existing equityholders will be diluted . also , the terms of any additional equity securities that may be issued in the future may include liquidation or other preferences that adversely affect the rights of common stockholders . debt financing may not be available when needed and may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . if we raise funds through collaborations , strategic alliances or licensing arrangements with third parties , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or product candidates or to grant licenses on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings or relationships with third parties when needed or on acceptable terms , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we might otherwise prefer to develop and market ourselves . failure to obtain adequate financing could eventually adversely affect our ability to operate as a going concern . off-balance sheet arrangements we did not have during the periods presented , and we do not currently have , any off-balance sheet arrangements , as defined under applicable sec rules . item 8. financial statements and supplementary data our consolidated financial statements and the reports of our independent registered public accounting firm are included in this report on pages f-1 through f-23 . item 9. changes in and disagreements with accountants on accounting and financial disclosure none . item 9a . controls and procedures conclusions regarding the effectiveness of disclosure controls and procedures we maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our exchange act reports is recorded , processed , summarized and reported within the timelines specified in the sec 's rules and forms , and that such information is accumulated and communicated to our management , including our chief executive officer and chief financial officer , as appropriate , to allow timely decisions regarding required disclosure . in designing and evaluating the disclosure controls and procedures , management recognized that any controls and procedures , no matter how well designed and operated , can only provide reasonable assurance of achieving the desired control objectives , and in reaching a reasonable level of assurance , management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures . as required by rule 13a-15 ( b ) under the exchange act , we carried out an evaluation , under the supervision and with the participation of our management , including our chief executive officer and chief financial officer , of the effectiveness of the design and operation of our disclosure controls and procedures , as of the end of the period covered by this report . based on the foregoing , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of december 31 , 2014
| liquidity and capital resources sources of liquidity since our inception , and through december 31 , 2014 , we have raised an aggregate of approximately $ 146 million to fund our operations , of which approximately $ 21 million was received from the incurrence of indebtedness under our september 2014 loan agreement with svb ( with approximately $ 11 million of such amount used to repay our then-existing loan with svb ) , $ 55 million was received from our issuance and sale of our common stock in an underwritten public offering in march 2014 , approximately $ 54 million was received from our issuance and sale of our common stock in two private placements in november 2013 , approximately $ 6 million was received from our issuance and sale of our preferred stock and $ 10 million was received from the incurrence of indebtedness under our december 2013 loan agreement with svb . as of december 31 , 2014 , we had also received a small amount of funding from our issuance of common stock upon the exercise from time to time of stock options , and from our issuance of common stock to our founders in august and september 2011. as of december 31 , 2014 , we had approximately $ 76.6 million in cash , cash equivalents and available-for-sale securities , consisting of approximately $ 6.3 million in cash and cash equivalents and approximately $ 70.3 million in available-for-sale securities . amended and restated loan agreement with svb . on september 30 , 2014 , we entered into an amended and restated loan agreement with svb under which we incurred $ 21 million of indebtedness , approximately $ 11 million of which was used to repay our then- 55 existing loan with svb . we also have an option to receive an additional $ 10 million loan tranche , which may be drawn down by us at any time prior to september 30 , 2015 , provided that we have initiated the phase iia portion of our ongoing , global phase i/ii clinical study of entrectinib and subject to other customary conditions for funding .
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in addition , note 2 to the accompanying consolidated financial statements of twenty-first century fox summarizes the company 's significant accounting policies , including the critical accounting policy discussion found in this section . overview of the company 's business the company is a diversified global media and entertainment company , which manages and reports its businesses in the following segments : cable network programming , which principally consists of the production and licensing of programming distributed primarily through cable television systems , direct broadcast satellite operators , telecommunication companies and online video distributors in the united states ( “ u.s. ” ) and internationally . 37 television , which principally consists of the broadcasting of network programming in the u.s. and the operation of 28 full power broadcast television stations , including 11 duopolies , in the u.s. ( of these stations , 17 are affiliated with the fox broadcasting company ( “ fox ” ) , nine are affiliated with master distribution service , inc. ( “ mynetworktv ” ) , one is affiliated with both the cw television network and mynetworktv and one is an independent station ) . filmed entertainment , which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide , and the production and licensing of television programming worldwide . direct broadcast satellite television , which consisted of the distribution of programming services via satellite , cable and broadband directly to subscribers in italy , germany and austria . the direct broadcast satellite television ( “ dbs ” ) segment consisted entirely of the operations of sky italia and sky deutschland ag ( “ sky deutschland ” ) ( collectively , the “ dbs businesses ” ) . on november 12 , 2014 , twenty-first century fox completed the sale of sky italia and its 57 % interest in sky deutschland to sky plc ( “ sky ” ) ( see note 3 – acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading “ sky italia and sky deutschland ” ) . sky is a pan-european digital television provider , which operates in italy , germany , austria , the united kingdom ( “ u.k. ” ) and ireland . other , corporate and eliminations , which principally consists of corporate overhead and eliminations . following the sale of the dbs businesses , the company continues to report in five segments for comparative purposes , and there is no current activity in the dbs segment . cable network programming and television the company 's cable networks , which target various demographics , derive a majority of their revenues from monthly affiliate fees received from multi-channel video programming distributors ( “ mvpds ” ) based on the number of their subscribers . affiliate fee revenues are net of the amortization of cable distribution investments ( capitalized fees paid to u.s. mvpds to typically facilitate the carriage of a domestic cable network ) . the company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period . in the u.s. , cable television and direct broadcast satellite are currently the predominant means of distribution of the company 's program services . internationally , distribution technology varies region by region . the television operations derive revenues primarily from the sale of advertising , and to a lesser extent , affiliate fee revenue . adverse changes in general market conditions for advertising may affect revenues . u.s. law governing retransmission consent revenue , recognized as affiliate fees , provides a mechanism for the television stations owned by the company to seek and obtain payment from mvpds who carry the company 's broadcast signals . retransmission consent revenue consists of per subscriber-based compensatory fees paid to the company by mvpds that distribute the signals of the company 's owned and operated television stations . the company also receives compensation from independently-owned television stations that are affiliated with fox and receive retransmission consent fees from mvpds for their signals . the most significant operating expenses of the cable network programming segment and the television segment are the acquisition and production expenses related to programming , marketing and promotional expenses , and the expenses related to operating the technical facilities of the cable network or broadcaster . marketing and promotional expenses relate to improving the market visibility and awareness of the cable network or broadcaster and its programming . additional expenses include salaries , employee benefits , rent and other routine overhead expenses . the profitability of u.s. national sports contracts and certain international sports rights agreements is based on the company 's best estimates at june 30 , 2017 of attributable revenues and costs ; such estimates may change in the future and such changes may be significant . should revenues decline materially from estimates applied at june 30 , 2017 , additional amortization of rights may be recognized . should revenues improve as compared to estimated revenues , the company may have improved results related to the contract , which may be recognized over the remaining contract term . 38 filmed entertainment the filmed entertainment segment derives revenue from the production and distribution of live-action and animated motion pictures and television series . in general , motion pictures produced or acquired for distribution by the company are exhibited in u.s. and foreign theaters , followed by home entertainment , including sale and rental of dvds and blu-rays , licensing through digital distribution platforms , premium subscription television , network television and basic cable and syndicated television exploitation . television series initially produced for the networks and first-run syndication are generally licensed to domestic and international markets concurrently and subsequently made available via digital distribution platforms and released in seasonal dvd and blu-ray box sets . more successful series are later syndicated in domestic markets . story_separator_special_tag 44 fiscal 2017 versus fiscal 2016 the following table reconciles income from continuing operations before income tax expense to total segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_11_th the following table sets forth the computation of total segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_12_th the following tables set forth the company 's revenues and segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_13_th replace_table_token_14_th 45 cable network programming ( 57 % and 55 % of the company 's consolidated revenues in fiscal 2017 and 2016 , respectively ) for fiscal 2017 , revenues at the cable network programming segment increased $ 1.1 billion , or 7 % , as compared to fiscal 2016 , primarily due to higher affiliate fee , advertising and content and other revenues as shown below : replace_table_token_15_th these revenue increases are net of a decrease of approximately $ 155 million due to the strengthening of the u.s. dollar against local currencies , primarily in latin america and europe , for fiscal 2017 , as compared to fiscal 2016. for fiscal 2017 , cable network programming segment oibda increased $ 456 million , or 9 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses of $ 645 million , or 7 % . for fiscal 2017 , the segment oibda increase is net of a decrease of approximately $ 60 million due to the strengthening of the u.s. dollar against local currencies as compared to fiscal 2016. the incremental revenues and expenses related to the ngs media business as a result of the acquisition were approximately $ 140 million for fiscal 2017 , as compared to fiscal 2016. domestic channels for fiscal 2017 , domestic affiliate fee revenue increased , as compared to fiscal 2016 , primarily due to higher average rates per subscriber led by fox news and the regional sports networks ( “ rsns ” ) partially offset by the impact of lower average subscribers . also contributing to the increase were fs1 and fs2 due to higher average rates per subscriber and higher average subscribers and fx networks due to higher average rates per subscriber . for fiscal 2017 , domestic advertising revenue increased , as compared to fiscal 2016 , primarily due to higher ratings and pricing at fox news and the broadcasts of the mlb postseason games at fs1 partially offset by the impact of lower ratings at fx networks . the increase in domestic content and other revenues for fiscal 2017 , as compared to fiscal 2016 , was primarily due to the acquisition of the ngs media business and higher svod revenue . for fiscal 2017 , domestic channels oibda increased 10 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses . operating expenses increased approximately $ 485 million for fiscal 2017 , as compared to fiscal 2016 , principally due to higher sports rights amortization , including the mlb , national basketball association ( “ nba ” ) and national association of stock car auto racing ( “ nascar ” ) rights at the company 's sports channels , higher programming and marketing costs related to the launch of new programming at fx networks and national geographic and the acquisition of the ngs media business . international channels for fiscal 2017 , international affiliate fee revenue increased , as compared to fiscal 2016 , as a result of local currency growth of 11 % , led by additional subscribers and higher rates at fox networks group international ( “ fngi ” ) in latin america and europe and at star india ( “ star ” ) . partially offsetting the affiliate fee increase for fiscal 2017 was the adverse impact of the strengthening of the u.s. dollar against local currencies . for fiscal 2017 , international advertising revenues decreased , as compared to fiscal 2016 , as local currency growth at fngi in latin america and europe was more than offset by lower local currency advertising revenue at star due to the effect of the indian government 's demonetization initiatives on the general advertising market in india , a lower volume of cricket matches broadcast in the current year and a decrease in market share . the adverse impact of the strengthening of the u.s. dollar against local currencies also contributed to the decrease in international advertising 46 revenue . the increase in international content and other revenues for fiscal 2017 , as compared to fiscal 2016 , was primarily due to higher network and syndication revenues in latin america and asia at fngi partially offset by lower syndication revenues related to sports rights at star . for fiscal 2017 , international channels oibda increased 4 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses . operating expenses increased approximately $ 150 million for fiscal 2017 , as compared to fiscal 2016 , primarily due to higher entertainment programming rights amortization at fngi in europe and latin america and at star partially offset by lower sports programming amortization at star , due to lower volume of cricket matches broadcast in the current year . television ( 20 % and 19 % of the company 's consolidated revenues in fiscal 2017 and 2016 , respectively ) for fiscal 2017 , revenues at the television segment increased $ 544 million , or 11 % , as compared to fiscal 2016 , primarily due to higher advertising , affiliate fee and content and other revenues . advertising revenue increased 8 % for fiscal 2017 , as compared to fiscal 2016 , primarily due to revenues resulting from the broadcast of super bowl li in february 2017 of approximately $ 425 million after agency commissions , the mlb world series which
| liquidity and capital resources sources of liquidity since our inception , and through december 31 , 2014 , we have raised an aggregate of approximately $ 146 million to fund our operations , of which approximately $ 21 million was received from the incurrence of indebtedness under our september 2014 loan agreement with svb ( with approximately $ 11 million of such amount used to repay our then-existing loan with svb ) , $ 55 million was received from our issuance and sale of our common stock in an underwritten public offering in march 2014 , approximately $ 54 million was received from our issuance and sale of our common stock in two private placements in november 2013 , approximately $ 6 million was received from our issuance and sale of our preferred stock and $ 10 million was received from the incurrence of indebtedness under our december 2013 loan agreement with svb . as of december 31 , 2014 , we had also received a small amount of funding from our issuance of common stock upon the exercise from time to time of stock options , and from our issuance of common stock to our founders in august and september 2011. as of december 31 , 2014 , we had approximately $ 76.6 million in cash , cash equivalents and available-for-sale securities , consisting of approximately $ 6.3 million in cash and cash equivalents and approximately $ 70.3 million in available-for-sale securities . amended and restated loan agreement with svb . on september 30 , 2014 , we entered into an amended and restated loan agreement with svb under which we incurred $ 21 million of indebtedness , approximately $ 11 million of which was used to repay our then- 55 existing loan with svb . we also have an option to receive an additional $ 10 million loan tranche , which may be drawn down by us at any time prior to september 30 , 2015 , provided that we have initiated the phase iia portion of our ongoing , global phase i/ii clinical study of entrectinib and subject to other customary conditions for funding .
