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although we undertake no obligation to revise or update any forward-looking statements , you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the securities and exchange commission , including annual reports on form 10-k , registration statements on form n-2 or form 10 , quarterly reports on form 10-q and current reports on form 8-k. overview nmf holdings is a delaware limited liability company . nmf holdings is externally managed and has elected to be treated as a business development company ( `` bdc `` ) under the investment company act of 1940 , as amended ( the `` 1940 act `` ) . as such , nmf holdings is obligated to comply with certain 66 regulatory requirements . nmf holdings intends to be treated as a partnership for federal income tax purposes for so long as it has at least two members . nmf holdings is externally managed by the investment adviser . new mountain finance administration , l.l.c . ( the `` administrator `` ) provides the administrative services necessary for operations . the investment adviser and administrator are wholly-owned subsidiaries of new mountain capital ( defined as new mountain capital group , l.l.c . and its affiliates ) . new mountain capital is a firm with a track record of investing in the middle market and with assets under management ( which includes amounts committed , not all of which have been drawn down and invested to date ) totaling approximately $ 9.0 billion as of december 31 , 2011. new mountain capital focuses on investing in defensive growth companies across its private equity , public equity , and credit investment vehicles . nmf holdings , formerly known as new mountain guardian ( leveraged ) , l.l.c . , was originally formed as a subsidiary of new mountain guardian aiv , l.p. ( `` guardian aiv `` ) by new mountain capital in october 2008. guardian aiv was formed through an allocation of approximately $ 300.0 million of the $ 5.1 billion of commitments supporting new mountain partners iii , l.p. , a private equity fund managed by new mountain capital . in february 2009 , new mountain capital formed a co-investment vehicle , new mountain guardian partners , l.p. , comprising $ 20.4 million of commitments . new mountain guardian ( leveraged ) , l.l.c . and new mountain guardian partners , l.p. , together with their respective direct and indirect wholly-owned subsidiaries , are defined as the `` predecessor entities `` . new mountain finance is a delaware corporation that was originally incorporated on june 29 , 2010. new mountain finance is a closed-end , non-diversified management investment company that has elected to be treated as a bdc under the 1940 act . as such , new mountain finance is obligated to comply with certain regulatory requirements . new mountain finance intends to be treated , and intends to comply with the requirements to qualify annually , as a regulated investment company ( `` ric `` ) under subchapter m of the internal revenue code of 1986 , as amended , ( the `` code `` ) commencing with its taxable year ended december 31 , 2011. aiv holdings is a delaware corporation that was originally incorporated on march 11 , 2011. guardian aiv , a delaware limited partnership , is aiv holdings ' sole stockholder . aiv holdings is a closed-end , non-diversified management investment company that has elected to be treated as a bdc under the 1940 act . as such , aiv holdings is obligated to comply with certain regulatory requirements . aiv holdings intends to be treated , and intends to comply with the requirements to qualify annually , as a ric under the code commencing with its taxable year ended december 31 , 2011. on may 19 , 2011 , new mountain finance priced its initial public offering ( the `` ipo `` ) of 7,272,727 shares of common stock at a public offering price of $ 13.75 per share . concurrently with the closing of the ipo and at the public offering price of $ 13.75 per share , new mountain finance sold an additional 2,172,000 shares of its common stock to certain executives and employees of , and other individuals affiliated with , new mountain capital in a concurrent private placement ( the `` concurrent private placement `` ) . additionally , 1,252,964 shares were issued to the limited partners of new mountain guardian partners , l.p. at that time for their ownership interest in the predecessor entities . in connection with new mountain finance 's ipo and through a series of transactions , nmf holdings owns all of the operations of the predecessor entities , including all of the assets and liabilities related to such operations . new mountain finance and aiv holdings are holding companies with no direct operations of their own , and their sole asset is their ownership in nmf holdings . new mountain finance and aiv holdings each entered into a joinder agreement with respect to the limited liability company agreement , as amended and restated , of nmf holdings , pursuant to which new mountain finance and aiv holdings were admitted as members of nmf holdings . new mountain finance acquired from nmf holdings , with the gross proceeds of the ipo and the concurrent private placement , common membership units ( `` units `` ) of nmf holdings ( the number of units are equal to the number 67 of shares of new mountain finance 's common stock sold in the ipo and the concurrent private placement ) . story_separator_special_tag this unrealized appreciation and unrealized depreciation is shown separately on the statements of operations of new mountain finance and aiv holdings , respectively . all expenses , including those of new mountain finance and aiv holdings , are paid and recorded by the operating company . expenses are allocated to new mountain finance and aiv holdings based on pro-rata ownership interest . in addition , the operating company paid all of the offering costs related to the ipo . new mountain finance and aiv holdings have recorded their portion of the offering costs as a direct reduction to net assets and the cost of their investment in the operating company . with respect to the expenses incident to any registration of shares of new mountain finance 's common stock issued in exchange for units of the operating company , aiv holdings is responsible for the expenses of any demand registration ( including underwriters ' discounts or commissions ) and their pro-rata share of any `` piggyback `` registration expenses . no shares have been exchanged since formation . monitoring of portfolio investments the operating company monitors the performance and financial trends of its portfolio companies on at least a quarterly basis . the operating company attempts to identify any developments at the portfolio company or within the industry or the macroeconomic environment that may alter any material element of its original investment strategy . the operating company uses an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio . the operating company uses a four-level numeric rating scale as follows : investment rating 1—investment is performing above expectations ; investment rating 2—investment is performing in-line with expectations . all new loans are rated 2 at initial purchase ; investment rating 3—investment is performing below expectations and risk has increased since the original investment ; and investment rating 4—investment is performing substantially below expectations and risks have increased substantially since the original investment . 73 as of december 31 , 2011 , all investments in the operating company 's portfolio had an investment rating of 1 or 2 with the exception of one investment . as of december 31 , 2011 , the operating company 's original first lien position in ati acquisition company had an investment rating of 4 due to the underlying business encountering significant regulatory headwinds which have led to the portfolio company 's underperformance . at december 31 , 2011 , the operating company 's original first lien position in ati acquisition company was also put on non-accrual status due to the inability of the portfolio company to service its interest payments for the quarter then ended . as of december 31 , 2011 , this first lien debt investment had a cost basis of $ 4.4 million and a fair value of $ 0.8 million . additionally , the operating company has two super priority first lien debt investments in ati acquisition company with a combined cost basis and fair value of $ 1.6 million as of december 31 , 2011. neither super priority first lien positions are on non-accrual status . as of december 31 , 2011 , the operating company 's total investment in ati acquisition company had an aggregate cost basis of $ 5.9 million and an aggregate fair value of $ 2.4 million . portfolio and investment activity the fair value of the operating company 's investments was approximately $ 703.5 million in 55 portfolio companies at december 31 , 2011 , $ 441.1 million in 43 portfolio companies at december 31 , 2010 and $ 320.5 million in 24 portfolio companies at december 31 , 2009. for the year ended december 31 , 2011 , nmf holdings made approximately $ 493.3 million of new investments in 37 portfolio companies . for the year ended december 31 , 2010 , nmf holdings made approximately $ 332.7 million of new investments in 34 portfolio companies . for the year ended december 31 , 2009 , nmf holdings made approximately $ 268.4 million of new investments in 29 portfolio companies . for the year ended december 31 , 2011 , nmf holdings had approximately $ 146.4 million in debt repayments in existing portfolio companies and sales of securities in 17 portfolio companies aggregating approximately $ 85.6 million . in addition , during the year ended december 31 , 2011 , nmf holdings had a change in unrealized appreciation on 17 portfolio companies totaling approximately $ 6.1 million , which was offset by a change in unrealized depreciation on 48 portfolio companies totaling approximately $ 29.2 million . for the year ended december 31 , 2010 , nmf holdings had approximately $ 40.3 million in debt repayments in existing portfolio companies and sales of securities in 16 portfolio companies aggregating approximately $ 217.9 million . during the year ended december 31 , 2010 , nmf holdings had a change in unrealized appreciation on 36 portfolio companies totaling approximately $ 13.0 million , which was offset by a change in unrealized depreciation on 18 portfolio companies totaling approximately $ 53.0 million . for the year ended december 31 , 2009 , nmf holdings had approximately $ 10.1 million in debt repayments in existing portfolio companies and sales of securities in 12 portfolio companies aggregating approximately $ 115.3 million . during the year ended december 31 , 2009 , nmf holdings had a change in unrealized appreciation on 21 portfolio companies totaling approximately $ 69.3 million , which was offset by a change in unrealized depreciation on four portfolio companies totaling approximately $ 1.2 million . at december 31 , 2011 , the operating company 's weighted average unadjusted and adjusted yield to maturity was approximately 10.7 % and 13.1 % , respectively . recent accounting standards updates in may 2011 , the financial accounting standards board ( `` fasb `` ) issued accounting standards update no . 2011-04 , amendments to achieve common fair

liquidity and capital resources the primary use of existing funds and any funds raised in the future is expected to be for the operating company 's repayment of indebtedness , the operating company 's investments in portfolio companies , cash distributions to our unit holders or for other general corporate purposes . guardian aiv and new mountain guardian partners , l.p. contributed a portfolio to the operating company in connection with the ipo of new mountain finance , receiving 20,221,938 units of nmf holdings and 1,252,964 shares of new mountain finance , respectively . on may 19 , 2011 , new mountain finance priced its initial offering of 7,272,727 shares of common stock at a public offering price of $ 13.75 per share . concurrently with the closing of the ipo and at the public offering price of $ 13.75 per share , new mountain finance sold an additional 2,172,000 shares of its common stock to certain executives and employees of , and other individuals affiliated with , new mountain capital in the concurrent private placement . new mountain finance used the gross proceeds from the ipo and concurrent private placement to acquire units in nmf holdings . the operating company 's liquidity is generated and generally available through advances from the revolving credit facilities , from cash flows from operations , and , we expect , through periodic follow-on equity offerings of new mountain finance . at december 31 , 2011 , december 31 , 2010 and december 31 , 2009 , the operating company had cash and cash equivalents of approximately $ 15.3 million , $ 10.7 million and $ 4.1 million , respectively . cash ( used in ) provided by operating activities for the years ended december 31 , 2011 , december 31 , 2010 and december 31 , 2009 was approximately $ ( 316.3 ) million , $ 29.1 million and $ ( 157.2 ) million , respectively . we expect that all current liquidity needs by the operating company will be met with cash flows from operations and other activities .

markets in africa and brazil have opened at a similar pace compared to fiscal year 2015 , and crop qualities are mixed , with production volumes expected to be lower in most origins . although we are not seeing significant delays in customer orders , we expect shipping instructions to be weighted towards the second half of our fiscal year . in addition , while our own leaf inventories are well-managed , global tobacco leaf inventory volumes are high . this may have the effect of extending the duration of the oversupply conditions , despite reduced new crop production and a more positive outlook for demand from some customers based on recent recoveries in certain of their retail markets . looking beyond near-term market conditions , we are optimistic about the future as we believe there are several trends in our business that could provide opportunities for us to increase our market share and to offer additional services to our customers . we have recently seen an increase in the level of supply chain services , which include direct purchasing , that we provide our customers , notably in the united states , mexico , brazil , and the dominican republic . we believe these moves acknowledge the efficiencies and services that global leaf suppliers bring to the entire supply chain . in addition , we believe that compliant leaf requirements and reduction in sourcing complexity will continue to be important to our customers and should favor stable global leaf suppliers who are able to meet these requirements . 18 results of operations amounts described as net income and earnings per diluted share in the following discussion are attributable to universal corporation and exclude earnings related to non-controlling interests in subsidiaries . the total for segment operating income referred to in the discussion below is a non-gaap financial measure . this measure is not a financial measure calculated in accordance with gaap and should not be considered as a substitute for net income , operating income , cash flows from operating activities or any other operating performance measure calculated in accordance with gaap , and it may not be comparable to similarly titled measures reported by other companies . we have provided a reconciliation of the total for segment operating income to consolidated operating income in note 15 . `` operating segments `` to the consolidated financial statements in item 8. we evaluate our segment performance excluding certain significant charges or credits . we believe this measure , which excludes these items that we believe are not indicative of our core operating results , provides investors with important information that is useful in understanding our business results and trends . fiscal year ended march 31 , 2015 , compared to the fiscal year ended march 31 , 2014 net income for the fiscal year ended march 31 , 2015 , was $ 114.6 million , or $ 4.06 per diluted share , compared with last year 's net income of $ 149.0 million , or $ 5.25 per diluted share . last year 's results included a gain of $ 81.6 million before tax ( $ 53.1 million after tax , or $ 1.87 per diluted share ) , from the favorable outcome of litigation in brazil related to previous years ' excise tax credits . results for the current fiscal year included a further gain related to those tax credits , of $ 12.7 million before tax ( $ 0.29 per diluted share ) recorded in the fourth fiscal quarter from updated projections of the utilization of the credits before expiration . the current year also included an income tax benefit of $ 8.0 million ( $ 0.28 per diluted share ) arising from a subsidiary 's payment of a portion of a fine following the resolution of a court case . pretax restructuring costs of $ 4.9 million ( $ 0.11 per diluted share ) and $ 6.7 million ( $ 0.15 per diluted share ) were also incurred for fiscal years 2015 and 2014 , respectively . excluding those items in both years , net income for the fiscal year increased $ 1.2 million ( $ 0.07 per diluted share ) compared to the same period last year . segment operating income , which excludes those items , was $ 167.2 million for fiscal year 2015 , a decrease of $ 8.0 million from the prior year . that reduction was primarily attributable to this year 's lower sales volumes , partially mitigated by a reduction in selling , general , and administrative costs . revenues of $ 2.3 billion for fiscal year 2015 declined 11 % compared with the previous year , driven mainly by those lower overall volumes and modestly lower green leaf costs . flue-cured and burley leaf tobacco operations other regions operating income for the other regions segment for the fiscal year ended march 31 , 2015 , was $ 125.8 million , down 6 % compared to $ 133.4 million in the previous fiscal year . the decrease was attributable mainly to reduced sales volumes in all regions along with inventory writedowns , primarily in africa and south america , reflecting this year 's oversupply market conditions . the impact of those factors was somewhat mitigated by improved gross margins , particularly in brazil , where volatile markets increased green leaf costs last year , as well as benefits from lower selling , general and administrative costs . results for europe were also negatively influenced by currency translation effects from a stronger u.s. dollar . selling , general , and administrative expenses for the segment declined for the fiscal year , mostly from lower currency remeasurement and exchange losses in the philippines and brazil , lower provisions for supplier advances , and positive comparisons of value-added tax valuation allowances , partly offset by higher customer claims . story_separator_special_tag in addition to our operating requirements for working capital , we expect to spend around $ 60 to $ 65 million during fiscal year 2016 for capital expenditures to maintain our facilities , complete the construction of a new manufacturing facility for our food ingredients business , and invest in opportunities to grow and improve our tobacco business . we also expect to provide about $ 12 million in funding to our pension plans . we have no long-term debt maturing before fiscal year 2020. after balancing our capital structure , any excess cash flow from operations after dividends and capital expenditures will be available to fund expansion , purchase our stock , or otherwise enhance shareholder value . story_separator_special_tag were unused and available to support seasonal working capital needs . we also have an active , undenominated universal shelf registration filed with the sec in november 2014 , that provides for future issuance of additional debt or equity securities . we have no long-term debt maturing in fiscal year 2016. derivatives from time to time , we use interest rate swap agreements to manage our exposure to changes in interest rates . upon repayment of outstanding term loans in december 2014 , we terminated $ 74 million notional amount of swap agreements . the fair value of these swap agreements was a liability of approximately $ 0.6 million . in january 2015 , we entered into interest rate swap agreements that convert the variable benchmark libor rate on the new term loans entered into in december 2014 to a fixed rate . with the swap agreements in place , the effective interest rates on the $ 150 million five-year term loan and the $ 220 million seven-year term loan were 2.95 % and 3.49 % , respectively , as of march 31 , 2015. these agreements were entered into to eliminate the variability of cash flows in the interest payments on our variable-rate five- and seven-year term loans and are accounted for as cash flow hedges . under the swap agreements , we receive variable rate interest and pay fixed rate interest . at march 31 , 2015 , the fair value of our open interest rate hedge swaps was a net liability of approximately $ 3 million . 24 we also enter forward contracts from time to time to hedge certain foreign currency exposures , primarily related to forecast purchases of tobacco and related processing costs in brazil , as well as our net monetary asset exposure in local currency there . we generally account for our hedges of forecast tobacco purchases as cash flow hedges . at march 31 , 2015 , the fair value of those open contracts was a net liability of approximately $ 0.3 million . we also had other forward contracts outstanding that were not designated as hedges , and the fair value of those contracts was a net asset of approximately $ 5 million at march 31 , 2015. for additional information , see note 9 to the consolidated financial statements in item 8. pension funding funds supporting our erisa-regulated u.s. defined benefit pension plan increased by $ 10 million during fiscal year 2015 to $ 204 million , as contributions and asset returns exceeded benefit payments . following the changes to the plan benefit formula during fiscal year 2014 , the accumulated benefit obligation ( “ abo ” ) and the projected benefit obligation ( “ pbo ” ) were both approximately $ 230 million as of march 31 , 2015 . the abo and pbo are calculated on the basis of certain assumptions that are outlined in note 11 to the consolidated financial statements in item 8. we expect to make contributions of about $ 12 million to our pension plans , including $ 5 million to our erisa-regulated plan , during the next year . it is our policy to regularly monitor the performance of the funds and to review the adequacy of our funding and plan contributions . contractual obligations our contractual obligations as of march 31 , 2015 , were as follows : replace_table_token_3_th ( 1 ) includes interest payments . interest payments on $ 429.9 million of variable rate debt were estimated based on rates as of march 31 , 2015 . the company has entered interest rate swaps that effectively convert the interest payments on the $ 370.0 million outstanding balance of its two bank term loans from variable to fixed . the fixed rate has been used to determine the contractual interest payments for all periods . in addition to principal and interest payments on notes payable and long-term debt , our contractual obligations include operating lease payments , inventory purchase commitments , and capital expenditure commitments . operating lease obligations represent minimum payments due under leases for various production , storage , distribution , and other facilities , as well as vehicles and equipment . tobacco inventory purchase obligations primarily represent contracts to purchase tobacco from farmers . the amounts shown above are estimates since actual quantities purchased will depend on crop yield , and prices will depend on the quality of the tobacco delivered . about 43 % of our crop year contracts to purchase tobacco are with farmers in brazil . we have partially funded our tobacco purchases in brazil and in other regions with advances to farmers and other suppliers , which totaled approximately $ 115 million , net of allowances , at march 31 , 2015 . in addition , we have guaranteed bank loans to farmers in brazil that relate to a portion of our tobacco purchase obligations there . at march 31 , 2015 , we were contingently liable under those guarantees for outstanding balances of approximately $ 17 million ( including accrued interest ) , and we had recorded a liability of approximately $ 2 million for the fair value of those guarantees . as tobacco is purchased and the related bank loans are repaid ,