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in addition , note 2 to the accompanying consolidated financial statements of twenty-first century fox summarizes the company 's significant accounting policies , including the critical accounting policy discussion found in this section . overview of the company 's business the company is a diversified global media and entertainment company , which manages and reports its businesses in the following segments : cable network programming , which principally consists of the production and licensing of programming distributed primarily through cable television systems , direct broadcast satellite operators , telecommunication companies and online video distributors in the united states ( “ u.s. ” ) and internationally . 37 television , which principally consists of the broadcasting of network programming in the u.s. and the operation of 28 full power broadcast television stations , including 11 duopolies , in the u.s. ( of these stations , 17 are affiliated with the fox broadcasting company ( “ fox ” ) , nine are affiliated with master distribution service , inc. ( “ mynetworktv ” ) , one is affiliated with both the cw television network and mynetworktv and one is an independent station ) . filmed entertainment , which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide , and the production and licensing of television programming worldwide . direct broadcast satellite television , which consisted of the distribution of programming services via satellite , cable and broadband directly to subscribers in italy , germany and austria . the direct broadcast satellite television ( “ dbs ” ) segment consisted entirely of the operations of sky italia and sky deutschland ag ( “ sky deutschland ” ) ( collectively , the “ dbs businesses ” ) . on november 12 , 2014 , twenty-first century fox completed the sale of sky italia and its 57 % interest in sky deutschland to sky plc ( “ sky ” ) ( see note 3 – acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading “ sky italia and sky deutschland ” ) . sky is a pan-european digital television provider , which operates in italy , germany , austria , the united kingdom ( “ u.k. ” ) and ireland . other , corporate and eliminations , which principally consists of corporate overhead and eliminations . following the sale of the dbs businesses , the company continues to report in five segments for comparative purposes , and there is no current activity in the dbs segment . cable network programming and television the company 's cable networks , which target various demographics , derive a majority of their revenues from monthly affiliate fees received from multi-channel video programming distributors ( “ mvpds ” ) based on the number of their subscribers . affiliate fee revenues are net of the amortization of cable distribution investments ( capitalized fees paid to u.s. mvpds to typically facilitate the carriage of a domestic cable network ) . the company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period . in the u.s. , cable television and direct broadcast satellite are currently the predominant means of distribution of the company 's program services . internationally , distribution technology varies region by region . the television operations derive revenues primarily from the sale of advertising , and to a lesser extent , affiliate fee revenue . adverse changes in general market conditions for advertising may affect revenues . u.s. law governing retransmission consent revenue , recognized as affiliate fees , provides a mechanism for the television stations owned by the company to seek and obtain payment from mvpds who carry the company 's broadcast signals . retransmission consent revenue consists of per subscriber-based compensatory fees paid to the company by mvpds that distribute the signals of the company 's owned and operated television stations . the company also receives compensation from independently-owned television stations that are affiliated with fox and receive retransmission consent fees from mvpds for their signals . the most significant operating expenses of the cable network programming segment and the television segment are the acquisition and production expenses related to programming , marketing and promotional expenses , and the expenses related to operating the technical facilities of the cable network or broadcaster . marketing and promotional expenses relate to improving the market visibility and awareness of the cable network or broadcaster and its programming . additional expenses include salaries , employee benefits , rent and other routine overhead expenses . the profitability of u.s. national sports contracts and certain international sports rights agreements is based on the company 's best estimates at june 30 , 2017 of attributable revenues and costs ; such estimates may change in the future and such changes may be significant . should revenues decline materially from estimates applied at june 30 , 2017 , additional amortization of rights may be recognized . should revenues improve as compared to estimated revenues , the company may have improved results related to the contract , which may be recognized over the remaining contract term . 38 filmed entertainment the filmed entertainment segment derives revenue from the production and distribution of live-action and animated motion pictures and television series . in general , motion pictures produced or acquired for distribution by the company are exhibited in u.s. and foreign theaters , followed by home entertainment , including sale and rental of dvds and blu-rays , licensing through digital distribution platforms , premium subscription television , network television and basic cable and syndicated television exploitation . television series initially produced for the networks and first-run syndication are generally licensed to domestic and international markets concurrently and subsequently made available via digital distribution platforms and released in seasonal dvd and blu-ray box sets . more successful series are later syndicated in domestic markets . story_separator_special_tag 44 fiscal 2017 versus fiscal 2016 the following table reconciles income from continuing operations before income tax expense to total segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_11_th the following table sets forth the computation of total segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_12_th the following tables set forth the company 's revenues and segment oibda for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_13_th replace_table_token_14_th 45 cable network programming ( 57 % and 55 % of the company 's consolidated revenues in fiscal 2017 and 2016 , respectively ) for fiscal 2017 , revenues at the cable network programming segment increased $ 1.1 billion , or 7 % , as compared to fiscal 2016 , primarily due to higher affiliate fee , advertising and content and other revenues as shown below : replace_table_token_15_th these revenue increases are net of a decrease of approximately $ 155 million due to the strengthening of the u.s. dollar against local currencies , primarily in latin america and europe , for fiscal 2017 , as compared to fiscal 2016. for fiscal 2017 , cable network programming segment oibda increased $ 456 million , or 9 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses of $ 645 million , or 7 % . for fiscal 2017 , the segment oibda increase is net of a decrease of approximately $ 60 million due to the strengthening of the u.s. dollar against local currencies as compared to fiscal 2016. the incremental revenues and expenses related to the ngs media business as a result of the acquisition were approximately $ 140 million for fiscal 2017 , as compared to fiscal 2016. domestic channels for fiscal 2017 , domestic affiliate fee revenue increased , as compared to fiscal 2016 , primarily due to higher average rates per subscriber led by fox news and the regional sports networks ( “ rsns ” ) partially offset by the impact of lower average subscribers . also contributing to the increase were fs1 and fs2 due to higher average rates per subscriber and higher average subscribers and fx networks due to higher average rates per subscriber . for fiscal 2017 , domestic advertising revenue increased , as compared to fiscal 2016 , primarily due to higher ratings and pricing at fox news and the broadcasts of the mlb postseason games at fs1 partially offset by the impact of lower ratings at fx networks . the increase in domestic content and other revenues for fiscal 2017 , as compared to fiscal 2016 , was primarily due to the acquisition of the ngs media business and higher svod revenue . for fiscal 2017 , domestic channels oibda increased 10 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses . operating expenses increased approximately $ 485 million for fiscal 2017 , as compared to fiscal 2016 , principally due to higher sports rights amortization , including the mlb , national basketball association ( “ nba ” ) and national association of stock car auto racing ( “ nascar ” ) rights at the company 's sports channels , higher programming and marketing costs related to the launch of new programming at fx networks and national geographic and the acquisition of the ngs media business . international channels for fiscal 2017 , international affiliate fee revenue increased , as compared to fiscal 2016 , as a result of local currency growth of 11 % , led by additional subscribers and higher rates at fox networks group international ( “ fngi ” ) in latin america and europe and at star india ( “ star ” ) . partially offsetting the affiliate fee increase for fiscal 2017 was the adverse impact of the strengthening of the u.s. dollar against local currencies . for fiscal 2017 , international advertising revenues decreased , as compared to fiscal 2016 , as local currency growth at fngi in latin america and europe was more than offset by lower local currency advertising revenue at star due to the effect of the indian government 's demonetization initiatives on the general advertising market in india , a lower volume of cricket matches broadcast in the current year and a decrease in market share . the adverse impact of the strengthening of the u.s. dollar against local currencies also contributed to the decrease in international advertising 46 revenue . the increase in international content and other revenues for fiscal 2017 , as compared to fiscal 2016 , was primarily due to higher network and syndication revenues in latin america and asia at fngi partially offset by lower syndication revenues related to sports rights at star . for fiscal 2017 , international channels oibda increased 4 % , as compared to fiscal 2016 , primarily due to the revenue increases noted above partially offset by higher expenses . operating expenses increased approximately $ 150 million for fiscal 2017 , as compared to fiscal 2016 , primarily due to higher entertainment programming rights amortization at fngi in europe and latin america and at star partially offset by lower sports programming amortization at star , due to lower volume of cricket matches broadcast in the current year . television ( 20 % and 19 % of the company 's consolidated revenues in fiscal 2017 and 2016 , respectively ) for fiscal 2017 , revenues at the television segment increased $ 544 million , or 11 % , as compared to fiscal 2016 , primarily due to higher advertising , affiliate fee and content and other revenues . advertising revenue increased 8 % for fiscal 2017 , as compared to fiscal 2016 , primarily due to revenues resulting from the broadcast of super bowl li in february 2017 of approximately $ 425 million after agency commissions , the mlb world series which
| debt instruments the following table summarizes cash from borrowings and cash used in repayment of borrowings for fiscal 2017 , 2016 and 2015 : replace_table_token_21_th ( a ) see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox for further discussion under the heading “ public debt - senior notes issued under august 2009 indenture ” . ( b ) the fiscal 2017 and 2016 activity includes $ 76 million and $ 373 million in borrowings , respectively , and $ 146 million and $ 379 million in repayments , respectively , under the yes network secured revolving credit facility . the balance of the repayments was related to the yes network term loan facility . the fiscal 2015 activity includes the effect of the amendment to the yes network credit agreement ( see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox under the heading “ bank loans ” ) . ( c ) see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox for further discussion under the heading “ public debt – predecessor indentures ” . ratings of the public debt the following table summarizes the company 's credit ratings as of june 30 , 2017 : rating agency senior debt outlook moody 's baa1 stable standard & poor 's( a ) bbb+ watch negative ( a ) standard & poor 's changed the outlook of the company 's public debt from stable to watch negative in december 2016 following the company 's announcement of the sky acquisition ( see note 3 – acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading “ sky ” ) .
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we also operate our business in a manner that permits us to maintain our exclusion from registration as an investment company under the investment company act . effective january 1 , 2020 , the operating partnership contributed substantially all of its assets to chmi sub-reit , inc. ( the “ sub-reit ” ) in exchange for all of the common stock of the sub-reit . as a result of this contribution , the sub-reit is a wholly-owned subsidiary of the operating partnership and operations formerly conducted by the operating partnership through its subsidiaries are now conducted by the sub-reit through those same subsidiaries . the sub-reit will elect to be taxed as a reit under the code commencing with the taxable year ending december 31 , 2020. from time to time , we may issue and sell shares of our common stock , our class a preferred stock or our class b preferred stock . see “ item 8. consolidated financial statements and supplementary data—note 6. equity and earnings per common share—common and preferred stock . ” in april 2018 , the company initiated an at-the-market offering program ( the “ preferred series a atm program ” ) pursuant to which it may offer through one or more sales agents and sell from time to time up to $ 35 million of its series a preferred stock at prices prevailing at the time , subject to volume and other regulatory limitations . the company did not issue and sell any shares of the series a preferred stock during the year ended december 31 , 2020. during the year ended december 31 , 2019 , the company issued and sold 63,429 shares of series a preferred stock under the preferred series a atm program . the shares were sold at a weighted average price of $ 25.21 per share for gross proceeds of approximately $ 1.6 million before fees of approximately $ 26,000. the net proceeds were used for general corporate purposes , including investment in rmbs . in august 2018 , the company initiated an at-the-market offering program ( the “ common stock atm program ” and , together with the preferred series a atm program , the “ atm programs ” ) pursuant to which it may offer through one or more sales agents and sell from time to time up to $ 50 million of its common stock at prices prevailing at the time , subject to volume and other regulatory limitations . the company did not issue and sell any common stock under the common stock atm program during the year ended december 31 , 2020. during the year ended december 31 , 2019 , the company issued and sold 225,646 shares of common stock under the common stock atm program . the shares were sold at a weighted average price of $ 17.40 per share for gross proceeds of approximately $ 3.9 million before fees of approximately $ 79,000. the net proceeds were used for general corporate purposes , including investment in rmbs . 37 in september 2019 , we initiated a share repurchase program that allows for the repurchase of up to an aggregate of $ 10.0 million of our common stock . shares may be repurchased from time to time through privately negotiated transactions or open market transactions , pursuant to a trading plan in accordance with rules 10b5-1 and 10b-18 under the securities exchange act of 1934 , as amended ( the “ exchange act ” ) , or by any combination of such methods . the manner , price , number and timing of share repurchases are subject to a variety of factors , including market conditions and applicable sec rules . the share repurchase program does not require the purchase of any minimum number of shares , and , subject to sec rules , purchases may be commenced or suspended at any time without prior notice . during the year ended december 31 , 2020 , the company repurchased 142,531 shares of its common stock pursuant to the repurchase program for approximately $ 1.8 million . during the year ended december 31 , 2019 , the company repurchased 235,950 shares of its common stock pursuant to the repurchase program for approximately $ 3.5 million . this management 's discussion and analysis of results of operations and financial condition omits discussion and comparison of results of operations and financial condition for the year ended december 31 , 2018. that discussion and comparison is included under the heading “ item 7. management 's discussion and analysis of results of operations and financial condition ” in our annual report on form 10-k for the year ended december 31 , 2019. effects of covid-19 on the company as the covid-19 pandemic and its effects on the economy escalated in the united states in early march 2020 , the financial markets started to deteriorate . the widening of nominal spreads resulted in a sudden and severe decline in the mark-to-market values assigned by repurchase agreement counterparties to our agency rmbs assets . the crisis in the agency rmbs market was closely followed by a substantial widening of spreads on credit assets and a reduction in available liquidity to finance credit assets , including , the credit risk transfer securities issued by fannie mae and freddie mac then held as part of the cmos in portfolio . the shelter in place restrictions imposed by federal and state governments have resulted in significant increases in the level of unemployment and the imposition of forbearance restrictions on lenders and servicers such as the company 's mortgage company subsidiary , aurora . as of december 31 , 2020 , 5.9 % of borrowers on loans serviced by aurora are reflected as being in an active forbearance program with 28 % of those borrowers continuing to make their regularly scheduled monthly payment . story_separator_special_tag this adjustment to the amortized cost basis of the security is reflected in realized gain ( loss ) on rmbs , available-for-sale , net in the consolidated statements of income ( loss ) . fair valued assets and liabilities asc 820 , fair value measurements and disclosures , defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . asc 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions . the fair value hierarchy gives the highest priority to quoted prices available in active markets ( i.e . , observable inputs ) and the lowest priority to data lacking transparency ( i.e . , unobservable inputs ) . additionally , asc 820 requires an entity to consider all aspects of nonperformance risk , including the entity 's own credit standing , when measuring the fair value of a liability . asc 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value . an instrument 's categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation . following is a description of the three levels : level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions . additionally , the entity must have the ability to access the active market and the quoted prices can not be adjusted by the entity . level 2 inputs include quoted prices in active markets for similar assets or liabilities ; quoted prices in inactive markets for identical or similar assets or liabilities ; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities . level 3 unobservable inputs are supported by little or no market activity . the unobservable inputs represent the assumptions that management believes market participants would use to price the assets and liabilities , including risk . generally , level 3 assets and liabilities are valued using pricing models , discounted cash flow methodologies , or similar techniques that require significant judgment or estimation . 41 the level in the fair value hierarchy within which the entirety of a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety . we have used level 2 for our rmbss , our derivative assets and liabilities and level 3 for our servicing related assets . when available , we use quoted market prices to determine the fair value of an asset or liability . if quoted market prices are not available , we will consult independent pricing services or third-party broker quotes , provided that there is no ongoing material event that affects the issuer of the securities being valued or the market . if there is such an ongoing event , or if quoted market prices are not available , we will determine the fair value of the securities using valuation techniques that use , when possible , current market-based or independently-sourced market parameters , such as interest rates . investments in msrs we have elected the fair value option to record our investments in msrs in order to provide users of our consolidated financial statements with better information regarding the effects of prepayment risk and other market factors on the msrs . under this election , we record a valuation adjustment on our investments in msrs on a quarterly basis to recognize the changes in fair value of our msrs in net income as described below . our msrs represent the right to service mortgage loans . as an owner and manager of msrs , we may be obligated to fund advances of principal and interest payments due to third-party owners of the loans , but not yet received from the individual borrowers . these advances are reported as servicing advances within the “ receivables and other assets ” line item on the consolidated balance sheets . although transactions in msrs are observable in the marketplace , the valuation includes unobservable market data inputs ( prepayment speeds , delinquency levels , costs to service and discount rates ) . changes in the fair value of msrs as well as servicing fee income and servicing expenses are reported on the consolidated statements of income ( loss ) . in determining the valuation of msrs , management uses internally developed models that are primarily based on observable market-based inputs but which also include unobservable market data inputs . for additional information on our fair value methodology , see “ item 8. consolidated financial statements and supplementary data–note 9. fair value . ” revenue recognition on investments in msrs mortgage servicing fee income represents revenue earned for servicing mortgage loans . the servicing fees are based on a contractual percentage of the outstanding principal balance and are recognized as revenue as the related mortgage payments are collected . corresponding costs to service are charged to expense as incurred . approximately $ 18.3 million and $ 16.6 million in reimbursable servicing advances were receivable at december 31 , 2020 and december 31 , 2019 , respectively , and have been classified within “ receivables and other assets ” on the consolidated balance sheets . servicing fee income received and servicing expenses incurred are reported on the consolidated statements of income ( loss ) . the difference between the fair value of msrs and their amortized cost basis is recorded on the consolidated statements of income ( loss ) as “ unrealized gain ( loss ) on investments in servicing related assets . ” fair value is generally determined by discounting the
| debt instruments the following table summarizes cash from borrowings and cash used in repayment of borrowings for fiscal 2017 , 2016 and 2015 : replace_table_token_21_th ( a ) see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox for further discussion under the heading “ public debt - senior notes issued under august 2009 indenture ” . ( b ) the fiscal 2017 and 2016 activity includes $ 76 million and $ 373 million in borrowings , respectively , and $ 146 million and $ 379 million in repayments , respectively , under the yes network secured revolving credit facility . the balance of the repayments was related to the yes network term loan facility . the fiscal 2015 activity includes the effect of the amendment to the yes network credit agreement ( see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox under the heading “ bank loans ” ) . ( c ) see note 11 – borrowings to the accompanying consolidated financial statements of twenty-first century fox for further discussion under the heading “ public debt – predecessor indentures ” . ratings of the public debt the following table summarizes the company 's credit ratings as of june 30 , 2017 : rating agency senior debt outlook moody 's baa1 stable standard & poor 's( a ) bbb+ watch negative ( a ) standard & poor 's changed the outlook of the company 's public debt from stable to watch negative in december 2016 following the company 's announcement of the sky acquisition ( see note 3 – acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading “ sky ” ) .