liquidity and capital resources the primary use of existing funds and any funds raised in the future is expected to be for the operating company 's repayment of indebtedness , the operating company 's investments in portfolio companies , cash distributions to our unit holders or for other general corporate purposes . guardian aiv and new mountain guardian partners , l.p. contributed a portfolio to the operating company in connection with the ipo of new mountain finance , receiving 20,221,938 units of nmf holdings and 1,252,964 shares of new mountain finance , respectively . on may 19 , 2011 , new mountain finance priced its initial offering of 7,272,727 shares of common stock at a public offering price of $ 13.75 per share . concurrently with the closing of the ipo and at the public offering price of $ 13.75 per share , new mountain finance sold an additional 2,172,000 shares of its common stock to certain executives and employees of , and other individuals affiliated with , new mountain capital in the concurrent private placement . new mountain finance used the gross proceeds from the ipo and concurrent private placement to acquire units in nmf holdings . the operating company 's liquidity is generated and generally available through advances from the revolving credit facilities , from cash flows from operations , and , we expect , through periodic follow-on equity offerings of new mountain finance . at december 31 , 2011 , december 31 , 2010 and december 31 , 2009 , the operating company had cash and cash equivalents of approximately $ 15.3 million , $ 10.7 million and $ 4.1 million , respectively . cash ( used in ) provided by operating activities for the years ended december 31 , 2011 , december 31 , 2010 and december 31 , 2009 was approximately $ ( 316.3 ) million , $ 29.1 million and $ ( 157.2 ) million , respectively . we expect that all current liquidity needs by the operating company will be met with cash flows from operations and other activities .

markets in africa and brazil have opened at a similar pace compared to fiscal year 2015 , and crop qualities are mixed , with production volumes expected to be lower in most origins . although we are not seeing significant delays in customer orders , we expect shipping instructions to be weighted towards the second half of our fiscal year . in addition , while our own leaf inventories are well-managed , global tobacco leaf inventory volumes are high . this may have the effect of extending the duration of the oversupply conditions , despite reduced new crop production and a more positive outlook for demand from some customers based on recent recoveries in certain of their retail markets . looking beyond near-term market conditions , we are optimistic about the future as we believe there are several trends in our business that could provide opportunities for us to increase our market share and to offer additional services to our customers . we have recently seen an increase in the level of supply chain services , which include direct purchasing , that we provide our customers , notably in the united states , mexico , brazil , and the dominican republic . we believe these moves acknowledge the efficiencies and services that global leaf suppliers bring to the entire supply chain . in addition , we believe that compliant leaf requirements and reduction in sourcing complexity will continue to be important to our customers and should favor stable global leaf suppliers who are able to meet these requirements . 18 results of operations amounts described as net income and earnings per diluted share in the following discussion are attributable to universal corporation and exclude earnings related to non-controlling interests in subsidiaries . the total for segment operating income referred to in the discussion below is a non-gaap financial measure . this measure is not a financial measure calculated in accordance with gaap and should not be considered as a substitute for net income , operating income , cash flows from operating activities or any other operating performance measure calculated in accordance with gaap , and it may not be comparable to similarly titled measures reported by other companies . we have provided a reconciliation of the total for segment operating income to consolidated operating income in note 15 . `` operating segments `` to the consolidated financial statements in item 8. we evaluate our segment performance excluding certain significant charges or credits . we believe this measure , which excludes these items that we believe are not indicative of our core operating results , provides investors with important information that is useful in understanding our business results and trends . fiscal year ended march 31 , 2015 , compared to the fiscal year ended march 31 , 2014 net income for the fiscal year ended march 31 , 2015 , was $ 114.6 million , or $ 4.06 per diluted share , compared with last year 's net income of $ 149.0 million , or $ 5.25 per diluted share . last year 's results included a gain of $ 81.6 million before tax ( $ 53.1 million after tax , or $ 1.87 per diluted share ) , from the favorable outcome of litigation in brazil related to previous years ' excise tax credits . results for the current fiscal year included a further gain related to those tax credits , of $ 12.7 million before tax ( $ 0.29 per diluted share ) recorded in the fourth fiscal quarter from updated projections of the utilization of the credits before expiration . the current year also included an income tax benefit of $ 8.0 million ( $ 0.28 per diluted share ) arising from a subsidiary 's payment of a portion of a fine following the resolution of a court case . pretax restructuring costs of $ 4.9 million ( $ 0.11 per diluted share ) and $ 6.7 million ( $ 0.15 per diluted share ) were also incurred for fiscal years 2015 and 2014 , respectively . excluding those items in both years , net income for the fiscal year increased $ 1.2 million ( $ 0.07 per diluted share ) compared to the same period last year . segment operating income , which excludes those items , was $ 167.2 million for fiscal year 2015 , a decrease of $ 8.0 million from the prior year . that reduction was primarily attributable to this year 's lower sales volumes , partially mitigated by a reduction in selling , general , and administrative costs . revenues of $ 2.3 billion for fiscal year 2015 declined 11 % compared with the previous year , driven mainly by those lower overall volumes and modestly lower green leaf costs . flue-cured and burley leaf tobacco operations other regions operating income for the other regions segment for the fiscal year ended march 31 , 2015 , was $ 125.8 million , down 6 % compared to $ 133.4 million in the previous fiscal year . the decrease was attributable mainly to reduced sales volumes in all regions along with inventory writedowns , primarily in africa and south america , reflecting this year 's oversupply market conditions . the impact of those factors was somewhat mitigated by improved gross margins , particularly in brazil , where volatile markets increased green leaf costs last year , as well as benefits from lower selling , general and administrative costs . results for europe were also negatively influenced by currency translation effects from a stronger u.s. dollar . selling , general , and administrative expenses for the segment declined for the fiscal year , mostly from lower currency remeasurement and exchange losses in the philippines and brazil , lower provisions for supplier advances , and positive comparisons of value-added tax valuation allowances , partly offset by higher customer claims . story_separator_special_tag in addition to our operating requirements for working capital , we expect to spend around $ 60 to $ 65 million during fiscal year 2016 for capital expenditures to maintain our facilities , complete the construction of a new manufacturing facility for our food ingredients business , and invest in opportunities to grow and improve our tobacco business . we also expect to provide about $ 12 million in funding to our pension plans . we have no long-term debt maturing before fiscal year 2020. after balancing our capital structure , any excess cash flow from operations after dividends and capital expenditures will be available to fund expansion , purchase our stock , or otherwise enhance shareholder value . story_separator_special_tag were unused and available to support seasonal working capital needs . we also have an active , undenominated universal shelf registration filed with the sec in november 2014 , that provides for future issuance of additional debt or equity securities . we have no long-term debt maturing in fiscal year 2016. derivatives from time to time , we use interest rate swap agreements to manage our exposure to changes in interest rates . upon repayment of outstanding term loans in december 2014 , we terminated $ 74 million notional amount of swap agreements . the fair value of these swap agreements was a liability of approximately $ 0.6 million . in january 2015 , we entered into interest rate swap agreements that convert the variable benchmark libor rate on the new term loans entered into in december 2014 to a fixed rate . with the swap agreements in place , the effective interest rates on the $ 150 million five-year term loan and the $ 220 million seven-year term loan were 2.95 % and 3.49 % , respectively , as of march 31 , 2015. these agreements were entered into to eliminate the variability of cash flows in the interest payments on our variable-rate five- and seven-year term loans and are accounted for as cash flow hedges . under the swap agreements , we receive variable rate interest and pay fixed rate interest . at march 31 , 2015 , the fair value of our open interest rate hedge swaps was a net liability of approximately $ 3 million . 24 we also enter forward contracts from time to time to hedge certain foreign currency exposures , primarily related to forecast purchases of tobacco and related processing costs in brazil , as well as our net monetary asset exposure in local currency there . we generally account for our hedges of forecast tobacco purchases as cash flow hedges . at march 31 , 2015 , the fair value of those open contracts was a net liability of approximately $ 0.3 million . we also had other forward contracts outstanding that were not designated as hedges , and the fair value of those contracts was a net asset of approximately $ 5 million at march 31 , 2015. for additional information , see note 9 to the consolidated financial statements in item 8. pension funding funds supporting our erisa-regulated u.s. defined benefit pension plan increased by $ 10 million during fiscal year 2015 to $ 204 million , as contributions and asset returns exceeded benefit payments . following the changes to the plan benefit formula during fiscal year 2014 , the accumulated benefit obligation ( “ abo ” ) and the projected benefit obligation ( “ pbo ” ) were both approximately $ 230 million as of march 31 , 2015 . the abo and pbo are calculated on the basis of certain assumptions that are outlined in note 11 to the consolidated financial statements in item 8. we expect to make contributions of about $ 12 million to our pension plans , including $ 5 million to our erisa-regulated plan , during the next year . it is our policy to regularly monitor the performance of the funds and to review the adequacy of our funding and plan contributions . contractual obligations our contractual obligations as of march 31 , 2015 , were as follows : replace_table_token_3_th ( 1 ) includes interest payments . interest payments on $ 429.9 million of variable rate debt were estimated based on rates as of march 31 , 2015 . the company has entered interest rate swaps that effectively convert the interest payments on the $ 370.0 million outstanding balance of its two bank term loans from variable to fixed . the fixed rate has been used to determine the contractual interest payments for all periods . in addition to principal and interest payments on notes payable and long-term debt , our contractual obligations include operating lease payments , inventory purchase commitments , and capital expenditure commitments . operating lease obligations represent minimum payments due under leases for various production , storage , distribution , and other facilities , as well as vehicles and equipment . tobacco inventory purchase obligations primarily represent contracts to purchase tobacco from farmers . the amounts shown above are estimates since actual quantities purchased will depend on crop yield , and prices will depend on the quality of the tobacco delivered . about 43 % of our crop year contracts to purchase tobacco are with farmers in brazil . we have partially funded our tobacco purchases in brazil and in other regions with advances to farmers and other suppliers , which totaled approximately $ 115 million , net of allowances , at march 31 , 2015 . in addition , we have guaranteed bank loans to farmers in brazil that relate to a portion of our tobacco purchase obligations there . at march 31 , 2015 , we were contingently liable under those guarantees for outstanding balances of approximately $ 17 million ( including accrued interest ) , and we had recorded a liability of approximately $ 2 million for the fair value of those guarantees . as tobacco is purchased and the related bank loans are repaid ,

cash flow our operations generated about $ 226.5 million in operating cash flows in fiscal year 2015. that amount was about $ 230 million higher than the $ 3.5 million we required during the same period last fiscal year , primarily due to lower crop purchase volumes and green leaf prices . during the fiscal year ended march 31 , 2015 , we increased our cash balances by $ 85.3 million , spent $ 58.4 million on capital projects , returned $ 94.9 million to shareholders in the form of dividends and repurchases of our common and preferred stock , and refinanced a major portion of our capital structure , extending our debt maturities . at march 31 , 2015 , cash balances totaled $ 248.8 million . working capital working capital at march 31 , 2015 , was about $ 1.4 billion , up $ 145.4 million from last year 's level . the $ 85.3 million increase in cash and cash equivalents was partially offset by fewer advances to suppliers on smaller anticipated 2015 crops , down $ 19.7 million . we extended our debt maturities as part of our $ 800 million refinancing in december 2014 and , as a result , we have no principal payments due on our long-term debt over the next twelve months . tobacco inventories of $ 636.5 million at march 31 , 2015 , were relatively flat compared to inventory levels at the end of the prior fiscal year . we usually finance inventory with a mix of cash , notes payable , and customer deposits , depending on our borrowing capabilities , interest rates , and exchange rates , as well as those of our customers . we generally do not purchase material quantities of tobacco on a speculative basis . however , when we contract directly with farmers , we are often obligated to buy all stalk positions , which may contain less marketable leaf styles .

sg & a is an important financial metric that we analyze to help us evaluate the contribution of our selling , marketing and proposal activities to revenue generation . 54 other income and expenses other income and expenses includes interest income , interest expense , changes in fair value of certain financial investments , gains/losses on sale of available-for-sale equity securities and losses from equity method investments . income tax expense our effective tax rates are substantially lower than the statutory rates primarily due to research and development tax credits . critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations discusses our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . when we prepare these consolidated financial statements , we are required 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 and the reported amounts of revenue and expenses during the reporting period . some of our accounting policies require that we make subjective judgments , including estimates that involve matters that are inherently uncertain . our most critical estimates include those related to revenue recognition , inventories and reserves for excess and obsolescence , self-insured liabilities , accounting for stock-based awards , and income taxes . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances , the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . our actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting estimates affect our more significant judgments and estimates used in preparing our consolidated financial statements . see note 1 of the notes to consolidated financial statements for our organization and significant accounting policies . there have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements . revenue recognition significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period . material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management 's estimates change on the basis of development of the business or market conditions . management judgments and estimates have been applied consistently and have been reliable historically . we believe that there are two key factors which impact the reliability of management 's estimates . the first of those key factors is that the terms of our contracts are typically less than six months . the short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions or other factors . the second key factor is that we have hundreds of contracts in any given accounting period , which reduces the risk that any one change in an accounting estimate on one or several contracts would have a material impact on our consolidated financial statements or our two reporting segments ' measures of profit . the substantial majority of our revenue is generated pursuant to written contractual arrangements to design , develop , manufacture and or modify complex products , and to provide related engineering , technical and other services according to customer specifications . these contracts may be fixed price or cost-reimbursable . we consider all contracts for treatment in accordance with authoritative guidance for contracts with multiple deliverables . 55 revenue from product sales not under contractual arrangement is recognized at the time title and the risk and rewards of ownership pass , which typically occurs when the products are shipped and collection is reasonably assured . revenue and profits on fixed-price contracts are recognized using percentage-of-completion methods of accounting . revenue and profits on fixed-price production contracts , whose units are produced and delivered in a continuous or sequential process , are recorded as units are delivered based on their selling prices , or the units-of-delivery method . revenue and profits on other fixed-price contracts with significant engineering as well as production requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract , or the cost-to-cost method . under percentage-of-completion methods of accounting , a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance , which can exceed one year . accounting for revenue and profits on a fixed-price contract requires the preparation of estimates of ( 1 ) the total contract revenue , ( 2 ) the total costs at completion , which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract 's statement of work and ( 3 ) the measurement of progress towards completion . the estimated profit or loss at completion on a contract is equal to the difference between the total estimated contract revenue and the total estimated cost at completion . under the units-of-delivery method , sales on a fixed-price type contract are recorded as the units are delivered during the period based on their contractual selling prices . under the cost-to-cost method , sales on a fixed-price type contract are recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion , multiplied by ( a ) the total estimated contract revenue , less ( b ) the cumulative sales recognized in prior periods . story_separator_special_tag uas gross margin increased $ 1.7 million , or 2 % , to $ 80.8 million for the fiscal year ended april 30 , 2014 , primarily due to an increase in sales volume . as a percentage of revenue , gross margin for uas decreased from 41 % to 39 % . ees gross margin decreased $ 0.7 million , or 5 % , to $ 12.8 million for the fiscal year ended april 30 , 2014. as a percentage of revenue , ees gross margin increased from 29 % to 30 % . selling , general and administrative . sg & a expense for the fiscal year ended april 30 , 2014 was $ 55.7 million , or 22 % of revenue , compared to sg & a expense of $ 51.5 million , or 21 % of revenue , for the fiscal year ended april 30 , 2013. sg & a expense increased by $ 4.2 million primarily due to impairment costs of tier-ii related assets and higher incentive compensation as a result of achieving certain measures of financial performance . research and development . r & d expense for the fiscal year ended april 30 , 2014 was $ 25.5 million , or 10 % of revenue , compared to r & d expense of $ 37.2 million , or 15 % of revenue , for the fiscal year ended april 30 , 2013. r & d expense decreased primarily due to decreased investments in various technology development initiatives . interest income . interest income for the fiscal year ended april 30 , 2014 was $ 0.9 million , as compared to $ 0.7 million for the fiscal year ended april 30 , 2013. other income . other income for the fiscal year ended april 30 , 2014 was $ 1.6 million , as compared to $ 6.2 million for the fiscal year ended april 30 , 2013. other income primarily represents the change in fair value of the conversion feature of our investment in convertible bonds . income tax expense . our effective income tax expense rate was 7.9 % for the fiscal year ended april 30 , 2014 , as compared to an effective income expense tax rate of 3.2 % for the fiscal year ended april 30 , 2013. the increase in the effective income tax expense rate was primarily due to higher taxable income and lower r & d tax credits . liquidity and capital resources we currently have no material cash commitments , except for normal recurring trade payables , accrued expenses and ongoing research and development costs , all of which we anticipate funding through our existing working capital and funds provided by operating activities . the majority of our purchase obligations are pursuant to funded contractual arrangements with our customers . in addition , we do not currently anticipate significant investment in property , plant and equipment , and we believe that our existing cash , cash equivalents , cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital , capital expenditure and debt service requirements , if any , during the next twelve months . there can be no assurance , however , that our business will continue to generate cash flow at current levels . if we are unable to generate sufficient cash flow from operations , then we may be required to sell assets , reduce capital expenditures or obtain additional financing . we anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future . our primary liquidity needs are for financing working capital , investing in capital expenditures , supporting product development efforts , introducing new products and enhancing existing products , and marketing acceptance and adoption of our products and services . our future capital requirements , to a certain extent , are also subject to general conditions in or affecting the defense and electric vehicle 61 industries and are subject to general economic , political , financial , competitive , legislative and regulatory factors that are beyond our control . moreover , to the extent that existing cash , cash equivalents , cash from operations , and cash from short-term borrowing are insufficient to fund our future activities , we may need to raise additional funds through public or private equity or debt financing . in addition , we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in , or acquisitions of , businesses , services or technologies . our working capital requirements vary by contract type . on cost-plus-fee programs , we typically bill our incurred costs and fees monthly as work progresses , and therefore working capital investment is minimal . on fixed-price contracts , we typically are paid as we deliver products , and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin . story_separator_special_tag size= `` 2 `` > revenue from contracts with customers ( topic 606 ) . the new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized . the core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . this asu is effective for annual periods beginning after december 15 , 2017 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption . we are evaluating the potential impact of this adoption on our consolidated financial statements . in june 2014 , the fasb issued asu no . 2014-12 , compensation—stock compensation (

cash flow our operations generated about $ 226.5 million in operating cash flows in fiscal year 2015. that amount was about $ 230 million higher than the $ 3.5 million we required during the same period last fiscal year , primarily due to lower crop purchase volumes and green leaf prices . during the fiscal year ended march 31 , 2015 , we increased our cash balances by $ 85.3 million , spent $ 58.4 million on capital projects , returned $ 94.9 million to shareholders in the form of dividends and repurchases of our common and preferred stock , and refinanced a major portion of our capital structure , extending our debt maturities . at march 31 , 2015 , cash balances totaled $ 248.8 million . working capital working capital at march 31 , 2015 , was about $ 1.4 billion , up $ 145.4 million from last year 's level . the $ 85.3 million increase in cash and cash equivalents was partially offset by fewer advances to suppliers on smaller anticipated 2015 crops , down $ 19.7 million . we extended our debt maturities as part of our $ 800 million refinancing in december 2014 and , as a result , we have no principal payments due on our long-term debt over the next twelve months . tobacco inventories of $ 636.5 million at march 31 , 2015 , were relatively flat compared to inventory levels at the end of the prior fiscal year . we usually finance inventory with a mix of cash , notes payable , and customer deposits , depending on our borrowing capabilities , interest rates , and exchange rates , as well as those of our customers . we generally do not purchase material quantities of tobacco on a speculative basis . however , when we contract directly with farmers , we are often obligated to buy all stalk positions , which may contain less marketable leaf styles .

sg & a is an important financial metric that we analyze to help us evaluate the contribution of our selling , marketing and proposal activities to revenue generation . 54 other income and expenses other income and expenses includes interest income , interest expense , changes in fair value of certain financial investments , gains/losses on sale of available-for-sale equity securities and losses from equity method investments . income tax expense our effective tax rates are substantially lower than the statutory rates primarily due to research and development tax credits . critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations discusses our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . when we prepare these consolidated financial statements , we are required 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 and the reported amounts of revenue and expenses during the reporting period . some of our accounting policies require that we make subjective judgments , including estimates that involve matters that are inherently uncertain . our most critical estimates include those related to revenue recognition , inventories and reserves for excess and obsolescence , self-insured liabilities , accounting for stock-based awards , and income taxes . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances , the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . our actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting estimates affect our more significant judgments and estimates used in preparing our consolidated financial statements . see note 1 of the notes to consolidated financial statements for our organization and significant accounting policies . there have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements . revenue recognition significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period . material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management 's estimates change on the basis of development of the business or market conditions . management judgments and estimates have been applied consistently and have been reliable historically . we believe that there are two key factors which impact the reliability of management 's estimates . the first of those key factors is that the terms of our contracts are typically less than six months . the short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions or other factors . the second key factor is that we have hundreds of contracts in any given accounting period , which reduces the risk that any one change in an accounting estimate on one or several contracts would have a material impact on our consolidated financial statements or our two reporting segments ' measures of profit . the substantial majority of our revenue is generated pursuant to written contractual arrangements to design , develop , manufacture and or modify complex products , and to provide related engineering , technical and other services according to customer specifications . these contracts may be fixed price or cost-reimbursable . we consider all contracts for treatment in accordance with authoritative guidance for contracts with multiple deliverables . 55 revenue from product sales not under contractual arrangement is recognized at the time title and the risk and rewards of ownership pass , which typically occurs when the products are shipped and collection is reasonably assured . revenue and profits on fixed-price contracts are recognized using percentage-of-completion methods of accounting . revenue and profits on fixed-price production contracts , whose units are produced and delivered in a continuous or sequential process , are recorded as units are delivered based on their selling prices , or the units-of-delivery method . revenue and profits on other fixed-price contracts with significant engineering as well as production requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract , or the cost-to-cost method . under percentage-of-completion methods of accounting , a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance , which can exceed one year . accounting for revenue and profits on a fixed-price contract requires the preparation of estimates of ( 1 ) the total contract revenue , ( 2 ) the total costs at completion , which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract 's statement of work and ( 3 ) the measurement of progress towards completion . the estimated profit or loss at completion on a contract is equal to the difference between the total estimated contract revenue and the total estimated cost at completion . under the units-of-delivery method , sales on a fixed-price type contract are recorded as the units are delivered during the period based on their contractual selling prices . under the cost-to-cost method , sales on a fixed-price type contract are recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion , multiplied by ( a ) the total estimated contract revenue , less ( b ) the cumulative sales recognized in prior periods . story_separator_special_tag uas gross margin increased $ 1.7 million , or 2 % , to $ 80.8 million for the fiscal year ended april 30 , 2014 , primarily due to an increase in sales volume . as a percentage of revenue , gross margin for uas decreased from 41 % to 39 % . ees gross margin decreased $ 0.7 million , or 5 % , to $ 12.8 million for the fiscal year ended april 30 , 2014. as a percentage of revenue , ees gross margin increased from 29 % to 30 % . selling , general and administrative . sg & a expense for the fiscal year ended april 30 , 2014 was $ 55.7 million , or 22 % of revenue , compared to sg & a expense of $ 51.5 million , or 21 % of revenue , for the fiscal year ended april 30 , 2013. sg & a expense increased by $ 4.2 million primarily due to impairment costs of tier-ii related assets and higher incentive compensation as a result of achieving certain measures of financial performance . research and development . r & d expense for the fiscal year ended april 30 , 2014 was $ 25.5 million , or 10 % of revenue , compared to r & d expense of $ 37.2 million , or 15 % of revenue , for the fiscal year ended april 30 , 2013. r & d expense decreased primarily due to decreased investments in various technology development initiatives . interest income . interest income for the fiscal year ended april 30 , 2014 was $ 0.9 million , as compared to $ 0.7 million for the fiscal year ended april 30 , 2013. other income . other income for the fiscal year ended april 30 , 2014 was $ 1.6 million , as compared to $ 6.2 million for the fiscal year ended april 30 , 2013. other income primarily represents the change in fair value of the conversion feature of our investment in convertible bonds . income tax expense . our effective income tax expense rate was 7.9 % for the fiscal year ended april 30 , 2014 , as compared to an effective income expense tax rate of 3.2 % for the fiscal year ended april 30 , 2013. the increase in the effective income tax expense rate was primarily due to higher taxable income and lower r & d tax credits . liquidity and capital resources we currently have no material cash commitments , except for normal recurring trade payables , accrued expenses and ongoing research and development costs , all of which we anticipate funding through our existing working capital and funds provided by operating activities . the majority of our purchase obligations are pursuant to funded contractual arrangements with our customers . in addition , we do not currently anticipate significant investment in property , plant and equipment , and we believe that our existing cash , cash equivalents , cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital , capital expenditure and debt service requirements , if any , during the next twelve months . there can be no assurance , however , that our business will continue to generate cash flow at current levels . if we are unable to generate sufficient cash flow from operations , then we may be required to sell assets , reduce capital expenditures or obtain additional financing . we anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future . our primary liquidity needs are for financing working capital , investing in capital expenditures , supporting product development efforts , introducing new products and enhancing existing products , and marketing acceptance and adoption of our products and services . our future capital requirements , to a certain extent , are also subject to general conditions in or affecting the defense and electric vehicle 61 industries and are subject to general economic , political , financial , competitive , legislative and regulatory factors that are beyond our control . moreover , to the extent that existing cash , cash equivalents , cash from operations , and cash from short-term borrowing are insufficient to fund our future activities , we may need to raise additional funds through public or private equity or debt financing . in addition , we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in , or acquisitions of , businesses , services or technologies . our working capital requirements vary by contract type . on cost-plus-fee programs , we typically bill our incurred costs and fees monthly as work progresses , and therefore working capital investment is minimal . on fixed-price contracts , we typically are paid as we deliver products , and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin . story_separator_special_tag size= `` 2 `` > revenue from contracts with customers ( topic 606 ) . the new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized . the core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . this asu is effective for annual periods beginning after december 15 , 2017 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption . we are evaluating the potential impact of this adoption on our consolidated financial statements . in june 2014 , the fasb issued asu no . 2014-12 , compensation—stock compensation (

cash flows the following table provides our cash flow data as of : replace_table_token_9_th cash provided by operating activities . net cash provided by operating activities for the fiscal year ended april 30 , 2015 increased by $ 5.4 million to $ 39.4 million , compared to net cash provided by operating activities of $ 34.0 million for the fiscal year ended april 30 , 2014. this increase in net cash provided by operating activities was primarily due to higher working capital generated of $ 16.1 million , a higher loss on disposal of fixed assets of $ 3.7 million and a change in fair value of the cybaero notes of $ 1.7 million , partially offset by lower net income of $ 10.8 million , lower impairment of long-lived assets of $ 2.9 million , lower tax benefits of $ 2.3 million and lower depreciation expense of $ 0.8 million . net cash provided by operating activities for the fiscal year ended april 30 , 2014 increased by $ 4.8 million to $ 34.0 million , compared to net cash provided by operating activities of $ 29.2 million for the fiscal year ended april 30 , 2013. this increase in net cash provided by operating activities was primarily due to the change in fair value of the cybaero notes of $ 4.4 million , impairment of tier-ii related assets of $ 3.3 million , higher net income of $ 3.3 million and higher working capital generated of $ 2.9 million , partially offset by higher deferred income taxes of $ 7.0 million and lower depreciation expense of $ 1.8 million . cash ( used in ) provided by investing activities .