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we also operate our business in a manner that permits us to maintain our exclusion from registration as an investment company under the investment company act . effective january 1 , 2020 , the operating partnership contributed substantially all of its assets to chmi sub-reit , inc. ( the “ sub-reit ” ) in exchange for all of the common stock of the sub-reit . as a result of this contribution , the sub-reit is a wholly-owned subsidiary of the operating partnership and operations formerly conducted by the operating partnership through its subsidiaries are now conducted by the sub-reit through those same subsidiaries . the sub-reit will elect to be taxed as a reit under the code commencing with the taxable year ending december 31 , 2020. from time to time , we may issue and sell shares of our common stock , our class a preferred stock or our class b preferred stock . see “ item 8. consolidated financial statements and supplementary data—note 6. equity and earnings per common share—common and preferred stock . ” in april 2018 , the company initiated an at-the-market offering program ( the “ preferred series a atm program ” ) pursuant to which it may offer through one or more sales agents and sell from time to time up to $ 35 million of its series a preferred stock at prices prevailing at the time , subject to volume and other regulatory limitations . the company did not issue and sell any shares of the series a preferred stock during the year ended december 31 , 2020. during the year ended december 31 , 2019 , the company issued and sold 63,429 shares of series a preferred stock under the preferred series a atm program . the shares were sold at a weighted average price of $ 25.21 per share for gross proceeds of approximately $ 1.6 million before fees of approximately $ 26,000. the net proceeds were used for general corporate purposes , including investment in rmbs . in august 2018 , the company initiated an at-the-market offering program ( the “ common stock atm program ” and , together with the preferred series a atm program , the “ atm programs ” ) pursuant to which it may offer through one or more sales agents and sell from time to time up to $ 50 million of its common stock at prices prevailing at the time , subject to volume and other regulatory limitations . the company did not issue and sell any common stock under the common stock atm program during the year ended december 31 , 2020. during the year ended december 31 , 2019 , the company issued and sold 225,646 shares of common stock under the common stock atm program . the shares were sold at a weighted average price of $ 17.40 per share for gross proceeds of approximately $ 3.9 million before fees of approximately $ 79,000. the net proceeds were used for general corporate purposes , including investment in rmbs . 37 in september 2019 , we initiated a share repurchase program that allows for the repurchase of up to an aggregate of $ 10.0 million of our common stock . shares may be repurchased from time to time through privately negotiated transactions or open market transactions , pursuant to a trading plan in accordance with rules 10b5-1 and 10b-18 under the securities exchange act of 1934 , as amended ( the “ exchange act ” ) , or by any combination of such methods . the manner , price , number and timing of share repurchases are subject to a variety of factors , including market conditions and applicable sec rules . the share repurchase program does not require the purchase of any minimum number of shares , and , subject to sec rules , purchases may be commenced or suspended at any time without prior notice . during the year ended december 31 , 2020 , the company repurchased 142,531 shares of its common stock pursuant to the repurchase program for approximately $ 1.8 million . during the year ended december 31 , 2019 , the company repurchased 235,950 shares of its common stock pursuant to the repurchase program for approximately $ 3.5 million . this management 's discussion and analysis of results of operations and financial condition omits discussion and comparison of results of operations and financial condition for the year ended december 31 , 2018. that discussion and comparison is included under the heading “ item 7. management 's discussion and analysis of results of operations and financial condition ” in our annual report on form 10-k for the year ended december 31 , 2019. effects of covid-19 on the company as the covid-19 pandemic and its effects on the economy escalated in the united states in early march 2020 , the financial markets started to deteriorate . the widening of nominal spreads resulted in a sudden and severe decline in the mark-to-market values assigned by repurchase agreement counterparties to our agency rmbs assets . the crisis in the agency rmbs market was closely followed by a substantial widening of spreads on credit assets and a reduction in available liquidity to finance credit assets , including , the credit risk transfer securities issued by fannie mae and freddie mac then held as part of the cmos in portfolio . the shelter in place restrictions imposed by federal and state governments have resulted in significant increases in the level of unemployment and the imposition of forbearance restrictions on lenders and servicers such as the company 's mortgage company subsidiary , aurora . as of december 31 , 2020 , 5.9 % of borrowers on loans serviced by aurora are reflected as being in an active forbearance program with 28 % of those borrowers continuing to make their regularly scheduled monthly payment . story_separator_special_tag this adjustment to the amortized cost basis of the security is reflected in realized gain ( loss ) on rmbs , available-for-sale , net in the consolidated statements of income ( loss ) . fair valued assets and liabilities asc 820 , fair value measurements and disclosures , defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . asc 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions . the fair value hierarchy gives the highest priority to quoted prices available in active markets ( i.e . , observable inputs ) and the lowest priority to data lacking transparency ( i.e . , unobservable inputs ) . additionally , asc 820 requires an entity to consider all aspects of nonperformance risk , including the entity 's own credit standing , when measuring the fair value of a liability . asc 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value . an instrument 's categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation . following is a description of the three levels : level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions . additionally , the entity must have the ability to access the active market and the quoted prices can not be adjusted by the entity . level 2 inputs include quoted prices in active markets for similar assets or liabilities ; quoted prices in inactive markets for identical or similar assets or liabilities ; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities . level 3 unobservable inputs are supported by little or no market activity . the unobservable inputs represent the assumptions that management believes market participants would use to price the assets and liabilities , including risk . generally , level 3 assets and liabilities are valued using pricing models , discounted cash flow methodologies , or similar techniques that require significant judgment or estimation . 41 the level in the fair value hierarchy within which the entirety of a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety . we have used level 2 for our rmbss , our derivative assets and liabilities and level 3 for our servicing related assets . when available , we use quoted market prices to determine the fair value of an asset or liability . if quoted market prices are not available , we will consult independent pricing services or third-party broker quotes , provided that there is no ongoing material event that affects the issuer of the securities being valued or the market . if there is such an ongoing event , or if quoted market prices are not available , we will determine the fair value of the securities using valuation techniques that use , when possible , current market-based or independently-sourced market parameters , such as interest rates . investments in msrs we have elected the fair value option to record our investments in msrs in order to provide users of our consolidated financial statements with better information regarding the effects of prepayment risk and other market factors on the msrs . under this election , we record a valuation adjustment on our investments in msrs on a quarterly basis to recognize the changes in fair value of our msrs in net income as described below . our msrs represent the right to service mortgage loans . as an owner and manager of msrs , we may be obligated to fund advances of principal and interest payments due to third-party owners of the loans , but not yet received from the individual borrowers . these advances are reported as servicing advances within the “ receivables and other assets ” line item on the consolidated balance sheets . although transactions in msrs are observable in the marketplace , the valuation includes unobservable market data inputs ( prepayment speeds , delinquency levels , costs to service and discount rates ) . changes in the fair value of msrs as well as servicing fee income and servicing expenses are reported on the consolidated statements of income ( loss ) . in determining the valuation of msrs , management uses internally developed models that are primarily based on observable market-based inputs but which also include unobservable market data inputs . for additional information on our fair value methodology , see “ item 8. consolidated financial statements and supplementary data–note 9. fair value . ” revenue recognition on investments in msrs mortgage servicing fee income represents revenue earned for servicing mortgage loans . the servicing fees are based on a contractual percentage of the outstanding principal balance and are recognized as revenue as the related mortgage payments are collected . corresponding costs to service are charged to expense as incurred . approximately $ 18.3 million and $ 16.6 million in reimbursable servicing advances were receivable at december 31 , 2020 and december 31 , 2019 , respectively , and have been classified within “ receivables and other assets ” on the consolidated balance sheets . servicing fee income received and servicing expenses incurred are reported on the consolidated statements of income ( loss ) . the difference between the fair value of msrs and their amortized cost basis is recorded on the consolidated statements of income ( loss ) as “ unrealized gain ( loss ) on investments in servicing related assets . ” fair value is generally determined by discounting the
| liquidity and capital resources liquidity is a measurement of our ability to meet potential cash requirements , including ongoing commitments to repay borrowings , fund and maintain investments and other general business needs . additionally , to maintain our status as a reit under the code , we must distribute annually at least 90 % of our reit taxable income . in 2017 , the internal revenue service issued a revenue procedure permitting “ publicly offered ” reits to make elective stock dividends ( i.e. , dividends paid in a mixture of stock and cash ) , with at least 20 % of the total distribution being paid in cash , to satisfy their reit distribution requirements . on may 4 , 2020 , the internal revenue service issued a revenue procedure that temporarily reduces ( through the end of 2020 ) the minimum amount of the total distribution that must be paid in cash to 10 % . pursuant to these revenue procedures , the company has in the past and may in the future elect to make distributions of its taxable income in a mixture of stock and cash . our primary sources of funds for liquidity consist of cash provided by operating activities ( primarily income from our investments in rmbs and net servicing income from our msrs ) , sales or repayments of rmbs and borrowings under repurchase agreements and our msr financing arrangements . the covid-19 pandemic has not adversely affected our ability to access these traditional sources of our funds on the same or reasonably similar terms as available before the pandemic . in the future , sources of funds for liquidity may include additional msr financing , warehouse agreements , securitizations and the issuance of equity or debt securities , when feasible . during the year ended december 31 , 2020 , we did not sell any capital stock pursuant to the atm programs . during the year ended december 31 , 2019 , we completed underwritten offerings and sales of our capital stock pursuant to our atm programs which resulted in aggregate net proceeds of approximately $ 5.4 million .