these rich media experiences include games , movies , music , television , and social interactions with family , friends , and colleagues . at microsoft , our approach is to simplify and increase the accessibility of these entertainment experiences to broaden market penetration of our software and services . we invest significant resources in partnerships , content , windows phone , xbox , and xbox live . search over the last two decades , web content and social connections have increased dramatically as people spend more time online , while discoverability and accessibility has been transforming from direct navigation and document links . there is significant opportunity to deliver differentiated products that helps users make better decisions and 23 part ii item 7 complete tasks more simply when using pc , mobile , and other devices . our approach is to use machine learning to try to understand user intent , and differentiate our product by focusing on the integration of visual , social , and other elements which simplifies people 's interaction with the internet . we invest significant resources in bing , sharepoint , windows , and windows phone . communications and productivity personal and business productivity has been transformed by the ubiquity of computing and software tools . over the last decade , microsoft redefined software productivity beyond the rich office client on the pc . productivity scenarios now encompass unified communications , business intelligence , collaboration , content management , and relationship management , which are increasingly powered by server-side applications . these server applications can be hosted by the customer , a partner , or by microsoft in the cloud . there are significant opportunities to provide productivity and communication scenarios across pcs , mobile devices , and other devices that connect to services . we invest significant resources in dynamics , exchange , lync , office , office 365 , sharepoint , and windows live . economic conditions , challenges and risks as discussed above , our industry is dynamic and highly competitive . we must anticipate changes in technology and business models . our model for growth is based on our ability to initiate and embrace disruptive technology trends , to enter new markets , both in terms of geographies and product areas , and to drive broad adoption of the products and services we develop and market . at microsoft , we prioritize our investments among the highest long-term growth opportunities . these investments require significant resources and are multi-year in nature . the products and services we bring to market can be built internally , brought to market as part of a partnership or alliance , or through acquisition . our success is highly dependent on our ability to attract and retain qualified employees . we rely on hiring from a mix of university and industry talent worldwide . microsoft competes for talented individuals worldwide by offering broad customer reach , scale in resources , and competitive compensation . demand for our software , services , and hardware has a strong correlation to global macroeconomic factors . the current macroeconomic factors remain dynamic . see a discussion of these factors and other risks under risk factors ( part 1 , item 1a . of this form 10-k ) . seasonality our revenue historically has fluctuated quarterly and has generally been the highest in the second quarter of our fiscal year due to corporate calendar year-end spending trends in our major markets and holiday season spending by consumers . our entertainment and devices division is particularly seasonal as its products are aimed at the consumer market and are in highest demand during the holiday shopping season . typically , the entertainment and devices division has generated approximately 40 % of its yearly segment revenue in our second fiscal quarter . in addition , quarterly revenue may be impacted by the deferral of revenue . see the discussions below regarding sales of earlier versions of the microsoft office system with a guarantee to be upgraded to the newest version of the microsoft office system at minimal or no cost ( the “office deferral” ) and sales of windows vista with a guarantee to be upgraded to windows 7 at minimal or no cost and of windows 7 to retailers before general availability ( the “windows 7 deferral” ) . 24 part ii item 7 results of operations summary of results for fiscal years 2011 , 2010 , and 2009 replace_table_token_3_th fiscal year 2011 compared with fiscal year 2010 revenue increased primarily due to strong sales of the xbox 360 entertainment platform , the 2010 microsoft office system , and server and tools products , offset in part by lower windows revenue . revenue also increased due to the $ 254 million office deferral in fiscal year 2010 and the subsequent recognition of the office deferral during fiscal year 2011. changes in foreign currency exchange rates had an insignificant impact on revenue . operating income increased reflecting the change in revenue , offset in part by higher operating expenses . key changes in operating expenses were : cost of revenue increased $ 3.2 billion or 26 % , due to higher costs associated with our online offerings , including traffic acquisition costs , and increased volumes of xbox 360 consoles and kinect sensors sold . sales and marketing expenses increased $ 726 million or 5 % , primarily reflecting increased advertising and marketing of the xbox 360 platform , windows phone , and windows and windows live , higher headcount-related expenses and increased fees paid to third party enterprise software advisors . research and development expenses increased $ 329 million or 4 % , due mainly to higher headcount-related expenses . general and administrative expenses increased $ 159 million or 4 % , due mainly to higher headcount-related expenses and new puerto rican excise taxes , partially offset by prior year transition expenses associated with the inception of the yahoo ! story_separator_special_tag we shipped 10.3 million xbox 360 consoles during fiscal year 2010 , compared with 11.2 million xbox 360 consoles during fiscal year 2009. non-gaming revenue decreased $ 197 million or 25 % primarily reflecting decreased zune and windows phone revenue . edd operating income increased due to reduced operating expenses . cost of revenue decreased $ 496 million or 12 % , primarily due to lower xbox 360 console costs , offset in part by increased royalty costs resulting from increased xbox live digital marketplace third-party content sales and charges resulting from the discontinuation of the kin phone . sales and marketing costs decreased $ 75 million or 9 % , primarily due to decreased xbox 360 platform marketing activities . research and development expenses increased $ 54 million or 6 % , primarily reflecting increased headcount-related expenses , offset in part by decreased third-party development and programming costs . corporate-level activity replace_table_token_9_th certain corporate-level activity is not allocated to our segments , including costs of : broad-based sales and marketing ; product support services ; human resources ; legal ; finance ; information technology ; corporate development and procurement activities ; research and development ; and legal settlements and contingencies . fiscal year 2011 compared with fiscal year 2010 corporate-level expenses increased due mainly to new puerto rican excise taxes , certain revenue related sales and marketing expenses , and increased headcount-related expenses . these increases were offset in part by lower legal charges , which were $ 332 million in fiscal year 2011 compared to $ 533 million in fiscal year 2010 . 30 part ii item 7 fiscal year 2010 compared with fiscal year 2009 corporate-level expenses decreased due mainly to employee severance charges of $ 330 million incurred in the prior year , decreased partner payments , and reductions in other costs due to resource management efforts . these decreases in expenses were offset in part by an increase in legal charges and costs associated with broad-based sales and marketing activities . legal charges were approximately $ 533 million compared to $ 283 million in the prior year . operating expenses cost of revenue replace_table_token_10_th cost of revenue includes : manufacturing and distribution costs for products sold and programs licensed ; operating costs related to product support service centers and product distribution centers ; costs incurred to include software on pcs sold by oems , to drive traffic to our web sites , and to acquire online advertising space ( “traffic acquisition costs” ) ; costs incurred to support and maintain internet-based products and services , including royalties ; warranty costs ; inventory valuation adjustments ; costs associated with the delivery of consulting services ; and the amortization of capitalized research and development costs . fiscal year 2011 compared with fiscal year 2010 cost of revenue increased primarily due to increased volumes of xbox 360 consoles and kinect sensors sold , higher costs associated with our online offerings , including traffic acquisition costs , and higher expenses from providing enterprise services , as well as royalty costs relating to xbox live digital content sold . fiscal year 2010 compared with fiscal year 2009 cost of revenue increased reflecting higher online costs , mainly yahoo ! reimbursement and implementation costs and traffic acquisition costs , as well as increased royalty costs resulting from increased xbox live digital marketplace third-party content sales and charges resulting from the discontinuation of the kin phone . for the current fiscal year , these costs were offset in part by lower xbox 360 console costs and reductions in other costs due to resource management efforts . research and development replace_table_token_11_th research and development expenses include payroll , employee benefits , stock-based compensation expense , and other headcount-related expenses associated with product development . research and development expenses also include third-party development and programming costs , localization costs incurred to translate software for international markets , and the amortization of purchased software code and services content . fiscal year 2011 compared with fiscal year 2010 research and development expenses increased primarily due to a 5 % increase in headcount-related expenses and the capitalization of certain software development costs in the prior year . 31 part ii item 7 fiscal year 2010 compared with fiscal year 2009 research and development expenses decreased , primarily reflecting decreased third-party development and programming costs and the capitalization of certain microsoft office system software development costs . these decreases were offset in part by the capitalization of certain software and development costs related to windows 7 product development in the prior year . sales and marketing replace_table_token_12_th sales and marketing expenses include payroll , employee benefits , stock-based compensation expense , and other headcount-related expenses associated with sales and marketing personnel and the costs of advertising , promotions , trade shows , seminars , and other programs . fiscal year 2011 compared with fiscal year 2010 sales and marketing expenses increased primarily as a result of increased advertising and marketing of the xbox 360 platform , windows phone , and windows and windows live , a 5 % increase in headcount-related expenses , and increased fees paid to third party enterprise software advisors . fiscal year 2010 compared with fiscal year 2009 sales and marketing expenses increased , primarily reflecting increased advertising and marketing of windows 7 and bing and increased sales force expenses related to windows 7. general and administrative replace_table_token_13_th general and administrative expenses include payroll , employee benefits , stock-based compensation expense , severance expense , and other headcount-related expenses associated with finance , legal , facilities , certain human resources and other administrative personnel , certain taxes , and legal and other administrative fees . fiscal year 2011 compared with fiscal year 2010 general and administrative expenses increased primarily due to a 12 % increase in headcount-related expenses and new puerto rican excise taxes , partially offset by prior year transition expenses associated with the inception of the yahoo ! commercial agreement . fiscal

cash flows the following table provides our cash flow data as of : replace_table_token_9_th cash provided by operating activities . net cash provided by operating activities for the fiscal year ended april 30 , 2015 increased by $ 5.4 million to $ 39.4 million , compared to net cash provided by operating activities of $ 34.0 million for the fiscal year ended april 30 , 2014. this increase in net cash provided by operating activities was primarily due to higher working capital generated of $ 16.1 million , a higher loss on disposal of fixed assets of $ 3.7 million and a change in fair value of the cybaero notes of $ 1.7 million , partially offset by lower net income of $ 10.8 million , lower impairment of long-lived assets of $ 2.9 million , lower tax benefits of $ 2.3 million and lower depreciation expense of $ 0.8 million . net cash provided by operating activities for the fiscal year ended april 30 , 2014 increased by $ 4.8 million to $ 34.0 million , compared to net cash provided by operating activities of $ 29.2 million for the fiscal year ended april 30 , 2013. this increase in net cash provided by operating activities was primarily due to the change in fair value of the cybaero notes of $ 4.4 million , impairment of tier-ii related assets of $ 3.3 million , higher net income of $ 3.3 million and higher working capital generated of $ 2.9 million , partially offset by higher deferred income taxes of $ 7.0 million and lower depreciation expense of $ 1.8 million . cash ( used in ) provided by investing activities .

these rich media experiences include games , movies , music , television , and social interactions with family , friends , and colleagues . at microsoft , our approach is to simplify and increase the accessibility of these entertainment experiences to broaden market penetration of our software and services . we invest significant resources in partnerships , content , windows phone , xbox , and xbox live . search over the last two decades , web content and social connections have increased dramatically as people spend more time online , while discoverability and accessibility has been transforming from direct navigation and document links . there is significant opportunity to deliver differentiated products that helps users make better decisions and 23 part ii item 7 complete tasks more simply when using pc , mobile , and other devices . our approach is to use machine learning to try to understand user intent , and differentiate our product by focusing on the integration of visual , social , and other elements which simplifies people 's interaction with the internet . we invest significant resources in bing , sharepoint , windows , and windows phone . communications and productivity personal and business productivity has been transformed by the ubiquity of computing and software tools . over the last decade , microsoft redefined software productivity beyond the rich office client on the pc . productivity scenarios now encompass unified communications , business intelligence , collaboration , content management , and relationship management , which are increasingly powered by server-side applications . these server applications can be hosted by the customer , a partner , or by microsoft in the cloud . there are significant opportunities to provide productivity and communication scenarios across pcs , mobile devices , and other devices that connect to services . we invest significant resources in dynamics , exchange , lync , office , office 365 , sharepoint , and windows live . economic conditions , challenges and risks as discussed above , our industry is dynamic and highly competitive . we must anticipate changes in technology and business models . our model for growth is based on our ability to initiate and embrace disruptive technology trends , to enter new markets , both in terms of geographies and product areas , and to drive broad adoption of the products and services we develop and market . at microsoft , we prioritize our investments among the highest long-term growth opportunities . these investments require significant resources and are multi-year in nature . the products and services we bring to market can be built internally , brought to market as part of a partnership or alliance , or through acquisition . our success is highly dependent on our ability to attract and retain qualified employees . we rely on hiring from a mix of university and industry talent worldwide . microsoft competes for talented individuals worldwide by offering broad customer reach , scale in resources , and competitive compensation . demand for our software , services , and hardware has a strong correlation to global macroeconomic factors . the current macroeconomic factors remain dynamic . see a discussion of these factors and other risks under risk factors ( part 1 , item 1a . of this form 10-k ) . seasonality our revenue historically has fluctuated quarterly and has generally been the highest in the second quarter of our fiscal year due to corporate calendar year-end spending trends in our major markets and holiday season spending by consumers . our entertainment and devices division is particularly seasonal as its products are aimed at the consumer market and are in highest demand during the holiday shopping season . typically , the entertainment and devices division has generated approximately 40 % of its yearly segment revenue in our second fiscal quarter . in addition , quarterly revenue may be impacted by the deferral of revenue . see the discussions below regarding sales of earlier versions of the microsoft office system with a guarantee to be upgraded to the newest version of the microsoft office system at minimal or no cost ( the “office deferral” ) and sales of windows vista with a guarantee to be upgraded to windows 7 at minimal or no cost and of windows 7 to retailers before general availability ( the “windows 7 deferral” ) . 24 part ii item 7 results of operations summary of results for fiscal years 2011 , 2010 , and 2009 replace_table_token_3_th fiscal year 2011 compared with fiscal year 2010 revenue increased primarily due to strong sales of the xbox 360 entertainment platform , the 2010 microsoft office system , and server and tools products , offset in part by lower windows revenue . revenue also increased due to the $ 254 million office deferral in fiscal year 2010 and the subsequent recognition of the office deferral during fiscal year 2011. changes in foreign currency exchange rates had an insignificant impact on revenue . operating income increased reflecting the change in revenue , offset in part by higher operating expenses . key changes in operating expenses were : cost of revenue increased $ 3.2 billion or 26 % , due to higher costs associated with our online offerings , including traffic acquisition costs , and increased volumes of xbox 360 consoles and kinect sensors sold . sales and marketing expenses increased $ 726 million or 5 % , primarily reflecting increased advertising and marketing of the xbox 360 platform , windows phone , and windows and windows live , higher headcount-related expenses and increased fees paid to third party enterprise software advisors . research and development expenses increased $ 329 million or 4 % , due mainly to higher headcount-related expenses . general and administrative expenses increased $ 159 million or 4 % , due mainly to higher headcount-related expenses and new puerto rican excise taxes , partially offset by prior year transition expenses associated with the inception of the yahoo ! story_separator_special_tag we shipped 10.3 million xbox 360 consoles during fiscal year 2010 , compared with 11.2 million xbox 360 consoles during fiscal year 2009. non-gaming revenue decreased $ 197 million or 25 % primarily reflecting decreased zune and windows phone revenue . edd operating income increased due to reduced operating expenses . cost of revenue decreased $ 496 million or 12 % , primarily due to lower xbox 360 console costs , offset in part by increased royalty costs resulting from increased xbox live digital marketplace third-party content sales and charges resulting from the discontinuation of the kin phone . sales and marketing costs decreased $ 75 million or 9 % , primarily due to decreased xbox 360 platform marketing activities . research and development expenses increased $ 54 million or 6 % , primarily reflecting increased headcount-related expenses , offset in part by decreased third-party development and programming costs . corporate-level activity replace_table_token_9_th certain corporate-level activity is not allocated to our segments , including costs of : broad-based sales and marketing ; product support services ; human resources ; legal ; finance ; information technology ; corporate development and procurement activities ; research and development ; and legal settlements and contingencies . fiscal year 2011 compared with fiscal year 2010 corporate-level expenses increased due mainly to new puerto rican excise taxes , certain revenue related sales and marketing expenses , and increased headcount-related expenses . these increases were offset in part by lower legal charges , which were $ 332 million in fiscal year 2011 compared to $ 533 million in fiscal year 2010 . 30 part ii item 7 fiscal year 2010 compared with fiscal year 2009 corporate-level expenses decreased due mainly to employee severance charges of $ 330 million incurred in the prior year , decreased partner payments , and reductions in other costs due to resource management efforts . these decreases in expenses were offset in part by an increase in legal charges and costs associated with broad-based sales and marketing activities . legal charges were approximately $ 533 million compared to $ 283 million in the prior year . operating expenses cost of revenue replace_table_token_10_th cost of revenue includes : manufacturing and distribution costs for products sold and programs licensed ; operating costs related to product support service centers and product distribution centers ; costs incurred to include software on pcs sold by oems , to drive traffic to our web sites , and to acquire online advertising space ( “traffic acquisition costs” ) ; costs incurred to support and maintain internet-based products and services , including royalties ; warranty costs ; inventory valuation adjustments ; costs associated with the delivery of consulting services ; and the amortization of capitalized research and development costs . fiscal year 2011 compared with fiscal year 2010 cost of revenue increased primarily due to increased volumes of xbox 360 consoles and kinect sensors sold , higher costs associated with our online offerings , including traffic acquisition costs , and higher expenses from providing enterprise services , as well as royalty costs relating to xbox live digital content sold . fiscal year 2010 compared with fiscal year 2009 cost of revenue increased reflecting higher online costs , mainly yahoo ! reimbursement and implementation costs and traffic acquisition costs , as well as increased royalty costs resulting from increased xbox live digital marketplace third-party content sales and charges resulting from the discontinuation of the kin phone . for the current fiscal year , these costs were offset in part by lower xbox 360 console costs and reductions in other costs due to resource management efforts . research and development replace_table_token_11_th research and development expenses include payroll , employee benefits , stock-based compensation expense , and other headcount-related expenses associated with product development . research and development expenses also include third-party development and programming costs , localization costs incurred to translate software for international markets , and the amortization of purchased software code and services content . fiscal year 2011 compared with fiscal year 2010 research and development expenses increased primarily due to a 5 % increase in headcount-related expenses and the capitalization of certain software development costs in the prior year . 31 part ii item 7 fiscal year 2010 compared with fiscal year 2009 research and development expenses decreased , primarily reflecting decreased third-party development and programming costs and the capitalization of certain microsoft office system software development costs . these decreases were offset in part by the capitalization of certain software and development costs related to windows 7 product development in the prior year . sales and marketing replace_table_token_12_th sales and marketing expenses include payroll , employee benefits , stock-based compensation expense , and other headcount-related expenses associated with sales and marketing personnel and the costs of advertising , promotions , trade shows , seminars , and other programs . fiscal year 2011 compared with fiscal year 2010 sales and marketing expenses increased primarily as a result of increased advertising and marketing of the xbox 360 platform , windows phone , and windows and windows live , a 5 % increase in headcount-related expenses , and increased fees paid to third party enterprise software advisors . fiscal year 2010 compared with fiscal year 2009 sales and marketing expenses increased , primarily reflecting increased advertising and marketing of windows 7 and bing and increased sales force expenses related to windows 7. general and administrative replace_table_token_13_th general and administrative expenses include payroll , employee benefits , stock-based compensation expense , severance expense , and other headcount-related expenses associated with finance , legal , facilities , certain human resources and other administrative personnel , certain taxes , and legal and other administrative fees . fiscal year 2011 compared with fiscal year 2010 general and administrative expenses increased primarily due to a 12 % increase in headcount-related expenses and new puerto rican excise taxes , partially offset by prior year transition expenses associated with the inception of the yahoo ! commercial agreement . fiscal

cash flows fiscal year 2011 compared with fiscal year 2010 cash flows from operations increased $ 2.9 billion during the current fiscal year to $ 27.0 billion due mainly to increased revenue and cash collections from customers . cash used in financing decreased $ 4.9 billion to $ 8.4 billion due mainly to a $ 5.8 billion increase in proceeds from issuance of debt , net of repayments , offset in part by a $ 602 million increase in cash paid for dividends . cash used in investing increased $ 3.3 billion to $ 14.6 billion due to a $ 5.8 billion increase in purchases of investments , offset in part by a $ 2.5 billion increase in cash from securities lending . fiscal year 2010 compared with fiscal year 2009 cash flow from operations increased $ 5.0 billion , primarily due to payment of $ 4.1 billion to the internal revenue service in the prior year as a result of our settlement of the 2000-2003 audit examination along with increased cash received from customers in the current year . cash used for financing increased $ 5.8 billion , primarily due to a $ 5.6 35 part ii item 7 billion decrease in net cash proceeds from issuance and repayments of short-term and long-term debt . financing activities also included a $ 1.9 billion increase in cash used for common stock repurchases , which was offset in part by a $ 1.7 billion increase in cash received from common stock issued . cash used for investing decreased $ 4.5 billion due to a $ 3.3 billion decrease in cash used for combined investment purchases , sales , and maturities along with a $ 1.1 billion decrease in additions to property and equipment . debt short-term debt during fiscal year 2011 , we repaid $ 1.0 billion of commercial paper , leaving zero outstanding . on november 5 , 2010 , our $ 1.0 billion 364-day credit facility expired .

our belief that our existing level of inventory will allow us to maintain competitive lead times and provide strong delivery performance to our customers ; the effect that distributor and customer inventory holding patterns will have on us ; our belief that customers recognize our products and brand name and use distributors as an effective supply channel ; anticipating increased customer requirements to meet voluntary criteria related to the reduction or elimination of substances in our products ; our belief that our direct sales personnel combined with our distributors provide an effective means of reaching our customer base ; the accuracy of our estimates of the useful life and values of our property , assets and other liabilities ; our ability to increase the proprietary portion of our analog , interface , mixed signal and timing product lines and the effect of such an increase ; our belief that our processes afford us both cost-effective designs in existing and derivative products and greater functionality in new product designs ; the impact of any supply disruption we may experience ; our ability to effectively utilize our facilities at appropriate capacity levels and anticipated costs ; 35 that we adjust capacity utilization to respond to actual and anticipated business and industry-related conditions ; that manufacturing costs will be reduced by transition to advanced process technologies ; our ability to maintain manufacturing yields ; continuing our investments in new and enhanced products ; the cost effectiveness of using our own assembly and test operations ; our plans for operation of our fabrication facilities , including our plan to close our facility in santa clara , california ; the cost savings from re-purposing fab 5 for the manufacture of discrete and specialty products in addition to a lower volume of a diversified set of standard products and transferring the manufacture of certain higher volume products to other facilities ; our anticipated level of capital expenditures ; continuation and amount of quarterly cash dividends ; the sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements , and the effects that our contractual obligations are expected to have on them ; the impact of seasonality on our business ; our belief that our it system compromise has not had a material adverse effect on our business or resulted in any material damage to us ; our expectation that we will continue to be the target of attacks on our data , attempts to breach our security and attempts to introduce malicious software into our it systems ; the accuracy of our estimates used in valuing employee equity awards ; that the resolution of legal actions will not have a material effect on our business , and the accuracy of our assessment of the probability of loss and range of potential loss ; the recoverability of our deferred tax assets ; the adequacy of our tax reserves to offset any potential tax liabilities , having the appropriate support for our income tax positions and the accuracy of our estimated tax rate ; our belief that the expiration of any tax holidays will not have a material impact on our financial statements or effective tax rate ; the impact of our intra-group asset transfers , and the geographical dispersion of our earnings and losses on our effective tax rate ; our belief that the estimates used in preparing our consolidated financial statements are reasonable ; our actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis ; our ability to obtain patents and intellectual property licenses and minimize the effects of litigation ; the level of risk we are exposed to for product liability claims or indemnification claims ; the effect of fluctuations in market interest rates on our income and or cash flows ; the effect of fluctuations in currency rates ; that we could increase our borrowings or seek additional equity or debt financing to maintain or expand our facilities , or to fund cash dividends , share repurchases , acquisitions or other corporate activities , and that the timing and amount of such financing requirements will depend on a number of factors ; our intention to satisfy the lesser of the principal amount or the conversion value of our debentures in cash ; our intention to invest substantially all of our foreign subsidiary earnings , as well as our capital in our foreign subsidiaries , indefinitely outside of the u.s. in those jurisdictions in which we would incur significant , additional costs upon repatriation of such amounts . changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings ; our belief that the effect the new tax laws will have on low-taxed income of foreign subsidiaries will have the most significant , adverse impact ; and our ability to collect accounts receivable . our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth in `` item 1a – risk factors , `` and elsewhere in this form 10-k . although we believe that the expectations reflected in our forward-looking statements are reasonable , we can not guarantee future results , levels of activity , performance or achievements . you should not place undue reliance on these forward-looking statements . we disclaim any obligation to update the information contained in any forward-looking statement . 36 introduction the following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document , as well as with other sections of this annual report on form 10-k , including `` item 1 – business ; `` `` item 6 – selected financial data ; `` and `` item 8 – financial statements and supplementary data . story_separator_special_tag after the transaction price has been allocated , we recognize revenue when the performance obligation is satisfied . substantially all of the revenue generated from contracts with distributors is recognized at the time risk and title of the inventory transfers to the distributor . sales to our direct customers are generally governed by a purchase order and an order acknowledgment . sales to direct customers usually do not meet the definition of a contract , as defined by asc 606 , until shipment of the product occurs . generally , the transaction price associated with contracts with direct customers is set at the standalone selling price and is not variable . usually , there is only a single performance obligation in the contract , and therefore the entire transaction price is allocated to the single performance obligation . after the transaction price has been allocated , we recognize revenue when the performance obligation is satisfied . substantially all of the revenue generated from contracts with direct customers is recognized at the time risk and title of the inventory transfers to the customer . revenue generated from our licensees is governed by licensing agreements . our primary performance obligation related to these agreements is to provide the licensee the right to use the intellectual property . the final transaction price is determined by multiplying the usage of the license by the royalty , which is fixed in the licensing agreement . revenue is recognized as usage of the license occurs . business combinations all of our business combinations are accounted for at fair value under the acquisition method of accounting . under the acquisition method of accounting , ( i ) acquisition-related costs , except for those costs incurred to issue debt or equity securities , will be expensed in the period incurred ; ( ii ) non-controlling interests will be valued at fair value at the acquisition date ; ( iii ) in-process research and development will be recorded at fair value as an intangible asset at the acquisition date and amortized once the technology reaches technological feasibility ; ( iv ) restructuring costs associated with a business combination will be expensed subsequent to the acquisition date ; and ( v ) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will be recognized through income tax expense . the measurement of the fair value of assets acquired and liabilities assumed requires significant judgment . the valuation of intangible assets , in particular , requires that we use valuation techniques such as the income approach . the income approach includes the use of a discounted cash flow model , which includes discounted cash flow scenarios and requires the following significant estimates : revenue , expenses , capital spending and other costs , and discount rates based on the respective risks of the cash flows . under the acquisition method of accounting , the aggregate amount of consideration we pay for a company is allocated to net tangible assets and intangible assets based on their estimated fair values as of the acquisition date . the excess of the purchase price over the value of the net tangible assets and intangible assets is recorded to goodwill . on an annual basis , we test goodwill for impairment and through march 31 , 2020 , we have never recorded an impairment charge against our goodwill balance . 40 share-based compensation we measure at fair value and recognize compensation expense for all share-based payment awards , including grants of employee stock options , restricted stock units ( rsus ) and employee stock purchase rights , to be recognized in our financial statements based on their respective grant date fair values . we utilize rsus as our primary equity incentive compensation instrument for employees . share-based compensation cost is measured on the grant date based on the fair market value of our common stock discounted for expected future dividends and is recognized as expense on a straight-line basis over the requisite service periods . total share-based compensation expense recognized during the fiscal 2020 was $ 170.2 million , of which $ 149.3 million was reflected in operating expenses and $ 20.9 million was reflected in cost of sales . total share-based compensation included in our inventory balance was $ 14.4 million at march 31 , 2020 . if there are any modifications or cancellations of the underlying unvested securities , we may be required to accelerate , increase or cancel any remaining unearned share-based compensation expense . future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions . inventories inventories are valued at the lower of cost or net realizable value using the first-in , first-out method . we write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions . if actual market conditions are less favorable than those we projected , additional inventory write-downs may be required . inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable . in estimating our inventory obsolescence , we primarily evaluate estimates of demand over a 12-month period and record impairment charges for inventory on hand in excess of the estimated 12-month demand . estimates for projected 12-month demand are generally based on the average shipments of the prior three-month period , which are then annualized to adjust for any potential seasonality in our business . the estimated 12-month demand is compared to our most recently developed sales forecast to further reconcile the 12-month demand estimate . management reviews and adjusts the estimates as appropriate based on specific situations . for example , demand

cash flows fiscal year 2011 compared with fiscal year 2010 cash flows from operations increased $ 2.9 billion during the current fiscal year to $ 27.0 billion due mainly to increased revenue and cash collections from customers . cash used in financing decreased $ 4.9 billion to $ 8.4 billion due mainly to a $ 5.8 billion increase in proceeds from issuance of debt , net of repayments , offset in part by a $ 602 million increase in cash paid for dividends . cash used in investing increased $ 3.3 billion to $ 14.6 billion due to a $ 5.8 billion increase in purchases of investments , offset in part by a $ 2.5 billion increase in cash from securities lending . fiscal year 2010 compared with fiscal year 2009 cash flow from operations increased $ 5.0 billion , primarily due to payment of $ 4.1 billion to the internal revenue service in the prior year as a result of our settlement of the 2000-2003 audit examination along with increased cash received from customers in the current year . cash used for financing increased $ 5.8 billion , primarily due to a $ 5.6 35 part ii item 7 billion decrease in net cash proceeds from issuance and repayments of short-term and long-term debt . financing activities also included a $ 1.9 billion increase in cash used for common stock repurchases , which was offset in part by a $ 1.7 billion increase in cash received from common stock issued . cash used for investing decreased $ 4.5 billion due to a $ 3.3 billion decrease in cash used for combined investment purchases , sales , and maturities along with a $ 1.1 billion decrease in additions to property and equipment . debt short-term debt during fiscal year 2011 , we repaid $ 1.0 billion of commercial paper , leaving zero outstanding . on november 5 , 2010 , our $ 1.0 billion 364-day credit facility expired .