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concession revenue from concession stand sales and sales of souvenirs are recorded at the time of sale . revenues and related expenses from barter transactions in which we receive advertising or other goods or services in exchange for sponsorships of motorsports events are recorded at fair value . barter transactions accounted for $ 598,000 , $ 626,000 and $ 779,000 of total revenues for the years ended december 31 , 2011 , 2010 and 2009 , respectively . expenses that are not directly related to a specific event are recorded as incurred . expenses that specifically relate to an event are deferred until the event is held , at which time they are expensed . these expenses include prize and point fund monies and sanction fees paid to various sanctioning bodies , including nascar , marketing , cost of goods sold for merchandise and souvenirs , and other expenses associated with the promotion of our racing events . results of operations year ended december 31 , 2011 vs. year ended december 31 , 2010 admissions revenue was $ 13,633,000 in 2011 as compared to $ 16,363,000 in 2010. we promoted ten events during 2011 and 2010. the $ 2,730,000 decrease was primarily related to lower admissions revenue at our nascar event weekends at dover international speedway . we believe the decrease in attendance at our dover weekends was attributable primarily to the general downturn in economic conditions , including those affecting disposable consumer income and corporate budgets such as employment and business conditions . we believe that adverse economic trends , particularly credit availability , the decline in consumer confidence , continued high unemployment and high gas prices have contributed to the decrease in attendance . event-related revenue was $ 10,309,000 in 2011 as compared to $ 11,594,000 in 2010. the $ 1,285,000 decrease was primarily related to lower luxury suite rentals , hospitality tent rentals , catering revenues , expo space revenues and concessions and souvenir sales at our nascar event weekends at dover international speedway as a result of the lower attendance and the aforementioned economic conditions . broadcasting revenue increased to $ 27,778,000 in 2011 from $ 26,872,000 in 2010 due to a contracted increase for the individual major motorsports events we promoted during 2011. operating and marketing expenses were $ 31,926,000 in 2011 as compared to $ 34,286,000 in 2010. the decrease was primarily due to cost cutting measures and reduced operating expenses resulting from the lower attendance at our nascar event weekends at dover international speedway . we concluded in the third quarter of 2011 that it was necessary for us to review the carrying value of the long-lived assets of our nashville facility for impairment . based on the results of this analysis , we recorded a 14 $ 15,687,000 non-cash impairment charge in the third quarter of 2011 to write-down the carrying value of long-lived assets at our nashville facility to fair value . general and administrative expenses were $ 8,329,000 in 2011 and $ 9,786,000 in 2010. the decrease was primarily related to lower wages and benefit costs at our dover facility , lower expenses at our nashville facility and from the sale of our memphis facility which was completed in january 2011. depreciation and amortization expense decreased to $ 4,588,000 in 2011 as compared to $ 5,825,000 in 2010. the decrease was primarily related to cessation of depreciation after the impairment of all depreciable assets of our nashville facility in the third quarter of 2011. net interest expense was $ 2,245,000 in 2011 as compared to $ 2,360,000 in 2010. we reversed $ 122,000 and $ 878,000 in 2011 and 2010 , respectively , of previously recorded interest expense on uncertain income tax positions which are no longer subject to examination . excluding the interest expense and reversals we recorded related to uncertain income tax positions , our net interest expense was $ 2,367,000 in 2011 as compared to $ 3,113,000 in 2010. the decrease was due primarily to lower average borrowings as well as a lower average interest rate on our new credit facility entered into on april 12 , 2011. on august 3 , 2011 , we announced that nashville superspeedway notified nascar that it will not seek 2012 sanction agreements for its two nationwide series and two camping world truck series events . we continue to use the track for nascar team testing and are currently evaluating all of our options for the facility . as a result , we recorded a $ 2,250,000 provision for contingent obligation reflecting the present value of the estimated portion of the wilson county bonds debt service that may not be covered by the projected sales and incremental property taxes from the facility . ( loss ) earnings from continuing operations before income taxes was ( $ 13,207,000 ) in 2011 as compared to $ 2,182,000 in 2010. excluding the non-cash impairment charges and provision for contingent obligation , our adjusted earnings from continuing operations before income taxes was $ 4,730,000 in 2011 as compared to $ 2,991,000 in 2010. replace_table_token_1_th the above financial information is presented using other than generally accepted accounting principles ( non-gaap ) and is reconciled to comparable information presented using gaap . non-gaap adjusted earnings from continuing operations before income taxes is derived by adjusting amounts determined in accordance with gaap for the non-cash impairment charges and provision for contingent obligation . we believe such non-gaap information is useful and meaningful to investors , and is used by investors and us to assess core operations . story_separator_special_tag these bonds are direct obligations of the sports authority and therefore have historically not been required to be recorded on our consolidated balance sheet . if the applicable taxes are insufficient for the payment of principal and interest on the bonds , we would become responsible for the difference . we are exposed to fluctuations in interest rates for these bonds . in the event we were unable to make the payments , they would be made pursuant to a $ 20,640,000 irrevocable direct-pay letter of credit issued by our bank group . as of december 31 , 2011 and 2010 , $ 1,534,000 and $ 1,200,000 , respectively , was available in the sales and incremental property tax fund maintained by the sports authority to pay the remaining principal and interest due under the bonds . during 2011 , we paid $ 1,075,000 into the sales and incremental property tax fund and $ 741,000 was deducted from the fund for principal and interest payments . if we fail to maintain the letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative to the letter of credit , the bonds would be immediately redeemable . on august 3 , 2011 , we announced that our wholly-owned subsidiary nashville superspeedway had notified nascar that it will not seek 2012 sanction agreements for its two nationwide series and two camping world truck series events . as a result , we recorded a $ 2,250,000 provision for contingent obligation reflecting the present value of the estimated portion of the wilson county bonds debt service that may not be covered by applicable taxes from 19 the facility . based on current projections , our first debt service payment would be due in 2021. an increase in interest rates would result in an increase in the portion of debt service not covered by applicable taxes and therefore an increase in our liability . related party transactions see note 12 related party transactions of the consolidated financial statements included elsewhere in this document . critical accounting policies the accounting policies described below are those we consider critical in preparing our consolidated financial statements . these policies include significant estimates made by management using information available at the time the estimates are made . as described below , these estimates could change materially if different information or assumptions were used . income taxes income taxes are accounted for under the asset and liability method . deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses . deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date . we record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized . as of december 31 , 2011 , our valuation allowance net of federal income taxes was $ 12,189,000 , which increased by $ 1,777,000 in 2011 , from reserving for the deferred tax assets related to state net operating loss carry-forwards . these state net operating losses are related to our midwest facilities that have not produced taxable income . valuation allowances fully reserve the state net operating loss carryforwards , net of federal tax benefit . we have considered ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . in the event we were to determine that we would be able to realize all or a portion of these deferred tax assets , an adjustment to the valuation allowance would increase earnings in the period such determination was made . likewise , should we determine that we would not be able to realize all or a portion of our remaining deferred tax assets in the future , an adjustment to the valuation allowance would be charged to earnings in the period such determination was made . property and equipment property and equipment are recorded at cost . depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 3 to 10 years for furniture , fixtures and equipment and up to 40 years for facilities . these estimates require assumptions that are believed to be reasonable . we perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable . an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value . generally , fair value is determined using valuation techniques such as the comparable sales approach . historically the impairment assessment for track facilities has also considered the cost approach valuation technique , which gives specific consideration to the value of the track land plus the contributory value to the improvements . the primary economic assumptions used in the valuation techniques include : ( i ) land value which is estimated by comparable transactions ; and ( ii ) that the highest and best use for the facilities is potential real estate development . changes to these assumptions can have a significant effect on the outcome of future impairment tests and as a result , future valuations could differ significantly from current estimates . 20 accrued pension cost on june 15 , 2011 , we decided to freeze participation and benefit accruals under our pension plans . the freeze was effective july 31 , 2011. the benefits provided by our defined-benefit pension plans are based on years of service and employee 's remuneration through july 31 , 2011.
| liquidity and capital resources liquidity is a measurement of our ability to meet potential cash requirements , including ongoing commitments to repay borrowings , fund and maintain investments and other general business needs . additionally , to maintain our status as a reit under the code , we must distribute annually at least 90 % of our reit taxable income . in 2017 , the internal revenue service issued a revenue procedure permitting “ publicly offered ” reits to make elective stock dividends ( i.e. , dividends paid in a mixture of stock and cash ) , with at least 20 % of the total distribution being paid in cash , to satisfy their reit distribution requirements . on may 4 , 2020 , the internal revenue service issued a revenue procedure that temporarily reduces ( through the end of 2020 ) the minimum amount of the total distribution that must be paid in cash to 10 % . pursuant to these revenue procedures , the company has in the past and may in the future elect to make distributions of its taxable income in a mixture of stock and cash . our primary sources of funds for liquidity consist of cash provided by operating activities ( primarily income from our investments in rmbs and net servicing income from our msrs ) , sales or repayments of rmbs and borrowings under repurchase agreements and our msr financing arrangements . the covid-19 pandemic has not adversely affected our ability to access these traditional sources of our funds on the same or reasonably similar terms as available before the pandemic . in the future , sources of funds for liquidity may include additional msr financing , warehouse agreements , securitizations and the issuance of equity or debt securities , when feasible . during the year ended december 31 , 2020 , we did not sell any capital stock pursuant to the atm programs . during the year ended december 31 , 2019 , we completed underwritten offerings and sales of our capital stock pursuant to our atm programs which resulted in aggregate net proceeds of approximately $ 5.4 million .
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concession revenue from concession stand sales and sales of souvenirs are recorded at the time of sale . revenues and related expenses from barter transactions in which we receive advertising or other goods or services in exchange for sponsorships of motorsports events are recorded at fair value . barter transactions accounted for $ 598,000 , $ 626,000 and $ 779,000 of total revenues for the years ended december 31 , 2011 , 2010 and 2009 , respectively . expenses that are not directly related to a specific event are recorded as incurred . expenses that specifically relate to an event are deferred until the event is held , at which time they are expensed . these expenses include prize and point fund monies and sanction fees paid to various sanctioning bodies , including nascar , marketing , cost of goods sold for merchandise and souvenirs , and other expenses associated with the promotion of our racing events . results of operations year ended december 31 , 2011 vs. year ended december 31 , 2010 admissions revenue was $ 13,633,000 in 2011 as compared to $ 16,363,000 in 2010. we promoted ten events during 2011 and 2010. the $ 2,730,000 decrease was primarily related to lower admissions revenue at our nascar event weekends at dover international speedway . we believe the decrease in attendance at our dover weekends was attributable primarily to the general downturn in economic conditions , including those affecting disposable consumer income and corporate budgets such as employment and business conditions . we believe that adverse economic trends , particularly credit availability , the decline in consumer confidence , continued high unemployment and high gas prices have contributed to the decrease in attendance . event-related revenue was $ 10,309,000 in 2011 as compared to $ 11,594,000 in 2010. the $ 1,285,000 decrease was primarily related to lower luxury suite rentals , hospitality tent rentals , catering revenues , expo space revenues and concessions and souvenir sales at our nascar event weekends at dover international speedway as a result of the lower attendance and the aforementioned economic conditions . broadcasting revenue increased to $ 27,778,000 in 2011 from $ 26,872,000 in 2010 due to a contracted increase for the individual major motorsports events we promoted during 2011. operating and marketing expenses were $ 31,926,000 in 2011 as compared to $ 34,286,000 in 2010. the decrease was primarily due to cost cutting measures and reduced operating expenses resulting from the lower attendance at our nascar event weekends at dover international speedway . we concluded in the third quarter of 2011 that it was necessary for us to review the carrying value of the long-lived assets of our nashville facility for impairment . based on the results of this analysis , we recorded a 14 $ 15,687,000 non-cash impairment charge in the third quarter of 2011 to write-down the carrying value of long-lived assets at our nashville facility to fair value . general and administrative expenses were $ 8,329,000 in 2011 and $ 9,786,000 in 2010. the decrease was primarily related to lower wages and benefit costs at our dover facility , lower expenses at our nashville facility and from the sale of our memphis facility which was completed in january 2011. depreciation and amortization expense decreased to $ 4,588,000 in 2011 as compared to $ 5,825,000 in 2010. the decrease was primarily related to cessation of depreciation after the impairment of all depreciable assets of our nashville facility in the third quarter of 2011. net interest expense was $ 2,245,000 in 2011 as compared to $ 2,360,000 in 2010. we reversed $ 122,000 and $ 878,000 in 2011 and 2010 , respectively , of previously recorded interest expense on uncertain income tax positions which are no longer subject to examination . excluding the interest expense and reversals we recorded related to uncertain income tax positions , our net interest expense was $ 2,367,000 in 2011 as compared to $ 3,113,000 in 2010. the decrease was due primarily to lower average borrowings as well as a lower average interest rate on our new credit facility entered into on april 12 , 2011. on august 3 , 2011 , we announced that nashville superspeedway notified nascar that it will not seek 2012 sanction agreements for its two nationwide series and two camping world truck series events . we continue to use the track for nascar team testing and are currently evaluating all of our options for the facility . as a result , we recorded a $ 2,250,000 provision for contingent obligation reflecting the present value of the estimated portion of the wilson county bonds debt service that may not be covered by the projected sales and incremental property taxes from the facility . ( loss ) earnings from continuing operations before income taxes was ( $ 13,207,000 ) in 2011 as compared to $ 2,182,000 in 2010. excluding the non-cash impairment charges and provision for contingent obligation , our adjusted earnings from continuing operations before income taxes was $ 4,730,000 in 2011 as compared to $ 2,991,000 in 2010. replace_table_token_1_th the above financial information is presented using other than generally accepted accounting principles ( non-gaap ) and is reconciled to comparable information presented using gaap . non-gaap adjusted earnings from continuing operations before income taxes is derived by adjusting amounts determined in accordance with gaap for the non-cash impairment charges and provision for contingent obligation . we believe such non-gaap information is useful and meaningful to investors , and is used by investors and us to assess core operations . story_separator_special_tag these bonds are direct obligations of the sports authority and therefore have historically not been required to be recorded on our consolidated balance sheet . if the applicable taxes are insufficient for the payment of principal and interest on the bonds , we would become responsible for the difference . we are exposed to fluctuations in interest rates for these bonds . in the event we were unable to make the payments , they would be made pursuant to a $ 20,640,000 irrevocable direct-pay letter of credit issued by our bank group . as of december 31 , 2011 and 2010 , $ 1,534,000 and $ 1,200,000 , respectively , was available in the sales and incremental property tax fund maintained by the sports authority to pay the remaining principal and interest due under the bonds . during 2011 , we paid $ 1,075,000 into the sales and incremental property tax fund and $ 741,000 was deducted from the fund for principal and interest payments . if we fail to maintain the letter of credit that secures the bonds or we allow an uncured event of default to exist under our reimbursement agreement relative to the letter of credit , the bonds would be immediately redeemable . on august 3 , 2011 , we announced that our wholly-owned subsidiary nashville superspeedway had notified nascar that it will not seek 2012 sanction agreements for its two nationwide series and two camping world truck series events . as a result , we recorded a $ 2,250,000 provision for contingent obligation reflecting the present value of the estimated portion of the wilson county bonds debt service that may not be covered by applicable taxes from 19 the facility . based on current projections , our first debt service payment would be due in 2021. an increase in interest rates would result in an increase in the portion of debt service not covered by applicable taxes and therefore an increase in our liability . related party transactions see note 12 related party transactions of the consolidated financial statements included elsewhere in this document . critical accounting policies the accounting policies described below are those we consider critical in preparing our consolidated financial statements . these policies include significant estimates made by management using information available at the time the estimates are made . as described below , these estimates could change materially if different information or assumptions were used . income taxes income taxes are accounted for under the asset and liability method . deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses . deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date . we record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized . as of december 31 , 2011 , our valuation allowance net of federal income taxes was $ 12,189,000 , which increased by $ 1,777,000 in 2011 , from reserving for the deferred tax assets related to state net operating loss carry-forwards . these state net operating losses are related to our midwest facilities that have not produced taxable income . valuation allowances fully reserve the state net operating loss carryforwards , net of federal tax benefit . we have considered ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . in the event we were to determine that we would be able to realize all or a portion of these deferred tax assets , an adjustment to the valuation allowance would increase earnings in the period such determination was made . likewise , should we determine that we would not be able to realize all or a portion of our remaining deferred tax assets in the future , an adjustment to the valuation allowance would be charged to earnings in the period such determination was made . property and equipment property and equipment are recorded at cost . depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 3 to 10 years for furniture , fixtures and equipment and up to 40 years for facilities . these estimates require assumptions that are believed to be reasonable . we perform reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable . an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value . generally , fair value is determined using valuation techniques such as the comparable sales approach . historically the impairment assessment for track facilities has also considered the cost approach valuation technique , which gives specific consideration to the value of the track land plus the contributory value to the improvements . the primary economic assumptions used in the valuation techniques include : ( i ) land value which is estimated by comparable transactions ; and ( ii ) that the highest and best use for the facilities is potential real estate development . changes to these assumptions can have a significant effect on the outcome of future impairment tests and as a result , future valuations could differ significantly from current estimates . 20 accrued pension cost on june 15 , 2011 , we decided to freeze participation and benefit accruals under our pension plans . the freeze was effective july 31 , 2011. the benefits provided by our defined-benefit pension plans are based on years of service and employee 's remuneration through july 31 , 2011.