our belief that our existing level of inventory will allow us to maintain competitive lead times and provide strong delivery performance to our customers ; the effect that distributor and customer inventory holding patterns will have on us ; our belief that customers recognize our products and brand name and use distributors as an effective supply channel ; anticipating increased customer requirements to meet voluntary criteria related to the reduction or elimination of substances in our products ; our belief that our direct sales personnel combined with our distributors provide an effective means of reaching our customer base ; the accuracy of our estimates of the useful life and values of our property , assets and other liabilities ; our ability to increase the proprietary portion of our analog , interface , mixed signal and timing product lines and the effect of such an increase ; our belief that our processes afford us both cost-effective designs in existing and derivative products and greater functionality in new product designs ; the impact of any supply disruption we may experience ; our ability to effectively utilize our facilities at appropriate capacity levels and anticipated costs ; 35 that we adjust capacity utilization to respond to actual and anticipated business and industry-related conditions ; that manufacturing costs will be reduced by transition to advanced process technologies ; our ability to maintain manufacturing yields ; continuing our investments in new and enhanced products ; the cost effectiveness of using our own assembly and test operations ; our plans for operation of our fabrication facilities , including our plan to close our facility in santa clara , california ; the cost savings from re-purposing fab 5 for the manufacture of discrete and specialty products in addition to a lower volume of a diversified set of standard products and transferring the manufacture of certain higher volume products to other facilities ; our anticipated level of capital expenditures ; continuation and amount of quarterly cash dividends ; the sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements , and the effects that our contractual obligations are expected to have on them ; the impact of seasonality on our business ; our belief that our it system compromise has not had a material adverse effect on our business or resulted in any material damage to us ; our expectation that we will continue to be the target of attacks on our data , attempts to breach our security and attempts to introduce malicious software into our it systems ; the accuracy of our estimates used in valuing employee equity awards ; that the resolution of legal actions will not have a material effect on our business , and the accuracy of our assessment of the probability of loss and range of potential loss ; the recoverability of our deferred tax assets ; the adequacy of our tax reserves to offset any potential tax liabilities , having the appropriate support for our income tax positions and the accuracy of our estimated tax rate ; our belief that the expiration of any tax holidays will not have a material impact on our financial statements or effective tax rate ; the impact of our intra-group asset transfers , and the geographical dispersion of our earnings and losses on our effective tax rate ; our belief that the estimates used in preparing our consolidated financial statements are reasonable ; our actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis ; our ability to obtain patents and intellectual property licenses and minimize the effects of litigation ; the level of risk we are exposed to for product liability claims or indemnification claims ; the effect of fluctuations in market interest rates on our income and or cash flows ; the effect of fluctuations in currency rates ; that we could increase our borrowings or seek additional equity or debt financing to maintain or expand our facilities , or to fund cash dividends , share repurchases , acquisitions or other corporate activities , and that the timing and amount of such financing requirements will depend on a number of factors ; our intention to satisfy the lesser of the principal amount or the conversion value of our debentures in cash ; our intention to invest substantially all of our foreign subsidiary earnings , as well as our capital in our foreign subsidiaries , indefinitely outside of the u.s. in those jurisdictions in which we would incur significant , additional costs upon repatriation of such amounts . changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings ; our belief that the effect the new tax laws will have on low-taxed income of foreign subsidiaries will have the most significant , adverse impact ; and our ability to collect accounts receivable . our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth in `` item 1a – risk factors , `` and elsewhere in this form 10-k . although we believe that the expectations reflected in our forward-looking statements are reasonable , we can not guarantee future results , levels of activity , performance or achievements . you should not place undue reliance on these forward-looking statements . we disclaim any obligation to update the information contained in any forward-looking statement . 36 introduction the following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document , as well as with other sections of this annual report on form 10-k , including `` item 1 – business ; `` `` item 6 – selected financial data ; `` and `` item 8 – financial statements and supplementary data . story_separator_special_tag after the transaction price has been allocated , we recognize revenue when the performance obligation is satisfied . substantially all of the revenue generated from contracts with distributors is recognized at the time risk and title of the inventory transfers to the distributor . sales to our direct customers are generally governed by a purchase order and an order acknowledgment . sales to direct customers usually do not meet the definition of a contract , as defined by asc 606 , until shipment of the product occurs . generally , the transaction price associated with contracts with direct customers is set at the standalone selling price and is not variable . usually , there is only a single performance obligation in the contract , and therefore the entire transaction price is allocated to the single performance obligation . after the transaction price has been allocated , we recognize revenue when the performance obligation is satisfied . substantially all of the revenue generated from contracts with direct customers is recognized at the time risk and title of the inventory transfers to the customer . revenue generated from our licensees is governed by licensing agreements . our primary performance obligation related to these agreements is to provide the licensee the right to use the intellectual property . the final transaction price is determined by multiplying the usage of the license by the royalty , which is fixed in the licensing agreement . revenue is recognized as usage of the license occurs . business combinations all of our business combinations are accounted for at fair value under the acquisition method of accounting . under the acquisition method of accounting , ( i ) acquisition-related costs , except for those costs incurred to issue debt or equity securities , will be expensed in the period incurred ; ( ii ) non-controlling interests will be valued at fair value at the acquisition date ; ( iii ) in-process research and development will be recorded at fair value as an intangible asset at the acquisition date and amortized once the technology reaches technological feasibility ; ( iv ) restructuring costs associated with a business combination will be expensed subsequent to the acquisition date ; and ( v ) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will be recognized through income tax expense . the measurement of the fair value of assets acquired and liabilities assumed requires significant judgment . the valuation of intangible assets , in particular , requires that we use valuation techniques such as the income approach . the income approach includes the use of a discounted cash flow model , which includes discounted cash flow scenarios and requires the following significant estimates : revenue , expenses , capital spending and other costs , and discount rates based on the respective risks of the cash flows . under the acquisition method of accounting , the aggregate amount of consideration we pay for a company is allocated to net tangible assets and intangible assets based on their estimated fair values as of the acquisition date . the excess of the purchase price over the value of the net tangible assets and intangible assets is recorded to goodwill . on an annual basis , we test goodwill for impairment and through march 31 , 2020 , we have never recorded an impairment charge against our goodwill balance . 40 share-based compensation we measure at fair value and recognize compensation expense for all share-based payment awards , including grants of employee stock options , restricted stock units ( rsus ) and employee stock purchase rights , to be recognized in our financial statements based on their respective grant date fair values . we utilize rsus as our primary equity incentive compensation instrument for employees . share-based compensation cost is measured on the grant date based on the fair market value of our common stock discounted for expected future dividends and is recognized as expense on a straight-line basis over the requisite service periods . total share-based compensation expense recognized during the fiscal 2020 was $ 170.2 million , of which $ 149.3 million was reflected in operating expenses and $ 20.9 million was reflected in cost of sales . total share-based compensation included in our inventory balance was $ 14.4 million at march 31 , 2020 . if there are any modifications or cancellations of the underlying unvested securities , we may be required to accelerate , increase or cancel any remaining unearned share-based compensation expense . future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions . inventories inventories are valued at the lower of cost or net realizable value using the first-in , first-out method . we write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions . if actual market conditions are less favorable than those we projected , additional inventory write-downs may be required . inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable . in estimating our inventory obsolescence , we primarily evaluate estimates of demand over a 12-month period and record impairment charges for inventory on hand in excess of the estimated 12-month demand . estimates for projected 12-month demand are generally based on the average shipments of the prior three-month period , which are then annualized to adjust for any potential seasonality in our business . the estimated 12-month demand is compared to our most recently developed sales forecast to further reconcile the 12-month demand estimate . management reviews and adjusts the estimates as appropriate based on specific situations . for example , demand

. cash dividends paid per share were $ 1.465 , $ 1.457 and $ 1.449 during fiscal 2020 , 2019 and 2018 , respectively . total dividend payments amounted to $ 350.1 million , $ 344.4 million and $ 337.5 million during fiscal 2020 , 2019 and 2018 , respectively . a quarterly dividend of $ 0.3675 per share was declared on may 7 , 2020 and will be paid on june 4 , 2020 to stockholders of record as of may 21 , 2020 . we expect the aggregate cash dividend for june 2020 to be approximately $ 90.3 million . our board is free to change our dividend practices at any time and to increase or decrease the dividend paid , or not to pay a dividend on our common stock on the basis of our results of operations , financial condition , cash requirements and future prospects , and other factors deemed relevant by our board . our current intent is to provide for ongoing quarterly cash dividends depending upon market conditions , our results of operations , and potential changes in tax laws . we believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our revolving credit facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months . however , the semiconductor industry is capital intensive . in order to remain competitive , we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development . we may increase our borrowings under our revolving credit facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities , for cash dividends , for share repurchases or for acquisitions or other purposes .

until their respective appointments , both doctors were associated with johns hopkins university , baltimore , maryland , as full-time residents . on december 1 , 2016 , dr. lough assigned the patent application as well as all related intellectual property to a newly-formed nevada corporation , polarityte , inc. ( “ polarity nv ” ) , and the company entered into an agreement and plan of reorganization ( the “ agreement ” ) with polarity nv and dr. lough . as a result , at closing , the patent application would be owned by the company without the need for further assignments or recordation with the patent trademark office . on april 7 , 2017 , the company issued 7,050 shares of its newly authorized series e preferred stock ( the “ series e preferred shares ” ) convertible into an aggregate of 7,050,000 shares of the company 's common stock with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) to dr. lough for the purchase of polarity nv 's assets . since the assets purchased were in-process research and development assets , the total purchase price was immediately expensed as research and development - intellectual property acquired since they have no alternative future use . polarityte , inc. is aiming to be the first company to deliver regenerative medicine into clinical practice through tissue engineering . subsequent to the acquisition , the company 's platform technology will allow it to regenerate a patient 's tissues using their own cells . research and development expenses . research and development expenses primarily represent employee related costs , including stock compensation , for research and development executives and staff , lab and office expenses and other overhead charges . research and development - intellectual property acquired . on april 7 , 2017 , as payment for the polarity nv asset acquisition , the company issued 7,050 shares of series e preferred stock convertible into an aggregate of 7,050,000 shares of the company 's common stock and with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) . since the assets purchased were in-process research and development assets , the total purchase price was immediately expensed as research and development - intellectual property acquired since they have no alternative future use . general and administrative expenses . general and administrative expenses primarily represent employee related costs , including stock compensation , for corporate executive and support staff , general office expenses , professional fees and various other overhead charges . professional fees , including legal and accounting expenses , typically represent one of the largest components of our general and administrative expenses . these fees are partially attributable to our required activities as a publicly traded company , such as sec filings , and corporate- and business-development initiatives . discontinued operations . on june 23 , 2017 , the company sold majesco entertainment company , a nevada corporation and wholly-owned subsidiary of the company ( “ majesco ” ) to zift interactive llc , a nevada limited liability company ( the “ purchaser ” ) pursuant to a purchase agreement ( the “ agreement ” ) . pursuant to the terms of the agreement , the company sold to the purchaser 100 % of the issued and outstanding shares of common stock of majesco , including all of the right , title and interest in and to majesco 's business of developing , publishing and distributing video game products through both retail distribution and mobile and online digital downloading . pursuant to the terms of the agreement , the company will receive total cash consideration of approximately $ 100,000 ( $ 5,000 upon signing the agreement and 19 additional monthly payments of $ 5,000 ) plus contingent consideration based on net revenues . income taxes . income taxes consist of our provisions for income taxes , as affected by our net operating loss carryforwards . future utilization of our net operating loss , or nol , carryforwards may be subject to a substantial annual limitation due to the “ change in ownership ” provisions of the internal revenue code . the annual limitation may result in the expiration of nol carryforwards before utilization . due to our history of losses , a valuation allowance sufficient to fully offset our nol and other deferred tax assets has been established under current accounting pronouncements , and this valuation allowance will be maintained unless sufficient positive evidence develops to support its reversal . in december 2017 , the federal government enacted numerous amendments to the internal revenue code of 1986 pursuant to an act known by the tax cuts and jobs act ( the “ tcja ” ) . the tcja may impact the company 's income tax expense ( benefit ) from continuing operations in future periods . the company has recorded a full valuation allowance on its net deferred tax assets and therefore any impact on the value of the company 's deferred tax assets will be offset by a change in the valuation allowance . critical accounting estimates our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . story_separator_special_tag dividends are payable quarterly in arrears on the fifteenth ( 15th ) day of the next applicable quarter , to the record holders of the series f preferred stock on the last day of the fiscal quarter immediately preceding the dividend payment date in shares of common stock , calculated using the vwap of the common stock on the ninety ( 90 ) days immediately preceding the dividend record date ; provided , however , that the company may , at its option , pay dividends in cash or in a combination of common shares and cash . upon the liquidation , dissolution or winding up of the business of the company , whether voluntary or involuntary , each holder of preferred shares shall be entitled to receive , for each share thereof , out of assets of the company legally available therefor , a preferential amount in cash equal to ( and not more than ) $ 2,750. on the two ( 2 ) year anniversary of the initial issuance date , any share of series f preferred stock outstanding and not otherwise already converted , shall , at the option of the holder , either ( i ) automatically convert into common stock of the company at the conversion price then in effect or ( ii ) be repaid by the company based on the stated value of such outstanding shares of series f preferred stock . in addition , in the event that the company 's common stock attains a consolidated bid price of $ 45 or greater for any four ( 4 ) trading days during any eight ( 8 ) trading day period , the series f preferred stock shall be automatically converted to common stock , without any further action by the holder ( subject to the conversion limitation in the event that such conversion would result in such holder holding in excess of four and ninety-nine one-hundredths ( 4.99 % ) percent of the common stock of the company ) . the warrants issued in connection with the series f preferred stock are liabilities pursuant to asc 815. the warrant agreement provides for an adjustment to the number of common shares issuable under the warrant and or adjustment to the exercise price , including but not limited to , if : ( a ) the company issues shares of common stock as a dividend or distribution to holders of its common stock ; ( b ) the company subdivides or combines its common stock ( i.e . , stock split ) ; ( c ) adjustment of exercise price upon issuance of new securities at less than the exercise price . under asc 815 , warrants that provide for down-round exercise price protection are recognized as derivative liabilities . the conversion feature within the series f preferred stock is not clearly and closely related to the identified host instrument and , as such , is recognized as a derivative liability measured at fair value pursuant to asc 815. the initial fair value of the warrants and bifurcated embedded conversion feature , estimated to be approximately $ 4.3 million and $ 9.3 million , respectively , was deducted from the gross proceeds of the unit offering to arrive at the initial discounted carrying value of the series f preferred stock . the resulting discount to the aggregate stated value of the series f preferred stock of approximately $ 13.6 million will be recognized as accretion , similar to preferred stock dividends , over the two-year period prior to optional redemption by the holders . the company recognized accretion of the discount to the stated value of the series f preferred stock of approximately $ 369,000 in the year ended october 31 , 2017 as a reduction of additional paid-in capital and an increase in the carrying value of the series f preferred stock . the accretion is presented in the statement of operations as a deemed dividend , increasing net loss to arrive at net loss attributable to common stockholders . 46 preferred share conversion activity during the year ended october 31 , 2017 , 3,991,487 shares of convertible preferred stock series a , 6,512 shares of convertible preferred stock series b , 23,185 shares of convertible preferred stock series c and 129,665 shares of convertible preferred stock series d were converted into 1,590,631 shares of common stock . common stock on january 18 , 2017 , the company entered into separate exchange agreements ( each an “ exchange agreement ” ) with certain accredited investors ( the “ investors ” ) who purchased warrants to purchase shares of the company 's common stock ( the “ warrants ” ) pursuant to the prospectus dated april 13 , 2016. pursuant to the offering , the company issued 250,000 shares of the company 's common stock and warrants to purchase 187,500 shares of common stock ( taking into account the reverse split of the company 's common stock on a 1 for 6 basis effective with the nasdaq stock market llc on august 1 , 2016 ) . the common stock and warrants were offered by the company pursuant to an effective shelf registration statement . under the terms of the exchange agreement , each investor exchanged each warrant it purchased in the offering for 0.3 shares of common stock . accordingly , the company issued an aggregate of 56,250 shares of common stock in exchange for the return and cancellation of 187,500 warrants . 47 during the year ended october 31 , 2017 , certain employees exercised their options at a weighted-average exercise price of $ 4.84 in exchange for the company 's common stock for an aggregated amount of 268,847 shares . off-balance sheet arrangements as of october 31 , 2017 , we had no off-balance sheet arrangements . inflation our management currently believes that inflation has not had , and does not currently have , a material impact on continuing operations .

. cash dividends paid per share were $ 1.465 , $ 1.457 and $ 1.449 during fiscal 2020 , 2019 and 2018 , respectively . total dividend payments amounted to $ 350.1 million , $ 344.4 million and $ 337.5 million during fiscal 2020 , 2019 and 2018 , respectively . a quarterly dividend of $ 0.3675 per share was declared on may 7 , 2020 and will be paid on june 4 , 2020 to stockholders of record as of may 21 , 2020 . we expect the aggregate cash dividend for june 2020 to be approximately $ 90.3 million . our board is free to change our dividend practices at any time and to increase or decrease the dividend paid , or not to pay a dividend on our common stock on the basis of our results of operations , financial condition , cash requirements and future prospects , and other factors deemed relevant by our board . our current intent is to provide for ongoing quarterly cash dividends depending upon market conditions , our results of operations , and potential changes in tax laws . we believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our revolving credit facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months . however , the semiconductor industry is capital intensive . in order to remain competitive , we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development . we may increase our borrowings under our revolving credit facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities , for cash dividends , for share repurchases or for acquisitions or other purposes .

until their respective appointments , both doctors were associated with johns hopkins university , baltimore , maryland , as full-time residents . on december 1 , 2016 , dr. lough assigned the patent application as well as all related intellectual property to a newly-formed nevada corporation , polarityte , inc. ( “ polarity nv ” ) , and the company entered into an agreement and plan of reorganization ( the “ agreement ” ) with polarity nv and dr. lough . as a result , at closing , the patent application would be owned by the company without the need for further assignments or recordation with the patent trademark office . on april 7 , 2017 , the company issued 7,050 shares of its newly authorized series e preferred stock ( the “ series e preferred shares ” ) convertible into an aggregate of 7,050,000 shares of the company 's common stock with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) to dr. lough for the purchase of polarity nv 's assets . since the assets purchased were in-process research and development assets , the total purchase price was immediately expensed as research and development - intellectual property acquired since they have no alternative future use . polarityte , inc. is aiming to be the first company to deliver regenerative medicine into clinical practice through tissue engineering . subsequent to the acquisition , the company 's platform technology will allow it to regenerate a patient 's tissues using their own cells . research and development expenses . research and development expenses primarily represent employee related costs , including stock compensation , for research and development executives and staff , lab and office expenses and other overhead charges . research and development - intellectual property acquired . on april 7 , 2017 , as payment for the polarity nv asset acquisition , the company issued 7,050 shares of series e preferred stock convertible into an aggregate of 7,050,000 shares of the company 's common stock and with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) . since the assets purchased were in-process research and development assets , the total purchase price was immediately expensed as research and development - intellectual property acquired since they have no alternative future use . general and administrative expenses . general and administrative expenses primarily represent employee related costs , including stock compensation , for corporate executive and support staff , general office expenses , professional fees and various other overhead charges . professional fees , including legal and accounting expenses , typically represent one of the largest components of our general and administrative expenses . these fees are partially attributable to our required activities as a publicly traded company , such as sec filings , and corporate- and business-development initiatives . discontinued operations . on june 23 , 2017 , the company sold majesco entertainment company , a nevada corporation and wholly-owned subsidiary of the company ( “ majesco ” ) to zift interactive llc , a nevada limited liability company ( the “ purchaser ” ) pursuant to a purchase agreement ( the “ agreement ” ) . pursuant to the terms of the agreement , the company sold to the purchaser 100 % of the issued and outstanding shares of common stock of majesco , including all of the right , title and interest in and to majesco 's business of developing , publishing and distributing video game products through both retail distribution and mobile and online digital downloading . pursuant to the terms of the agreement , the company will receive total cash consideration of approximately $ 100,000 ( $ 5,000 upon signing the agreement and 19 additional monthly payments of $ 5,000 ) plus contingent consideration based on net revenues . income taxes . income taxes consist of our provisions for income taxes , as affected by our net operating loss carryforwards . future utilization of our net operating loss , or nol , carryforwards may be subject to a substantial annual limitation due to the “ change in ownership ” provisions of the internal revenue code . the annual limitation may result in the expiration of nol carryforwards before utilization . due to our history of losses , a valuation allowance sufficient to fully offset our nol and other deferred tax assets has been established under current accounting pronouncements , and this valuation allowance will be maintained unless sufficient positive evidence develops to support its reversal . in december 2017 , the federal government enacted numerous amendments to the internal revenue code of 1986 pursuant to an act known by the tax cuts and jobs act ( the “ tcja ” ) . the tcja may impact the company 's income tax expense ( benefit ) from continuing operations in future periods . the company has recorded a full valuation allowance on its net deferred tax assets and therefore any impact on the value of the company 's deferred tax assets will be offset by a change in the valuation allowance . critical accounting estimates our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . story_separator_special_tag dividends are payable quarterly in arrears on the fifteenth ( 15th ) day of the next applicable quarter , to the record holders of the series f preferred stock on the last day of the fiscal quarter immediately preceding the dividend payment date in shares of common stock , calculated using the vwap of the common stock on the ninety ( 90 ) days immediately preceding the dividend record date ; provided , however , that the company may , at its option , pay dividends in cash or in a combination of common shares and cash . upon the liquidation , dissolution or winding up of the business of the company , whether voluntary or involuntary , each holder of preferred shares shall be entitled to receive , for each share thereof , out of assets of the company legally available therefor , a preferential amount in cash equal to ( and not more than ) $ 2,750. on the two ( 2 ) year anniversary of the initial issuance date , any share of series f preferred stock outstanding and not otherwise already converted , shall , at the option of the holder , either ( i ) automatically convert into common stock of the company at the conversion price then in effect or ( ii ) be repaid by the company based on the stated value of such outstanding shares of series f preferred stock . in addition , in the event that the company 's common stock attains a consolidated bid price of $ 45 or greater for any four ( 4 ) trading days during any eight ( 8 ) trading day period , the series f preferred stock shall be automatically converted to common stock , without any further action by the holder ( subject to the conversion limitation in the event that such conversion would result in such holder holding in excess of four and ninety-nine one-hundredths ( 4.99 % ) percent of the common stock of the company ) . the warrants issued in connection with the series f preferred stock are liabilities pursuant to asc 815. the warrant agreement provides for an adjustment to the number of common shares issuable under the warrant and or adjustment to the exercise price , including but not limited to , if : ( a ) the company issues shares of common stock as a dividend or distribution to holders of its common stock ; ( b ) the company subdivides or combines its common stock ( i.e . , stock split ) ; ( c ) adjustment of exercise price upon issuance of new securities at less than the exercise price . under asc 815 , warrants that provide for down-round exercise price protection are recognized as derivative liabilities . the conversion feature within the series f preferred stock is not clearly and closely related to the identified host instrument and , as such , is recognized as a derivative liability measured at fair value pursuant to asc 815. the initial fair value of the warrants and bifurcated embedded conversion feature , estimated to be approximately $ 4.3 million and $ 9.3 million , respectively , was deducted from the gross proceeds of the unit offering to arrive at the initial discounted carrying value of the series f preferred stock . the resulting discount to the aggregate stated value of the series f preferred stock of approximately $ 13.6 million will be recognized as accretion , similar to preferred stock dividends , over the two-year period prior to optional redemption by the holders . the company recognized accretion of the discount to the stated value of the series f preferred stock of approximately $ 369,000 in the year ended october 31 , 2017 as a reduction of additional paid-in capital and an increase in the carrying value of the series f preferred stock . the accretion is presented in the statement of operations as a deemed dividend , increasing net loss to arrive at net loss attributable to common stockholders . 46 preferred share conversion activity during the year ended october 31 , 2017 , 3,991,487 shares of convertible preferred stock series a , 6,512 shares of convertible preferred stock series b , 23,185 shares of convertible preferred stock series c and 129,665 shares of convertible preferred stock series d were converted into 1,590,631 shares of common stock . common stock on january 18 , 2017 , the company entered into separate exchange agreements ( each an “ exchange agreement ” ) with certain accredited investors ( the “ investors ” ) who purchased warrants to purchase shares of the company 's common stock ( the “ warrants ” ) pursuant to the prospectus dated april 13 , 2016. pursuant to the offering , the company issued 250,000 shares of the company 's common stock and warrants to purchase 187,500 shares of common stock ( taking into account the reverse split of the company 's common stock on a 1 for 6 basis effective with the nasdaq stock market llc on august 1 , 2016 ) . the common stock and warrants were offered by the company pursuant to an effective shelf registration statement . under the terms of the exchange agreement , each investor exchanged each warrant it purchased in the offering for 0.3 shares of common stock . accordingly , the company issued an aggregate of 56,250 shares of common stock in exchange for the return and cancellation of 187,500 warrants . 47 during the year ended october 31 , 2017 , certain employees exercised their options at a weighted-average exercise price of $ 4.84 in exchange for the company 's common stock for an aggregated amount of 268,847 shares . off-balance sheet arrangements as of october 31 , 2017 , we had no off-balance sheet arrangements . inflation our management currently believes that inflation has not had , and does not currently have , a material impact on continuing operations .

liquidity and capital resources as of october 31 , 2017 , our cash and cash equivalents balance was $ 17.7 million and our working capital was approximately $ 2.5 million , compared to cash and equivalents of $ 6.5 million and working capital of $ 5.4 million at october 31 , 2016. as reflected in the consolidated financial statements , we had an accumulated deficit of approximately $ 259.0 million at october 31 , 2017 , a loss of approximately $ 130.5 million from continuing operations and approximately $ 7.6 million net cash used in continuing operating activities for the year ended october 31 , 2017. these factors raise substantial doubt about the company 's ability to continue as a going concern . we will continue to pursue fundraising opportunities that meet our long-term objectives , however , our cash position is not sufficient to support our operations through december 2018. the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the company be unable to continue as a going concern . 45 series e preferred shares on april 7 , 2017 , the company issued 7,050 shares of its newly authorized series e preferred stock ( the “ series e preferred shares ” ) convertible into an aggregate of 7,050,000 shares of the company 's common stock with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) to dr. lough for the purchase of the polarity nv 's assets . the preferred e shares are convertible into shares of common stock based on a conversion calculation equal to the stated value of such preferred e shares , plus all accrued and unpaid dividends , if any as of such date of determination , divided by the conversion price .

cargo revenue increased $ 123 million , or 11.0 % , in 2018 as compared to 2017 , primarily due to freight volume and higher yield in the atlantic and pacific markets . other operating revenue increased $ 150 million , or 6.8 % , in 2018 as compared to 2017 , primarily due to increased revenue related to mileageplus miles sales . 25 operating expense the table below includes data related to the company 's operating expense for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_8_th salaries and related costs increased $ 517 million , or 4.7 % , in 2018 as compared to 2017 , primarily due to higher pay rates , higher benefit expenses ( primarily health and pension costs ) , and a 0.7 % increase in average full-time employees . aircraft fuel expense increased $ 2.4 billion , or 34.6 % , in 2018 as compared to 2017 , primarily due to increased fuel prices and a 4.9 % increase in capacity . the table below presents the significant changes in aircraft fuel cost per gallon for the years ended december 31 ( in millions , except percentage changes and per gallon data ) : replace_table_token_9_th regional capacity purchase costs increased $ 369 million , or 16.5 % , in 2018 as compared to 2017 , primarily due to increased flying related to the company 's initiative to improve connectivity at its domestic hubs , as well as rate increases under various capacity purchase agreements ( `` cpas `` ) with regional carriers . landing fees and other rent increased $ 119 million , or 5.3 % , in 2018 as compared to 2017 , primarily due to increased rates and our capacity growth . depreciation and amortization increased $ 91 million , or 4.2 % , in 2018 as compared to 2017 , primarily due to additions of new and used aircraft , aircraft improvements and increases in information technology infrastructure and application development projects . aircraft maintenance materials and outside repairs decreased $ 89 million , or 4.8 % , in 2018 as compared to 2017 , primarily due to optimization of fleet retirement schedules and related maintenance costs for those aircraft and timing of certain maintenance events . distribution expenses increased $ 123 million , or 8.6 % , in 2018 as compared to 2017 , primarily due to higher credit card and travel agency booking fees as a result of the overall increase in passenger revenue . aircraft rent decreased $ 188 million , or 30.3 % , in 2018 as compared to 2017 , primarily due to the purchase of leased aircraft , conversion of certain operating leases to capital leases and lease term expirations . the table below presents special charges incurred by the company during the years ended december 31 ( in millions ) : 26 replace_table_token_10_th see note 14 to the financial statements included in part ii , item 8 of this report for additional information . other operating expenses increased $ 251 million , or 4.5 % , in 2018 as compared to 2017 , primarily due to an increase in purchased services related to our airport operations resulting from capacity growth , technology initiatives , facility projects , crew-related lodging and trucking and handling of cargo shipments . nonoperating income ( expense ) the following table illustrates the year-over-year dollar and percentage changes in the company 's nonoperating income ( expense ) for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_11_th interest expense increased $ 58 million , or 8.6 % , in 2018 as compared to 2017 , primarily due to debt issued for the acquisition of new aircraft and the conversion of certain operating leases to capital leases . interest income increased $ 44 million , or 77.2 % , in 2018 as compared to 2017 , primarily due to increased interest rates . miscellaneous , net decreased $ 25 million , or 24.8 % , in 2018 as compared to 2017 , primarily due to a decrease in pension benefit costs that was partially offset by an increase in foreign exchange losses and an increase in equity earnings from affiliates . 2017 compared to 2016 operating revenue the table below illustrates the year-over-year percentage change in the company 's operating revenues for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_12_th the table below presents selected passenger revenue and operating data of the company , broken out by geographic region , expressed as year-over-year changes : 27 increase ( decrease ) in 2017 from 2016 ( a ) : domestic atlantic pacific latin total passenger revenue ( in millions ) $ 885 $ 117 $ ( 144 ) $ 173 $ 1,031 passenger revenue 4.4 % 2.0 % ( 3.2 ) % 5.8 % 3.1 % average fare per passenger 0.2 % 1.5 % ( 0.1 ) % 4.0 % ( 0.3 ) % yield ( 0.3 ) % 1.1 % ( 2.4 ) % 4.1 % 0.2 % prasm ( 0.5 ) % 1.6 % ( 6.0 ) % 3.3 % ( 0.4 ) % passengers 4.2 % 0.5 % ( 3.1 ) % 1.7 % 3.4 % rpms ( traffic ) 4.7 % 0.9 % ( 0.9 ) % 1.6 % 2.8 % asms ( capacity ) 4.9 % 0.4 % 2.9 % 2.4 % 3.5 % passenger load factor ( points ) ( 0.2 ) 0.4 ( 3.0 ) ( 0.7 ) ( 0.5 ) ( a ) see part ii , item 6 , selected financial data , of this report for the definition of these statistics . passenger revenue increased $ 1.0 billion , or 3.1 % , in 2017 as compared to 2016 , primarily due to a 2.8 % increase in traffic . prasm decreased 0.4 % in 2017 as compared to 2016 . story_separator_special_tag at december 31 , 2018 , the company had $ 3.5 billion of floating rate debt and $ 27 million of fixed rate debt , with remaining terms of up to 12 years , that are subject to these increased cost provisions . in several financing transactions involving loans or leases from non-u.s. entities , with remaining terms of up to 12 years and an aggregate balance of $ 3.2 billion , the company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-u.s. entities to withholding taxes , subject to customary exclusions . fuel consortia . united participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage . interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage . the consortia ( and in limited cases , the participating carriers ) have entered into long-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax-exempt bonds , either special facilities lease revenue bonds or general airport revenue bonds , issued by various local municipalities . in general , each consortium lease agreement requires the consortium to make lease payments in amounts sufficient to pay the maturing principal and interest payments on the bonds . as of december 31 , 2018 , approximately $ 1.7 billion principal amount of such bonds were secured by significant fuel facility leases in which united participates , as to which united and each of the signatory airlines has provided indirect guarantees of the debt . as of december 31 , 2018 , the company 's contingent exposure was approximately $ 164 million principal amount of such bonds based on its recent consortia participation . the company 's contingent exposure could increase if the participation of other air carriers decreases . the guarantees will expire when the tax-exempt bonds are paid in full , which ranges from 2022 to 2051 . the company did not record a liability at the time these indirect guarantees were made . critical accounting policies critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions . the company has prepared the financial statements in conformity with accounting principles generally accepted in the united states of america ( `` gaap `` ) , which requires management to make estimates and assumptions that affect the reported amounts in the financial statements . actual results could differ from those estimates under different assumptions or conditions . the company has identified the following critical accounting policies that impact the preparation of the financial statements . frequent flyer accounting . united 's mileageplus loyalty program builds customer loyalty by offering awards , benefits and services to program participants . members in this program earn miles for travel on united , united express , star alliance members and certain other airlines that participate in the program . members can also earn miles by purchasing the goods and services of our network of non-airline partners . we have contracts to sell miles to these partners with the terms extending from one to eight years . these partners include domestic and international credit card issuers , retail merchants , hotels , car rental companies and our participating airline partners . miles can be redeemed for free ( other than taxes and government imposed fees ) , discounted or upgraded air travel and non-travel awards . miles expire after 18 months of member account inactivity . miles earned in conjunction with travel . when frequent flyers earn miles for flights , the company recognizes a portion of the ticket sales as revenue when the travel occurs and defers a portion of the ticket sale representing the value of the related miles as a separate performance obligation . the company determines the estimated selling price of travel and miles as if each element is sold on a separate basis . the total consideration from each ticket sale is then allocated to each of these elements , individually , on a pro-rata basis . at the time of travel , the company records the portion allocated to the miles to frequent flyer deferred revenue on the company 's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel and non-air travel awards . the company 's estimated selling price of miles is based on an equivalent ticket value less breakage , which incorporates the expected redemption of miles , as the best estimate of selling price for these miles . the equivalent ticket value is based on the prior 12 months ' weighted average equivalent ticket value of similar fares as those used to settle award redemptions while 34 taking into consideration such factors as redemption pattern , cabin class , loyalty status and geographic region . the estimated selling price of miles is adjusted by breakage that considers a number of factors , including redemption patterns of various customer groups . the company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns . the company 's estimate of the expected expiration of miles requires significant management judgment . current and future changes to expiration assumptions or to the expiration policy , or to program rules and program redemption opportunities , may result in material changes to the deferred revenue balance as well as recognized revenues from the program . for the portion of the outstanding miles that we estimate will not be redeemed , we recognize the associated value proportionally as the remaining miles are redeemed . co-brand agreement . united has a significant contract ( the `` co-brand agreement `` ) to sell mileageplus miles to its co-branded credit card partner chase bank usa ,

liquidity and capital resources as of october 31 , 2017 , our cash and cash equivalents balance was $ 17.7 million and our working capital was approximately $ 2.5 million , compared to cash and equivalents of $ 6.5 million and working capital of $ 5.4 million at october 31 , 2016. as reflected in the consolidated financial statements , we had an accumulated deficit of approximately $ 259.0 million at october 31 , 2017 , a loss of approximately $ 130.5 million from continuing operations and approximately $ 7.6 million net cash used in continuing operating activities for the year ended october 31 , 2017. these factors raise substantial doubt about the company 's ability to continue as a going concern . we will continue to pursue fundraising opportunities that meet our long-term objectives , however , our cash position is not sufficient to support our operations through december 2018. the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the company be unable to continue as a going concern . 45 series e preferred shares on april 7 , 2017 , the company issued 7,050 shares of its newly authorized series e preferred stock ( the “ series e preferred shares ” ) convertible into an aggregate of 7,050,000 shares of the company 's common stock with a fair value of approximately $ 104.7 million which is equal to 7,050,000 common shares times $ 14.85 ( the closing price of the company 's common stock as of april 7 , 2017 ) to dr. lough for the purchase of the polarity nv 's assets . the preferred e shares are convertible into shares of common stock based on a conversion calculation equal to the stated value of such preferred e shares , plus all accrued and unpaid dividends , if any as of such date of determination , divided by the conversion price .