| liquidity and capital resources our operations and cash flows from operating activities are seasonal in nature with a majority of our 2011 motorsports events occurring during the second and fourth quarters this year . net cash provided by operating activities was $ 7,858,000 in 2011 as compared to $ 966,000 in 2010. the increase was primarily due to reduced operating losses at our midwest facilities . net cash provided by investing activities was $ 1,611,000 in 2011 as compared to $ 5,366,000 in 2010. capital expenditures were $ 258,000 in 2011 compared with $ 488,000 in 2010. the 2011 additions related primarily to 17 replacement of safer barriers at our nashville facility and improvements to our luxury skybox suites at our dover facility . the 2010 additions related primarily to payments for concessions equipment and facility improvements . we completed the sale of our memphis facility in january 2011 which resulted in additional net proceeds of $ 1,875,000. the decrease in our restricted cash accounts was $ 5,333,000 in 2010. on july 21 , 2010 , we redeemed all of the outstanding swida bonds and the remaining restricted cash was subsequently returned to us by the trustee . net cash used in financing activities was $ 9,523,000 in 2011 as compared to $ 6,418,000 in 2010. we had net repayments on our outstanding line of credit of $ 9,040,000 in 2011 as compared to $ 2,800,000 in 2010. repayments of our outstanding swida bonds were $ 2,986,000 in 2010. we incurred $ 167,000 of premiums and fees associated with the aforementioned swida bond redemption in 2010. on july 29 , 2009 , our board of directors voted to suspend the declaration of regular quarterly cash dividends on all classes of our common stock . dividends are prohibited by our credit facility . at december 31 , 2011 , dover motorsports , inc. and its wholly owned subsidiaries dover international speedway , inc. and nashville speedway , usa , inc. , as co-borrowers , had a $ 65,000,000 secured credit agreement with a bank group .
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33 key financial metrics and drivers as discussed in the previous section , we utilize a portfolio of key financial metrics to manage the company , including gaap and non-gaap measures . as detailed below , we review revenues by type and by segment , or by major product line . we also review expenses by activity , which provides more transparency into how resources are being deployed . in addition , we utilize operating metrics including run rate , subscription sales and retention rate to analyze past performance and to provide insight into our latest reported portfolio of recurring business . in the discussion that follows , we provide certain variances excluding the impact of foreign currency exchange rate fluctuations . foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period . while operating revenues adjusted for the impact of foreign currency fluctuations includes asset-based fees that have been adjusted for the impact of foreign currency fluctuations , the underlying aum , which is the primary component of asset-based fees , is not adjusted for foreign currency fluctuations . approximately two-thirds of the aum are invested in securities denominated in currencies other than the u.s. dollar , and accordingly , any such impact is excluded from the disclosed foreign currency-adjusted variances . revenues our revenues are characterized by type , which broadly reflects the nature of how they are recognized or earned . our revenue types are recurring subscription , asset-based fees and non-recurring revenues . we also group our revenues by segment and provide the revenue type within each segment . recurring subscription revenues represent fees earned from clients primarily under renewable contracts and are generally recognized ratably over the term of the license or service pursuant to the contract terms . the fees are recognized as we provide the product and service to the client over the license period and are generally billed in advance , prior to the license start date . asset-based fees represent fees earned on the aum linked to our indexes from independent third-party sources or the most recently reported information provided by the client . asset-based fees also include revenues related to futures and options contracts linked to our indexes , which are primarily based on trading volumes . non-recurring revenues primarily represent fees earned on products and services where we do not have renewal contracts and primarily include revenues for providing historical data , certain implementation services and other special client requests , which are generally recognized at a point in time . operating expenses we group our operating expenses into the following activity categories : cost of revenues ; selling and marketing ; research and development ( “ r & d ” ) ; general and administrative ( “ g & a ” ) ; amortization of intangible assets ; and depreciation and amortization of property , equipment and leasehold improvements . costs are assigned to these activity categories based on the nature of the expense or , when not directly attributable , an estimated allocation based on the type of effort involved . 34 cost of revenues cost of revenues expenses consist of costs related to the production and servicing of our products and services and primarily includes related information technology costs , including data center , platform and infrastructure costs ; costs to acquire , produce and maintain market data information ; costs of research to support and maintain existing products ; costs of product management teams ; costs of client service and consultant teams to support customer needs ; as well as other support costs directly attributable to the cost of revenues including certain human resources , finance and legal costs . selling and marketing selling and marketing expenses consist of costs associated with acquiring new clients or selling new products or product renewals to existing clients and primarily includes the costs of our sales and marketing teams , as well as costs incurred in other groups associated with acquiring new business , including product management , research , technology and sales operations . research and development r & d expenses consist of costs to develop new or enhance existing products and costs to develop new or improved technology and service platforms for the delivery of our products and services and primarily include the costs of development , research , product management , project management and the technology support associated with these efforts . general and administrative g & a expenses consist of costs primarily related to finance operations , human resources , office of the ceo , legal , corporate technology , corporate development and certain other administrative costs that are not directly attributed , but are instead allocated , to a product or service . amortization of intangible assets amortization of intangible assets expense relates to definite-lived intangible assets arising from past acquisitions and internal capitalized software projects . intangibles arising from past acquisitions consist of customer relationships , trademarks and trade names , technology and software , proprietary processes and data and non-competition agreements . we amortize definite-lived intangible assets over their estimated useful lives . definite-lived intangible assets are tested for impairment when impairment indicators are present , and , if impaired , written down to fair value based on either discounted cash flows or appraised values . we have no indefinite-lived intangible assets . depreciation and amortization of property , equipment and leasehold improvements this category consists of expenses related to depreciating or amortizing the cost of furniture and fixtures , computer and related equipment and leasehold improvements over the estimated useful life of the assets . story_separator_special_tag depreciation and amortization of property , equipment and leasehold improvements depreciation and amortization of property , equipment and leasehold improvements for the year ended december 31 , 2019 and 2018 was $ 30.0 million and $ 31.3 million , respectively . other expense ( income ) , net other expense ( income ) , net for the year ended december 31 , 2019 increased 167.3 % to $ 152.4 million compared to $ 57.0 million for the year ended december 31 , 2018. the increase was primarily driven by the absence of the $ 46.6 million and $ 10.6 million of gains realized from the investorforce and fea divestitures , respectively , which occurred in 2018. the increase was also driven by the $ 16.8 million loss on extinguishment associated with the partial pre-maturity redemption of the 2024 senior notes which included approximately $ 13.1 million of call premium paid in accordance with the redemption prices set forth in the indenture and the write-off of approximately $ 3.7 million of unamortized costs associated with the 2024 senior notes . in addition , the increase also reflects higher interest expense associated with higher outstanding debt and higher foreign currency exchange losses . income taxes the provision for income tax decreased 67.5 % to $ 39.7 million for the year ended december 31 , 2019 compared to $ 122.0 million for the year ended december 31 , 2018. these amounts reflect effective tax rates of 6.6 % and 19.4 % for the years ended december 31 , 2019 and 2018 , respectively . the effective tax rate of 6.6 % for the year ended december 31 , 2019 reflects the impact of certain favorable discrete items totaling $ 85.7 million . these discrete items primarily relate to $ 66.6 million of excess tax benefits recognized upon vesting of the 2016 multi-year psus and $ 16.1 million of excess tax benefits on other share-based compensation recognized during the period . in addition , the effective tax rate was impacted by a beneficial geographic mix of earnings . the effective tax rate of 19.4 % for the year ended december 31 , 2018 reflects the impact of certain favorable discrete items totaling $ 31.9 million . these discrete items include $ 8.8 million of excess tax benefits related to stock-based compensation , $ 11.9 million related to the release of valuation allowances previously recorded on capital loss carryforwards and $ 11.2 million related to the final impact of tax reform . 42 net income as a result of the factors described above , net income for the year ended december 31 , 2019 increased 11.0 % to $ 563.6 million compared to $ 507.9 million for the year ended december 31 , 2018. adjusted ebitda the following table presents the calculation of the non-gaap adjusted ebitda measure for the years indicated : replace_table_token_12_th adjusted ebitda increased 10.1 % to $ 850.5 million for the year ended december 31 , 2019 compared to $ 772.4 million for the year ended december 31 , 2018. adjusted ebitda margin increased to 54.6 % for the year ended december 31 , 2019 compared to 53.9 % for the year ended december 31 , 2018. the increase in adjusted ebitda margin reflects a higher rate of growth in operating revenues as compared to the rate of growth of adjusted ebitda expenses . reconciliation of adjusted ebitda to net income and adjusted ebitda expenses to operating expenses the following table presents the reconciliation of adjusted ebitda to net income for the years indicated : replace_table_token_13_th 43 the following table presents the reconciliation of adjusted ebitda expenses to operating expenses for the years indicated : replace_table_token_14_th segment results the results for each of our three reportable segments for the years ended december 31 , 2019 and 2018 are presented below : index segment the following table presents the results for the index segment for the years indicated : replace_table_token_15_th revenues related to index products increased 10.2 % to $ 920.9 million for the year ended december 31 , 2019 compared to $ 835.5 million for the year ended december 31 , 2018. revenues from recurring subscriptions were up 11.2 % to $ 531.0 million for the year ended december 31 , 2019 compared to $ 477.6 million for the year ended december 31 , 2018. the increase was driven by strong growth in core developed market modules , factor and esg index products and emerging market modules . the impact of foreign currency exchange rate fluctuations on revenues from recurring subscriptions was negligible . 44 revenues from asset-based fees increased 7.5 % to $ 361.9 million for the year ended december 31 , 2019 compared to $ 336.6 million for the year ended december 31 , 2018. the increase in asset-based fees was primarily driven by an increase in revenues from exchange traded futures and options contracts linked to msci indexes . the increase in revenues from futures and options contracts was driven by approximately $ 5.0 million in additional fees associated with prior periods attributed to a retrospective price increase from a renegotiated contract entered into during the year ended december 31 , 2019 , as well as the cumulative impact of price and volume increases . the increase in revenues from asset-based fees was also driven by higher revenues from etfs linked to msci indexes , which was driven by a 7 . 6 % increase in average aum , partially offset by the impact of a change in product mix . in addition , the increase in revenues from asset-based fees was driven by higher revenues from non-etf passive products linked to msci indexes . the impact of foreign currency exchange rate fluctuations on revenues from asset-based fees was negligible . index segment adjusted ebitda expenses increased 10.2 % to $ 250.7 million for the year ended december 31 , 2019 compared to $ 227.6 million for the year ended december 31 , 2018 , reflecting higher expenses
| liquidity and capital resources our operations and cash flows from operating activities are seasonal in nature with a majority of our 2011 motorsports events occurring during the second and fourth quarters this year . net cash provided by operating activities was $ 7,858,000 in 2011 as compared to $ 966,000 in 2010. the increase was primarily due to reduced operating losses at our midwest facilities . net cash provided by investing activities was $ 1,611,000 in 2011 as compared to $ 5,366,000 in 2010. capital expenditures were $ 258,000 in 2011 compared with $ 488,000 in 2010. the 2011 additions related primarily to 17 replacement of safer barriers at our nashville facility and improvements to our luxury skybox suites at our dover facility . the 2010 additions related primarily to payments for concessions equipment and facility improvements . we completed the sale of our memphis facility in january 2011 which resulted in additional net proceeds of $ 1,875,000. the decrease in our restricted cash accounts was $ 5,333,000 in 2010. on july 21 , 2010 , we redeemed all of the outstanding swida bonds and the remaining restricted cash was subsequently returned to us by the trustee . net cash used in financing activities was $ 9,523,000 in 2011 as compared to $ 6,418,000 in 2010. we had net repayments on our outstanding line of credit of $ 9,040,000 in 2011 as compared to $ 2,800,000 in 2010. repayments of our outstanding swida bonds were $ 2,986,000 in 2010. we incurred $ 167,000 of premiums and fees associated with the aforementioned swida bond redemption in 2010. on july 29 , 2009 , our board of directors voted to suspend the declaration of regular quarterly cash dividends on all classes of our common stock . dividends are prohibited by our credit facility . at december 31 , 2011 , dover motorsports , inc. and its wholly owned subsidiaries dover international speedway , inc. and nashville speedway , usa , inc. , as co-borrowers , had a $ 65,000,000 secured credit agreement with a bank group .
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33 key financial metrics and drivers as discussed in the previous section , we utilize a portfolio of key financial metrics to manage the company , including gaap and non-gaap measures . as detailed below , we review revenues by type and by segment , or by major product line . we also review expenses by activity , which provides more transparency into how resources are being deployed . in addition , we utilize operating metrics including run rate , subscription sales and retention rate to analyze past performance and to provide insight into our latest reported portfolio of recurring business . in the discussion that follows , we provide certain variances excluding the impact of foreign currency exchange rate fluctuations . foreign currency exchange rate fluctuations reflect the difference between the current period results as reported compared to the current period results recalculated using the foreign currency exchange rates in effect for the comparable prior period . while operating revenues adjusted for the impact of foreign currency fluctuations includes asset-based fees that have been adjusted for the impact of foreign currency fluctuations , the underlying aum , which is the primary component of asset-based fees , is not adjusted for foreign currency fluctuations . approximately two-thirds of the aum are invested in securities denominated in currencies other than the u.s. dollar , and accordingly , any such impact is excluded from the disclosed foreign currency-adjusted variances . revenues our revenues are characterized by type , which broadly reflects the nature of how they are recognized or earned . our revenue types are recurring subscription , asset-based fees and non-recurring revenues . we also group our revenues by segment and provide the revenue type within each segment . recurring subscription revenues represent fees earned from clients primarily under renewable contracts and are generally recognized ratably over the term of the license or service pursuant to the contract terms . the fees are recognized as we provide the product and service to the client over the license period and are generally billed in advance , prior to the license start date . asset-based fees represent fees earned on the aum linked to our indexes from independent third-party sources or the most recently reported information provided by the client . asset-based fees also include revenues related to futures and options contracts linked to our indexes , which are primarily based on trading volumes . non-recurring revenues primarily represent fees earned on products and services where we do not have renewal contracts and primarily include revenues for providing historical data , certain implementation services and other special client requests , which are generally recognized at a point in time . operating expenses we group our operating expenses into the following activity categories : cost of revenues ; selling and marketing ; research and development ( “ r & d ” ) ; general and administrative ( “ g & a ” ) ; amortization of intangible assets ; and depreciation and amortization of property , equipment and leasehold improvements . costs are assigned to these activity categories based on the nature of the expense or , when not directly attributable , an estimated allocation based on the type of effort involved . 34 cost of revenues cost of revenues expenses consist of costs related to the production and servicing of our products and services and primarily includes related information technology costs , including data center , platform and infrastructure costs ; costs to acquire , produce and maintain market data information ; costs of research to support and maintain existing products ; costs of product management teams ; costs of client service and consultant teams to support customer needs ; as well as other support costs directly attributable to the cost of revenues including certain human resources , finance and legal costs . selling and marketing selling and marketing expenses consist of costs associated with acquiring new clients or selling new products or product renewals to existing clients and primarily includes the costs of our sales and marketing teams , as well as costs incurred in other groups associated with acquiring new business , including product management , research , technology and sales operations . research and development r & d expenses consist of costs to develop new or enhance existing products and costs to develop new or improved technology and service platforms for the delivery of our products and services and primarily include the costs of development , research , product management , project management and the technology support associated with these efforts . general and administrative g & a expenses consist of costs primarily related to finance operations , human resources , office of the ceo , legal , corporate technology , corporate development and certain other administrative costs that are not directly attributed , but are instead allocated , to a product or service . amortization of intangible assets amortization of intangible assets expense relates to definite-lived intangible assets arising from past acquisitions and internal capitalized software projects . intangibles arising from past acquisitions consist of customer relationships , trademarks and trade names , technology and software , proprietary processes and data and non-competition agreements . we amortize definite-lived intangible assets over their estimated useful lives . definite-lived intangible assets are tested for impairment when impairment indicators are present , and , if impaired , written down to fair value based on either discounted cash flows or appraised values . we have no indefinite-lived intangible assets . depreciation and amortization of property , equipment and leasehold improvements this category consists of expenses related to depreciating or amortizing the cost of furniture and fixtures , computer and related equipment and leasehold improvements over the estimated useful life of the assets . story_separator_special_tag depreciation and amortization of property , equipment and leasehold improvements depreciation and amortization of property , equipment and leasehold improvements for the year ended december 31 , 2019 and 2018 was $ 30.0 million and $ 31.3 million , respectively . other expense ( income ) , net other expense ( income ) , net for the year ended december 31 , 2019 increased 167.3 % to $ 152.4 million compared to $ 57.0 million for the year ended december 31 , 2018. the increase was primarily driven by the absence of the $ 46.6 million and $ 10.6 million of gains realized from the investorforce and fea divestitures , respectively , which occurred in 2018. the increase was also driven by the $ 16.8 million loss on extinguishment associated with the partial pre-maturity redemption of the 2024 senior notes which included approximately $ 13.1 million of call premium paid in accordance with the redemption prices set forth in the indenture and the write-off of approximately $ 3.7 million of unamortized costs associated with the 2024 senior notes . in addition , the increase also reflects higher interest expense associated with higher outstanding debt and higher foreign currency exchange losses . income taxes the provision for income tax decreased 67.5 % to $ 39.7 million for the year ended december 31 , 2019 compared to $ 122.0 million for the year ended december 31 , 2018. these amounts reflect effective tax rates of 6.6 % and 19.4 % for the years ended december 31 , 2019 and 2018 , respectively . the effective tax rate of 6.6 % for the year ended december 31 , 2019 reflects the impact of certain favorable discrete items totaling $ 85.7 million . these discrete items primarily relate to $ 66.6 million of excess tax benefits recognized upon vesting of the 2016 multi-year psus and $ 16.1 million of excess tax benefits on other share-based compensation recognized during the period . in addition , the effective tax rate was impacted by a beneficial geographic mix of earnings . the effective tax rate of 19.4 % for the year ended december 31 , 2018 reflects the impact of certain favorable discrete items totaling $ 31.9 million . these discrete items include $ 8.8 million of excess tax benefits related to stock-based compensation , $ 11.9 million related to the release of valuation allowances previously recorded on capital loss carryforwards and $ 11.2 million related to the final impact of tax reform . 42 net income as a result of the factors described above , net income for the year ended december 31 , 2019 increased 11.0 % to $ 563.6 million compared to $ 507.9 million for the year ended december 31 , 2018. adjusted ebitda the following table presents the calculation of the non-gaap adjusted ebitda measure for the years indicated : replace_table_token_12_th adjusted ebitda increased 10.1 % to $ 850.5 million for the year ended december 31 , 2019 compared to $ 772.4 million for the year ended december 31 , 2018. adjusted ebitda margin increased to 54.6 % for the year ended december 31 , 2019 compared to 53.9 % for the year ended december 31 , 2018. the increase in adjusted ebitda margin reflects a higher rate of growth in operating revenues as compared to the rate of growth of adjusted ebitda expenses . reconciliation of adjusted ebitda to net income and adjusted ebitda expenses to operating expenses the following table presents the reconciliation of adjusted ebitda to net income for the years indicated : replace_table_token_13_th 43 the following table presents the reconciliation of adjusted ebitda expenses to operating expenses for the years indicated : replace_table_token_14_th segment results the results for each of our three reportable segments for the years ended december 31 , 2019 and 2018 are presented below : index segment the following table presents the results for the index segment for the years indicated : replace_table_token_15_th revenues related to index products increased 10.2 % to $ 920.9 million for the year ended december 31 , 2019 compared to $ 835.5 million for the year ended december 31 , 2018. revenues from recurring subscriptions were up 11.2 % to $ 531.0 million for the year ended december 31 , 2019 compared to $ 477.6 million for the year ended december 31 , 2018. the increase was driven by strong growth in core developed market modules , factor and esg index products and emerging market modules . the impact of foreign currency exchange rate fluctuations on revenues from recurring subscriptions was negligible . 44 revenues from asset-based fees increased 7.5 % to $ 361.9 million for the year ended december 31 , 2019 compared to $ 336.6 million for the year ended december 31 , 2018. the increase in asset-based fees was primarily driven by an increase in revenues from exchange traded futures and options contracts linked to msci indexes . the increase in revenues from futures and options contracts was driven by approximately $ 5.0 million in additional fees associated with prior periods attributed to a retrospective price increase from a renegotiated contract entered into during the year ended december 31 , 2019 , as well as the cumulative impact of price and volume increases . the increase in revenues from asset-based fees was also driven by higher revenues from etfs linked to msci indexes , which was driven by a 7 . 6 % increase in average aum , partially offset by the impact of a change in product mix . in addition , the increase in revenues from asset-based fees was driven by higher revenues from non-etf passive products linked to msci indexes . the impact of foreign currency exchange rate fluctuations on revenues from asset-based fees was negligible . index segment adjusted ebitda expenses increased 10.2 % to $ 250.7 million for the year ended december 31 , 2019 compared to $ 227.6 million for the year ended december 31 , 2018 , reflecting higher expenses
| liquidity and capital resources we require capital to fund ongoing operations , internal growth initiatives and acquisitions . our primary sources of liquidity are cash flows generated from our operations , existing cash and cash equivalents and credit capacity under our existing credit facilities . in addition , we believe we have access to additional funding in the public and private markets . we intend to use these sources of liquidity to , among other things , service our existing and future debt obligations , fund our working capital requirements for capital expenditures , investments , acquisitions , dividend payments and repurchases of our common stock . in connection with our business strategy , we regularly evaluate acquisition and strategic partnership opportunities . we believe our liquidity , along with other financing alternatives , will provide the necessary capital to fund these transactions and achieve our planned growth . senior notes and credit agreement we have an aggregate of $ 3,100.0 million in senior unsecured notes ( collectively , the “ senior notes ” ) consisting of five discrete private placement offerings and entered into a $ 400.0 million revolving credit agreement with a syndicate of banks . see note 5 , “ commitments and contingencies , ” of the notes to consolidated financial statements included herein for additional information on our senior notes and revolving credit agreement . the senior notes and the revolving credit agreement are fully and unconditionally , and jointly and severally , guaranteed by our direct or indirect wholly-owned domestic subsidiaries that account for more than 5 % of our and our subsidiaries ' consolidated assets , other than certain excluded subsidiaries ( the “ subsidiary guarantors ” ) . amounts due under the revolving credit agreement are our and the subsidiary guarantors ' senior unsecured obligations and rank equally with the senior notes and any of our other unsecured , unsubordinated debt , senior to any of our subordinated debt and effectively subordinated to our secured debt to the extent of the assets securing such debt .
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we believe future acquisitions could strengthen our competitive position , enhance the products and services that we can offer to customers , expand our customer base , grow our revenues and increase our overall value . fiscal 2014 acquisition in october 2013 , we entered into a tender offer agreement with cameleon software sa ( `` pros france `` ) . as a result of shares purchased in the market following the completion of the tender in january 2014 , the exercise of warrants in july 2014 , and second tender completed in november 2014 , we controlled 100 % of pros france 's common stock as of december 31 , 2014. we acquired pros france for total cash consideration of approximately $ 32 million , net of cash acquired . fiscal 2013 acquisition in december 2013 , we acquired signaldemand , inc. for total cash consideration of $ 13.5 million . financing activities in december 2014 , we issued $ 143.8 million aggregate principal amount of 2.0 % convertible senior notes due december 1 , 2019 , unless earlier purchased or converted . interest is payable semiannually in arrears on june 1 and december 1 of each year , commencing on june 1 , 2015. backlog our backlog is derived from agreements that we believe to be firm commitments to provide software solutions and related services in the future . our backlog is based on significant estimates and judgments that we make regarding total contract values , as well as maintenance renewals and changes to existing maintenance and support agreements . backlog includes committed maintenance , amounts under maintenance and support agreements that we reasonably expect to renew , as well as deferred revenue . we compute our backlog as of a specific date , and we update our backlog to reflect changes in our estimates and judgments or subsequent additions , delays , terminations or reductions in our agreements . backlog can vary significantly from period to period depending on a number of factors including the timing of our sales and the nature of the agreements we enter into with our customers . for example , we have agreements that include non-standard provisions which require us to exercise judgment over the extent to which to include these agreements in our backlog . however , based on our history of successfully implementing our software solutions , we generally include the full estimated value of these agreements in backlog . for these and other reasons , our backlog may not be a meaningful indicator of future revenue to be recognized in any particular quarter , and there can be no assurance that our backlog at any point in time will translate into revenue in any specific quarter . furthermore , as we continue our migration to a saas provider , our historical definition of backlog and the relevance to our future revenues may change . we had backlog of approximately $ 209 million as of december 31 , 2015 as compared to backlog of approximately $ 194 million as of december 31 , 2014 . the portion of our backlog as of december 31 , 2015 not reasonably expected to be recognized as revenue within the next twelve months is estimated to be approximately $ 86 million . opportunities , trends and uncertainties we have noted opportunities , trends and uncertainties that we believe are particularly significant to understand our financial results and condition . 28 cloud-first strategy . we have historically sold the majority of our products via perpetual licenses . we also sold our solutions via term licenses or saas , which defers revenue recognition . in connection with our subscription based cloud-first strategy announced in 2015 , we expect to sell a lower percentage of perpetual licenses and more subscription-based solutions such as saas and subscription cloud-based solutions . following a transition period , we expect this business model will increase our recurring subscription revenue . we anticipate that this strategy will result in lower license revenue , lower total revenues and lower operating cash flows in 2016. however , we do not anticipate a corresponding decrease in expenses in 2016 , which will adversely affect our net income , operating margins and cash flow . variability in bookings . historically , we have experienced the strongest customer demand in fourth and second quarters of each year . however , the size and timing of orders for our products and services varies considerably , which can cause significant fluctuations in our bookings results from quarter to quarter . due to our average deal sizes , our bookings in any particular quarter have in the past , and may continue in the future , to be dependent on a relatively small number of orders . during 2015 , we experienced unanticipated sales execution challenges which we believe stemmed from the pace of change associated with our cloud-first strategy . the timing of our bookings also varies based on a number of factors over which we may have little or no control , including the complexity of the transaction , our customers ' internal budgeting and approval processes , our customers purchasing behaviors and the level of competition . variability in revenue . the timing of our revenue recognition varies based on the nature and requirements of our contracts . in conjunction with our cloud-first announcement in 2015 , we expect to have an increasing number of subscription contracts , which will result in less license revenue recognized in 2016. the timing of our revenue recognition for our saas solutions also varies based on the mix of products sold . for example , our saas solutions purchased by our travel customers often require more complex implementations which can delay the commencement of subscription revenue recognition . story_separator_special_tag deferred revenue does not reflect the total contract value of our customer arrangements at any point in time as we only record deferred revenue if amounts are invoiced in advance of the corresponding recognition of license and implementation revenue . as a result , there is little correlation between the timing of our revenue recognition , the timing of our invoicing and the amount of deferred revenue . 32 results of operations comparison of year ended december 31 , 2015 with year ended december 31 , 2014 revenue : replace_table_token_5_th license revenue . for the year ended december 31 , 2015 , license revenue decreased $ 25.8 million to $ 32.7 million from $ 58.5 million for the year ended december 31 , 2014 , representing a 44 % decrease . our license revenue is dependent on the amount of perpetual licenses sold in the period , as well as the timing of revenue recognition . as a result of our shift to a cloud-first strategy , we experienced a decrease in the sale of perpetual licenses and a corresponding decrease in license revenue , which included a decrease of $ 18.2 million in license revenue recognized upon software delivery . we recognized $ 9.0 million and $ 27.2 million of license revenue upon software delivery for the years ended december 31 , 2015 and 2014 , respectively . as a result of our shift to a cloud-first strategy , we expect customers will be purchasing more subscription-based solutions such as saas and cloud-based solutions , resulting in lower future license revenue . services revenue . for the year ended december 31 , 2015 , services revenue decreased $ 6.4 million to $ 42.9 million from $ 49.2 million for the year ended december 31 , 2014 , representing a 13 % decrease . the decrease in services revenue was primarily attributable to several customer implementations that were completed in 2014 with significant professional services and to a lesser extent certain pre-packaged offerings requiring less professional services . in addition , even though the total number of customers generating services revenue increased to 212 for the year ended december 31 , 2015 , as compared to 193 in the corresponding period in 2014 , an increase of 10 % , the decrease in services revenue was also attributed to an overall lower effective services man-day rate . subscription revenue . for the year ended december 31 , 2015 , subscription revenue increased $ 5.5 million to $ 29.0 million from $ 23.5 million for the year ended december 31 , 2014 , representing a 24 % increase . the increase in subscription revenue was primarily attributable to an increase in the number of customers subscribing to our saas and cloud-based solutions . the total number of customers generating subscription revenue was 102 for the year ended december 31 , 2015 , as compared to 90 in the corresponding period in 2014 , an increase of 13 % . we expect our subscription revenue will continue to increase as a result of our shift to a cloud-first strategy . maintenance and support . maintenance and support revenue increased $ 9.0 million to $ 63.7 million for the year ended december 31 , 2015 from $ 54.6 million for the year ended december 31 , 2014 , representing a 17 % increase . the increase in maintenance and support revenue was principally a result of an increase in the number of customers purchasing maintenance and support services related to their licensing of our software . we expect our maintenance revenue growth will decrease as a result of customers licensing less of our software as we shift to a cloud-first strategy . 33 cost of revenue and gross profit . replace_table_token_6_th cost of license . cost of license primarily consists of third-party fees for licenses . cost of license increased $ 0.1 million for the year ended december 31 , 2015 to $ 0.3 million from $ 0.2 million for the year ended december 31 , 2014 , representing a 25 % increase . license gross profit percentages for the year ended december 31 , 2015 and 2014 , remained relatively unchanged as a result of limited third-party fees for licensed software incurred over both periods . cost of services . cost of services decreased $ 3.8 million to $ 36.1 million for the year ended december 31 , 2015 from $ 40.0 million for the year ended december 31 , 2014 , representing a 10 % decrease . the decrease was primarily attributable to a decrease in personnel costs used in our software implementations of $ 2.6 million and a decrease in other overhead expenses of $ 1.2 million . services gross profit percentages for the years ended december 31 , 2015 and 2014 , were 16 % and 19 % , respectively . the percent decrease in services gross profit was primarily driven by the completion of several implementations in 2014 with higher professional services man-day rates and lower professional services utilization during the year ended december 31 , 2015 . service gross profit percentages can vary from period to period depending on different factors , including the level of professional services required to implement our software and the utilization of our professional services personnel . cost of subscription . cost of subscription increased $ 5.5 million to $ 12.8 million for the year ended december 31 , 2015 from $ 7.3 million for the year ended december 31 , 2014 , representing a 74 % increase . the increase was primarily attributable to a $ 2.6 million increase in personnel costs and a $ 2.9 million increase in infrastructure costs to support our current and anticipated future subscription customer base . our subscription gross profit percentage for the years ended december 31 , 2015 and 2014 , was 56 % and 69 % , respectively . cost of maintenance and support . cost of maintenance and support revenue increased $
| liquidity and capital resources we require capital to fund ongoing operations , internal growth initiatives and acquisitions . our primary sources of liquidity are cash flows generated from our operations , existing cash and cash equivalents and credit capacity under our existing credit facilities . in addition , we believe we have access to additional funding in the public and private markets . we intend to use these sources of liquidity to , among other things , service our existing and future debt obligations , fund our working capital requirements for capital expenditures , investments , acquisitions , dividend payments and repurchases of our common stock . in connection with our business strategy , we regularly evaluate acquisition and strategic partnership opportunities . we believe our liquidity , along with other financing alternatives , will provide the necessary capital to fund these transactions and achieve our planned growth . senior notes and credit agreement we have an aggregate of $ 3,100.0 million in senior unsecured notes ( collectively , the “ senior notes ” ) consisting of five discrete private placement offerings and entered into a $ 400.0 million revolving credit agreement with a syndicate of banks . see note 5 , “ commitments and contingencies , ” of the notes to consolidated financial statements included herein for additional information on our senior notes and revolving credit agreement . the senior notes and the revolving credit agreement are fully and unconditionally , and jointly and severally , guaranteed by our direct or indirect wholly-owned domestic subsidiaries that account for more than 5 % of our and our subsidiaries ' consolidated assets , other than certain excluded subsidiaries ( the “ subsidiary guarantors ” ) . amounts due under the revolving credit agreement are our and the subsidiary guarantors ' senior unsecured obligations and rank equally with the senior notes and any of our other unsecured , unsubordinated debt , senior to any of our subordinated debt and effectively subordinated to our secured debt to the extent of the assets securing such debt .
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we believe future acquisitions could strengthen our competitive position , enhance the products and services that we can offer to customers , expand our customer base , grow our revenues and increase our overall value . fiscal 2014 acquisition in october 2013 , we entered into a tender offer agreement with cameleon software sa ( `` pros france `` ) . as a result of shares purchased in the market following the completion of the tender in january 2014 , the exercise of warrants in july 2014 , and second tender completed in november 2014 , we controlled 100 % of pros france 's common stock as of december 31 , 2014. we acquired pros france for total cash consideration of approximately $ 32 million , net of cash acquired . fiscal 2013 acquisition in december 2013 , we acquired signaldemand , inc. for total cash consideration of $ 13.5 million . financing activities in december 2014 , we issued $ 143.8 million aggregate principal amount of 2.0 % convertible senior notes due december 1 , 2019 , unless earlier purchased or converted . interest is payable semiannually in arrears on june 1 and december 1 of each year , commencing on june 1 , 2015. backlog our backlog is derived from agreements that we believe to be firm commitments to provide software solutions and related services in the future . our backlog is based on significant estimates and judgments that we make regarding total contract values , as well as maintenance renewals and changes to existing maintenance and support agreements . backlog includes committed maintenance , amounts under maintenance and support agreements that we reasonably expect to renew , as well as deferred revenue . we compute our backlog as of a specific date , and we update our backlog to reflect changes in our estimates and judgments or subsequent additions , delays , terminations or reductions in our agreements . backlog can vary significantly from period to period depending on a number of factors including the timing of our sales and the nature of the agreements we enter into with our customers . for example , we have agreements that include non-standard provisions which require us to exercise judgment over the extent to which to include these agreements in our backlog . however , based on our history of successfully implementing our software solutions , we generally include the full estimated value of these agreements in backlog . for these and other reasons , our backlog may not be a meaningful indicator of future revenue to be recognized in any particular quarter , and there can be no assurance that our backlog at any point in time will translate into revenue in any specific quarter . furthermore , as we continue our migration to a saas provider , our historical definition of backlog and the relevance to our future revenues may change . we had backlog of approximately $ 209 million as of december 31 , 2015 as compared to backlog of approximately $ 194 million as of december 31 , 2014 . the portion of our backlog as of december 31 , 2015 not reasonably expected to be recognized as revenue within the next twelve months is estimated to be approximately $ 86 million . opportunities , trends and uncertainties we have noted opportunities , trends and uncertainties that we believe are particularly significant to understand our financial results and condition . 28 cloud-first strategy . we have historically sold the majority of our products via perpetual licenses . we also sold our solutions via term licenses or saas , which defers revenue recognition . in connection with our subscription based cloud-first strategy announced in 2015 , we expect to sell a lower percentage of perpetual licenses and more subscription-based solutions such as saas and subscription cloud-based solutions . following a transition period , we expect this business model will increase our recurring subscription revenue . we anticipate that this strategy will result in lower license revenue , lower total revenues and lower operating cash flows in 2016. however , we do not anticipate a corresponding decrease in expenses in 2016 , which will adversely affect our net income , operating margins and cash flow . variability in bookings . historically , we have experienced the strongest customer demand in fourth and second quarters of each year . however , the size and timing of orders for our products and services varies considerably , which can cause significant fluctuations in our bookings results from quarter to quarter . due to our average deal sizes , our bookings in any particular quarter have in the past , and may continue in the future , to be dependent on a relatively small number of orders . during 2015 , we experienced unanticipated sales execution challenges which we believe stemmed from the pace of change associated with our cloud-first strategy . the timing of our bookings also varies based on a number of factors over which we may have little or no control , including the complexity of the transaction , our customers ' internal budgeting and approval processes , our customers purchasing behaviors and the level of competition . variability in revenue . the timing of our revenue recognition varies based on the nature and requirements of our contracts . in conjunction with our cloud-first announcement in 2015 , we expect to have an increasing number of subscription contracts , which will result in less license revenue recognized in 2016. the timing of our revenue recognition for our saas solutions also varies based on the mix of products sold . for example , our saas solutions purchased by our travel customers often require more complex implementations which can delay the commencement of subscription revenue recognition . story_separator_special_tag deferred revenue does not reflect the total contract value of our customer arrangements at any point in time as we only record deferred revenue if amounts are invoiced in advance of the corresponding recognition of license and implementation revenue . as a result , there is little correlation between the timing of our revenue recognition , the timing of our invoicing and the amount of deferred revenue . 32 results of operations comparison of year ended december 31 , 2015 with year ended december 31 , 2014 revenue : replace_table_token_5_th license revenue . for the year ended december 31 , 2015 , license revenue decreased $ 25.8 million to $ 32.7 million from $ 58.5 million for the year ended december 31 , 2014 , representing a 44 % decrease . our license revenue is dependent on the amount of perpetual licenses sold in the period , as well as the timing of revenue recognition . as a result of our shift to a cloud-first strategy , we experienced a decrease in the sale of perpetual licenses and a corresponding decrease in license revenue , which included a decrease of $ 18.2 million in license revenue recognized upon software delivery . we recognized $ 9.0 million and $ 27.2 million of license revenue upon software delivery for the years ended december 31 , 2015 and 2014 , respectively . as a result of our shift to a cloud-first strategy , we expect customers will be purchasing more subscription-based solutions such as saas and cloud-based solutions , resulting in lower future license revenue . services revenue . for the year ended december 31 , 2015 , services revenue decreased $ 6.4 million to $ 42.9 million from $ 49.2 million for the year ended december 31 , 2014 , representing a 13 % decrease . the decrease in services revenue was primarily attributable to several customer implementations that were completed in 2014 with significant professional services and to a lesser extent certain pre-packaged offerings requiring less professional services . in addition , even though the total number of customers generating services revenue increased to 212 for the year ended december 31 , 2015 , as compared to 193 in the corresponding period in 2014 , an increase of 10 % , the decrease in services revenue was also attributed to an overall lower effective services man-day rate . subscription revenue . for the year ended december 31 , 2015 , subscription revenue increased $ 5.5 million to $ 29.0 million from $ 23.5 million for the year ended december 31 , 2014 , representing a 24 % increase . the increase in subscription revenue was primarily attributable to an increase in the number of customers subscribing to our saas and cloud-based solutions . the total number of customers generating subscription revenue was 102 for the year ended december 31 , 2015 , as compared to 90 in the corresponding period in 2014 , an increase of 13 % . we expect our subscription revenue will continue to increase as a result of our shift to a cloud-first strategy . maintenance and support . maintenance and support revenue increased $ 9.0 million to $ 63.7 million for the year ended december 31 , 2015 from $ 54.6 million for the year ended december 31 , 2014 , representing a 17 % increase . the increase in maintenance and support revenue was principally a result of an increase in the number of customers purchasing maintenance and support services related to their licensing of our software . we expect our maintenance revenue growth will decrease as a result of customers licensing less of our software as we shift to a cloud-first strategy . 33 cost of revenue and gross profit . replace_table_token_6_th cost of license . cost of license primarily consists of third-party fees for licenses . cost of license increased $ 0.1 million for the year ended december 31 , 2015 to $ 0.3 million from $ 0.2 million for the year ended december 31 , 2014 , representing a 25 % increase . license gross profit percentages for the year ended december 31 , 2015 and 2014 , remained relatively unchanged as a result of limited third-party fees for licensed software incurred over both periods . cost of services . cost of services decreased $ 3.8 million to $ 36.1 million for the year ended december 31 , 2015 from $ 40.0 million for the year ended december 31 , 2014 , representing a 10 % decrease . the decrease was primarily attributable to a decrease in personnel costs used in our software implementations of $ 2.6 million and a decrease in other overhead expenses of $ 1.2 million . services gross profit percentages for the years ended december 31 , 2015 and 2014 , were 16 % and 19 % , respectively . the percent decrease in services gross profit was primarily driven by the completion of several implementations in 2014 with higher professional services man-day rates and lower professional services utilization during the year ended december 31 , 2015 . service gross profit percentages can vary from period to period depending on different factors , including the level of professional services required to implement our software and the utilization of our professional services personnel . cost of subscription . cost of subscription increased $ 5.5 million to $ 12.8 million for the year ended december 31 , 2015 from $ 7.3 million for the year ended december 31 , 2014 , representing a 74 % increase . the increase was primarily attributable to a $ 2.6 million increase in personnel costs and a $ 2.9 million increase in infrastructure costs to support our current and anticipated future subscription customer base . our subscription gross profit percentage for the years ended december 31 , 2015 and 2014 , was 56 % and 69 % , respectively . cost of maintenance and support . cost of maintenance and support revenue increased $
| net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2015 was $ 15.5 million , compared to $ 1.8 million for the year ended december 31 , 2014 . net cash provided by operating activities for the year ended december 31 , 2015 was primarily comprised of cash provided from net changes in working capital , including a $ 32.3 million decrease in accounts receivable due to lower revenue levels and higher collections , partially offset by our $ 65.8 million net loss and the net effect of non-cash items , including $ 27.9 million of share-based compensation , $ 10.4 million of depreciation and amortization , $ 6.0 million of amortization of debt discount and $ 2.9 million impairment of internal-use software . the $ 13.8 million increase in net cash from december 31 , 2014 was primarily due to the net impact of working capital changes , mainly driven by a decrease in accounts receivable . net cash provided by operating activities for the year ended december 31 , 2014 was $ 1.8 million , primarily comprised of our net loss of $ 37.6 million , non-cash items including $ 22.7 million of share based compensation , $ 10.4 million of depreciation and amortization , $ 12.6 million of deferred taxes and $ 4.0 million impairment of internal-use software , partially offset by a $ 10.5 million use of cash from changes in our working capital . the use of cash from changes in our working capital was principally due to a $ 14.0 million increase in accounts receivable as a result of higher revenue levels . net cash provided by operating activities for the year ended december 31 , 2013 was $ 17.0 million , primarily comprised of our net income prior to non-cash expenses such as depreciation and share based compensation , partially offset by net impact of working capital changes principally due to an increase in accounts receivable due to higher revenue levels .
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25 expenses our level of profitability is also impacted by our expenses , including direct costs to support our revenue such as bandwidth and co-location costs . we have observed the following trends related to our profitability in recent years : network bandwidth costs represent a significant portion of our cost of revenue . historically , we have been able to mitigate increases in these costs by reducing our network bandwidth costs per unit and investing in internal-use software development to improve the performance and efficiency of our network . our total bandwidth costs may increase in the future as a result of expected higher traffic levels and serving more traffic from higher cost regions . we will need to continue to effectively manage our bandwidth costs to maintain current levels of profitability . co-location costs are also a significant portion of our cost of revenue . by improving our internal-use software and managing our hardware deployments to enable us to use servers more efficiently , we have been able to manage the growth of co-location costs . we expect to continue to scale our network in the future and will need to continue to effectively manage our co-location costs to maintain current levels of profitability . due to the fixed nature of some of our co-location and bandwidth costs over a minimum time period , it may not be possible to quickly reduce those costs . if our revenue growth rate declines , our profitability could decrease . payroll and related compensation costs have grown as we have increased headcount to support our revenue growth and strategic initiatives . we increased our headcount by 406 employees during the year ended december 31 , 2016 . during the year ended december 31 , 2015 , we increased our headcount by 979 employees . we expect to continue to hire additional employees , both domestically and internationally , in support of our strategic initiatives . fluctuations in foreign currency exchange rates have also impacted our reported results . revenue and expenses of our operations outside of the u.s. are important contributors to our overall financial performance , and as currencies have weakened against the u.s. dollar , our revenue has been negatively impacted and our expenses have been positively impacted . if foreign currency exchange rates during the year ended december 31 , 2016 had remained the same as exchange rates during the year ended december 31 , 2015 , our revenue would have increased by 7 % as opposed to 6 % . conversely , diluted earnings per share would have decreased by 1 % as opposed to increasing by 1 % . if foreign currency exchange rates during the year ended december 31 , 2015 had remained the same as exchange rates during the year ended december 31 , 2014 , our revenue would have increased by 16 % as opposed to 12 % . similarly , diluted earnings per share would have increased by 2 % as opposed to decreasing 3 % had exchange rates remained constant during the same period . in recent years , we have used strategic acquisitions to complement and augment existing technological capabilities . during 2016 , 2015 and 2014 we completed various acquisitions which were immaterial to our financial results as a whole during those years , but have contributed to increases in our revenue and level of expenses . also in february 2014 , we completed an offering of $ 690.0 million in par value of convertible senior notes . the notes do not bear regular interest , but have an effective interest rate of 3.2 % attributable to the conversion feature . 26 results of operations the following sets forth , as a percentage of revenue , consolidated statements of income data for the years indicated : replace_table_token_3_th revenue revenue during the periods presented is as follows ( in thousands ) : replace_table_token_4_th the increase in our revenue from 2015 to 2016 was primarily the result of continued strong growth from our cloud security solutions , which grew 43 % . our web performance solutions also contributed to our revenue growth in 2016. our overall revenue growth rate was lower than it has been in the past , primarily due to the `` do-it-yourself `` efforts of our internet platform customers , some of which have developed internal infrastructure to deliver more of their media content themselves rather than rely on our media services . revenue from these six customers ( amazon , apple , facebook , google , microsoft and netflix ) in the aggregate was $ 250.4 million and $ 379.3 million for the years ended december 31 , 2016 and 2015 , respectively . the increase in our revenue from 2014 to 2015 was driven by higher demand for our services across all of our solutions and geographies , with particularly strong growth from our cloud security solutions . revenue from our internet platform customers was $ 379.3 million and $ 358.9 million for the years ended december 31 , 2015 and 2014 , respectively . 27 the following table quantifies the contribution to revenue from our solution categories for the years ended december 31 , 2016 , 2015 and 2014 ( in thousands ) : replace_table_token_5_th the increases in performance and security solutions revenue for 2016 as compared to 2015 , and 2015 as compared to 2014 , were due to increased demand across all major product lines , with especially strong growth in our cloud security solutions . cloud security solutions revenue for the year ended december 31 , 2016 was $ 364.9 million , as compared to $ 254.4 million and $ 170.0 million for the years ended december 31 , 2015 and 2014 , respectively . story_separator_special_tag stock-based compensation and amortization of capitalized stock-based compensation – although stock-based compensation is an important aspect of the compensation paid to our employees , the grant date fair value varies based on the stock price at the time of grant , varying valuation methodologies , subjective assumptions and the variety of award types . this makes the comparison of our current financial results to previous and future periods difficult to evaluate ; therefore , we believe it is useful to exclude stock-based compensation and amortization of capitalized stock-based compensation from our non-gaap financial measures in order to highlight the performance of our core business and to be consistent with the way many investors evaluate our performance and compare our operating results to peer companies . acquisition-related costs – acquisition-related costs include transaction fees , advisory fees , due diligence costs and other direct costs associated with strategic activities . in addition , subsequent adjustments to our initial estimated amounts of contingent consideration and indemnification associated with specific acquisitions are included within acquisition-related costs . these amounts are impacted by the timing and size of the acquisitions . we exclude acquisition-related costs from our non-gaap financial measures to provide a useful comparison of our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of our acquisition transactions . 34 restructuring charges – we have incurred restructuring charges that are included in our gaap financial statements , primarily related to workforce reductions and estimated costs of exiting facility lease commitments . we exclude these items from our non-gaap financial measures when evaluating our continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses . in addition , these charges do not necessarily provide meaningful insight into the fundamentals of current or historical operations of our business . benefit from adoption of software development activities – in 2014 , we recognized a benefit to non-income related tax expense associated with the adoption of software development activities . we exclude this item from our non-gaap financial measures because transactions of this nature occur infrequently and are not considered part of our core business operations . amortization of debt discount and issuance costs and amortization of capitalized interest expense – in february 2014 , we issued $ 690 million of convertible senior notes due 2019 with a coupon interest rate of 0 % . the imputed interest rate of the convertible senior notes was approximately 3.2 % . this is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity under gaap , thereby reducing the carrying value of the convertible debt instrument . the debt discount is amortized as interest expense together with the issuance costs of the debt . all of our interest expense is comprised of these non-cash components and is excluded from management 's assessment of our operating performance because management believes the non-cash expense is not representative of ongoing operating performance . gains and losses on investments – we have recorded gains and losses from the disposition and impairment of certain investments . we believe excluding these amounts from our non-gaap financial measures is useful to investors as the types of events giving rise to them occur infrequently and are not representative of our core business operations and ongoing operating performance . legal matter costs – we have incurred losses from the settlement of legal matters and costs with respect to our internal u.s. foreign corrupt practices act investigation in addition to the disgorgement we were required to pay to resolve it . we believe excluding these amounts from our non-gaap financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations . income tax effect of non-gaap adjustments and certain discrete tax items – the non-gaap adjustments described above are reported on a pre-tax basis . the income tax effect of non-gaap adjustments is the difference between gaap and non-gaap income tax expense . non-gaap income tax expense is computed on non-gaap pre-tax income ( gaap pre-tax income adjusted for non-gaap adjustments ) and excludes certain discrete tax items ( such as recording or releasing of valuation allowances ) , if any . we believe that applying the non-gaap adjustments and their related income tax effect allows us to highlight income attributable to our core operations . the following table reconciles gaap income from operations to non-gaap income from operations and non-gaap operating margin for the years ended december 31 , 2016 , 2015 and 2014 ( in thousands ) : replace_table_token_16_th 35 the following table reconciles gaap net income to non-gaap net income for the years ended december 31 , 2016 , 2015 and 2014 ( in thousands ) : replace_table_token_17_th the following table reconciles gaap net income per diluted share to non-gaap net income per diluted share for the years ended december 31 , 2016 , 2015 and 2014 ( share in thousands ) : replace_table_token_18_th non-gaap net income per diluted share is calculated as non-gaap net income divided by diluted weighted average common shares outstanding . gaap diluted weighted average shares outstanding are adjusted in non-gaap per share calculations for the shares that would be delivered to us pursuant to the note hedge transactions entered into in connection with the issuance of our convertible senior notes . under gaap , shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered . however , we would receive a benefit from the note hedge transactions and would not allow the dilution to occur , so management believes that adjusting for this benefit provides a meaningful view of net income per share . unless and until our weighted average stock price is greater than $ 89.56 , the initial conversion price , there
| net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2015 was $ 15.5 million , compared to $ 1.8 million for the year ended december 31 , 2014 . net cash provided by operating activities for the year ended december 31 , 2015 was primarily comprised of cash provided from net changes in working capital , including a $ 32.3 million decrease in accounts receivable due to lower revenue levels and higher collections , partially offset by our $ 65.8 million net loss and the net effect of non-cash items , including $ 27.9 million of share-based compensation , $ 10.4 million of depreciation and amortization , $ 6.0 million of amortization of debt discount and $ 2.9 million impairment of internal-use software . the $ 13.8 million increase in net cash from december 31 , 2014 was primarily due to the net impact of working capital changes , mainly driven by a decrease in accounts receivable . net cash provided by operating activities for the year ended december 31 , 2014 was $ 1.8 million , primarily comprised of our net loss of $ 37.6 million , non-cash items including $ 22.7 million of share based compensation , $ 10.4 million of depreciation and amortization , $ 12.6 million of deferred taxes and $ 4.0 million impairment of internal-use software , partially offset by a $ 10.5 million use of cash from changes in our working capital . the use of cash from changes in our working capital was principally due to a $ 14.0 million increase in accounts receivable as a result of higher revenue levels . net cash provided by operating activities for the year ended december 31 , 2013 was $ 17.0 million , primarily comprised of our net income prior to non-cash expenses such as depreciation and share based compensation , partially offset by net impact of working capital changes principally due to an increase in accounts receivable due to higher revenue levels .
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