cargo revenue increased $ 123 million , or 11.0 % , in 2018 as compared to 2017 , primarily due to freight volume and higher yield in the atlantic and pacific markets . other operating revenue increased $ 150 million , or 6.8 % , in 2018 as compared to 2017 , primarily due to increased revenue related to mileageplus miles sales . 25 operating expense the table below includes data related to the company 's operating expense for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_8_th salaries and related costs increased $ 517 million , or 4.7 % , in 2018 as compared to 2017 , primarily due to higher pay rates , higher benefit expenses ( primarily health and pension costs ) , and a 0.7 % increase in average full-time employees . aircraft fuel expense increased $ 2.4 billion , or 34.6 % , in 2018 as compared to 2017 , primarily due to increased fuel prices and a 4.9 % increase in capacity . the table below presents the significant changes in aircraft fuel cost per gallon for the years ended december 31 ( in millions , except percentage changes and per gallon data ) : replace_table_token_9_th regional capacity purchase costs increased $ 369 million , or 16.5 % , in 2018 as compared to 2017 , primarily due to increased flying related to the company 's initiative to improve connectivity at its domestic hubs , as well as rate increases under various capacity purchase agreements ( `` cpas `` ) with regional carriers . landing fees and other rent increased $ 119 million , or 5.3 % , in 2018 as compared to 2017 , primarily due to increased rates and our capacity growth . depreciation and amortization increased $ 91 million , or 4.2 % , in 2018 as compared to 2017 , primarily due to additions of new and used aircraft , aircraft improvements and increases in information technology infrastructure and application development projects . aircraft maintenance materials and outside repairs decreased $ 89 million , or 4.8 % , in 2018 as compared to 2017 , primarily due to optimization of fleet retirement schedules and related maintenance costs for those aircraft and timing of certain maintenance events . distribution expenses increased $ 123 million , or 8.6 % , in 2018 as compared to 2017 , primarily due to higher credit card and travel agency booking fees as a result of the overall increase in passenger revenue . aircraft rent decreased $ 188 million , or 30.3 % , in 2018 as compared to 2017 , primarily due to the purchase of leased aircraft , conversion of certain operating leases to capital leases and lease term expirations . the table below presents special charges incurred by the company during the years ended december 31 ( in millions ) : 26 replace_table_token_10_th see note 14 to the financial statements included in part ii , item 8 of this report for additional information . other operating expenses increased $ 251 million , or 4.5 % , in 2018 as compared to 2017 , primarily due to an increase in purchased services related to our airport operations resulting from capacity growth , technology initiatives , facility projects , crew-related lodging and trucking and handling of cargo shipments . nonoperating income ( expense ) the following table illustrates the year-over-year dollar and percentage changes in the company 's nonoperating income ( expense ) for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_11_th interest expense increased $ 58 million , or 8.6 % , in 2018 as compared to 2017 , primarily due to debt issued for the acquisition of new aircraft and the conversion of certain operating leases to capital leases . interest income increased $ 44 million , or 77.2 % , in 2018 as compared to 2017 , primarily due to increased interest rates . miscellaneous , net decreased $ 25 million , or 24.8 % , in 2018 as compared to 2017 , primarily due to a decrease in pension benefit costs that was partially offset by an increase in foreign exchange losses and an increase in equity earnings from affiliates . 2017 compared to 2016 operating revenue the table below illustrates the year-over-year percentage change in the company 's operating revenues for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_12_th the table below presents selected passenger revenue and operating data of the company , broken out by geographic region , expressed as year-over-year changes : 27 increase ( decrease ) in 2017 from 2016 ( a ) : domestic atlantic pacific latin total passenger revenue ( in millions ) $ 885 $ 117 $ ( 144 ) $ 173 $ 1,031 passenger revenue 4.4 % 2.0 % ( 3.2 ) % 5.8 % 3.1 % average fare per passenger 0.2 % 1.5 % ( 0.1 ) % 4.0 % ( 0.3 ) % yield ( 0.3 ) % 1.1 % ( 2.4 ) % 4.1 % 0.2 % prasm ( 0.5 ) % 1.6 % ( 6.0 ) % 3.3 % ( 0.4 ) % passengers 4.2 % 0.5 % ( 3.1 ) % 1.7 % 3.4 % rpms ( traffic ) 4.7 % 0.9 % ( 0.9 ) % 1.6 % 2.8 % asms ( capacity ) 4.9 % 0.4 % 2.9 % 2.4 % 3.5 % passenger load factor ( points ) ( 0.2 ) 0.4 ( 3.0 ) ( 0.7 ) ( 0.5 ) ( a ) see part ii , item 6 , selected financial data , of this report for the definition of these statistics . passenger revenue increased $ 1.0 billion , or 3.1 % , in 2017 as compared to 2016 , primarily due to a 2.8 % increase in traffic . prasm decreased 0.4 % in 2017 as compared to 2016 . story_separator_special_tag at december 31 , 2018 , the company had $ 3.5 billion of floating rate debt and $ 27 million of fixed rate debt , with remaining terms of up to 12 years , that are subject to these increased cost provisions . in several financing transactions involving loans or leases from non-u.s. entities , with remaining terms of up to 12 years and an aggregate balance of $ 3.2 billion , the company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non-u.s. entities to withholding taxes , subject to customary exclusions . fuel consortia . united participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage . interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage . the consortia ( and in limited cases , the participating carriers ) have entered into long-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax-exempt bonds , either special facilities lease revenue bonds or general airport revenue bonds , issued by various local municipalities . in general , each consortium lease agreement requires the consortium to make lease payments in amounts sufficient to pay the maturing principal and interest payments on the bonds . as of december 31 , 2018 , approximately $ 1.7 billion principal amount of such bonds were secured by significant fuel facility leases in which united participates , as to which united and each of the signatory airlines has provided indirect guarantees of the debt . as of december 31 , 2018 , the company 's contingent exposure was approximately $ 164 million principal amount of such bonds based on its recent consortia participation . the company 's contingent exposure could increase if the participation of other air carriers decreases . the guarantees will expire when the tax-exempt bonds are paid in full , which ranges from 2022 to 2051 . the company did not record a liability at the time these indirect guarantees were made . critical accounting policies critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions . the company has prepared the financial statements in conformity with accounting principles generally accepted in the united states of america ( `` gaap `` ) , which requires management to make estimates and assumptions that affect the reported amounts in the financial statements . actual results could differ from those estimates under different assumptions or conditions . the company has identified the following critical accounting policies that impact the preparation of the financial statements . frequent flyer accounting . united 's mileageplus loyalty program builds customer loyalty by offering awards , benefits and services to program participants . members in this program earn miles for travel on united , united express , star alliance members and certain other airlines that participate in the program . members can also earn miles by purchasing the goods and services of our network of non-airline partners . we have contracts to sell miles to these partners with the terms extending from one to eight years . these partners include domestic and international credit card issuers , retail merchants , hotels , car rental companies and our participating airline partners . miles can be redeemed for free ( other than taxes and government imposed fees ) , discounted or upgraded air travel and non-travel awards . miles expire after 18 months of member account inactivity . miles earned in conjunction with travel . when frequent flyers earn miles for flights , the company recognizes a portion of the ticket sales as revenue when the travel occurs and defers a portion of the ticket sale representing the value of the related miles as a separate performance obligation . the company determines the estimated selling price of travel and miles as if each element is sold on a separate basis . the total consideration from each ticket sale is then allocated to each of these elements , individually , on a pro-rata basis . at the time of travel , the company records the portion allocated to the miles to frequent flyer deferred revenue on the company 's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel and non-air travel awards . the company 's estimated selling price of miles is based on an equivalent ticket value less breakage , which incorporates the expected redemption of miles , as the best estimate of selling price for these miles . the equivalent ticket value is based on the prior 12 months ' weighted average equivalent ticket value of similar fares as those used to settle award redemptions while 34 taking into consideration such factors as redemption pattern , cabin class , loyalty status and geographic region . the estimated selling price of miles is adjusted by breakage that considers a number of factors , including redemption patterns of various customer groups . the company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns . the company 's estimate of the expected expiration of miles requires significant management judgment . current and future changes to expiration assumptions or to the expiration policy , or to program rules and program redemption opportunities , may result in material changes to the deferred revenue balance as well as recognized revenues from the program . for the portion of the outstanding miles that we estimate will not be redeemed , we recognize the associated value proportionally as the remaining miles are redeemed . co-brand agreement . united has a significant contract ( the `` co-brand agreement `` ) to sell mileageplus miles to its co-branded credit card partner chase bank usa ,

debt and capital lease principal payments during the year ended december 31 , 2018 , the company made debt and capital lease principal payments of $ 1.9 billion . significant financing events in 2017 were as follows : share repurchases the company used $ 1.8 billion of cash to purchase approximately 27.8 million shares of its common stock during 2017 , completing its july 2016 repurchase authorization . in december 2017 , ual 's board of directors authorized a new $ 3.0 billion share repurchase program to acquire ual 's common stock . as of december 31 , 2017 , the company had approximately $ 3.0 billion remaining to purchase shares under its share repurchase program . debt issuances during 2017 , united received and recorded $ 1.8 billion of proceeds as debt related to enhanced equipment trust certificate ( `` eetc '' ) offerings created in 2016 and 2017 to finance the purchase of aircraft . in 2017 , ual issued , and united guaranteed , ( i ) $ 400 million aggregate principal amount of unsecured 4.25 % senior notes due october 1 , 2022 , and ( ii ) $ 300 million aggregate principal amount of unsecured 5 % senior notes due february 1 , 2024. in 2017 , united and ual , as borrower and guarantor , respectively , increased the term loan under the credit agreement by approximately $ 440 million . during 2017 , united borrowed approximately $ 497 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2017. debt and capital lease principal payments during the year ended december 31 , 2017 , the company made debt and capital lease principal payments of $ 1.0 billion .

however , we can not assure you that we will be successful in accomplishing any of these plans and , if we are unable to obtain adequate capital , we could be forced to cease operations . finally , the acquisition of the acueity assets may become a complement to our current business at some point in the future . we are not currently allocating human or financial resources to these assets , with the exception of approximately $ 50,000 for patent maintenance fees and application prosecution expenses related to the acueity asset purchase . following the launch of our four diagnostic tests in the u.s. , we will then begin to allocate human and financial resources to further develop and ultimately commercialize these medical devices . we intend to complete the steps necessary to begin marketing and selling these tools , such as re-establishment of the supply chain of component parts , securing manufacturers , performing test builds and commercial scale manufacturing , in late 2013. this asset purchase is not expected to have an impact on the development and commercialization timetables of our existing product lines . we can not , however , provide any assurances that delays related to the launch of our four diagnostic tests , independent of this asset purchase , would not delay the expected development of these diagnostic tools or that we will ultimately be successful selling these tools . on march 27 , 2013 we entered into a stock purchase agreement with aspire capital fund , llc , which provides that , upon the terms and subject to the conditions and limitations set forth therein , aspire is committed to purchase up to an aggregate of $ 30 million of shares of our common stock over the three-year term of the agreement . under the agreement , aspire purchased $ 1,000,000 of our common stock on march 27 , 2013 for $ 12 per share . before we can sell any additional shares under the agreement , we must register the shares and have the registration statement declared effective by the sec . revenue sources the commercialization of the forecyte test provides us with two revenue sources : ( i ) sales-based revenue from the sale of the masct system device and patient kits to distributors , physicians , breast health clinics , and mammography clinics and ( ii ) service , or use-based , revenue from the preparation and interpretation of the naf samples sent to our laboratory for analysis . the commercialization of the arguscyte test provides only laboratory service revenue . 41 commencing in december 2011 , we began to market the forecyte test to physicians , primarily obstetric-gynecologists , as well as breast health and mammography clinics , for use in conjunction with other health screening examinations , including annual physical examinations and regularly scheduled cervical pap smears and mammograms . we are establishing relationships with breast cancer centers to provide the arguscyte test to their patients . we plan to initially use regional specialty product distributors , with independent sale representatives specializing in women 's health , to commercialize the forecyte and arguscyte tests . as of december 31 , 2012 , we have entered an agreement with clarity women 's health , a division of diagnostic test group llc ( dtg ) ; however , we can not be certain that we will be able to build distributor relationships , including our relationship with dtg , adequately to address the national market . in addition to dr. quay , in april 2012 we hired a board-certified pathologist part-time to assist in the interpretation of the naf samples . commercial lease agreements on september 29 , 2010 , the company entered into a commercial lease agreement with complegen , inc. for laboratory space located in seattle , wa . the lease provides for monthly rent of $ 3,658 and a security deposit of $ 3,658. the lease terms are from september 29 , 2010 through march 31 , 2011 , at which time the lease has converted to month to month unless two months ' prior written notice of the intent to terminate the agreement is given . the monthly rent for the lease increased to $ 4,267 commencing january 2012. for the twelve months ended december 31 , 2012 , the company incurred $ 46,529 of rent expense for the lease . the lease was terminated in december 2012 , and the rental deposit was applied to the rent of the final month . on march 4 , 2011 , the company entered into a commercial lease agreement with sanders properties , llc for office space located in seattle , wa . the lease provides for monthly rent of $ 1,100 and a security deposit of $ 1,500. the lease terms are from april 1 , 2011 through march 31 , 2013. for the twelve months ended december 31 , 2012 , the company incurred $ 13,200 of rent expense for the lease . on july 9 , 2011 , the company entered into a commercial lease agreement with sanders properties , llc for additional office space located in seattle , wa . the lease provides for monthly rent of $ 600 and a security deposit of $ 1,200. the lease terms are from july 11 , 2011 through july 31 , 2012. for the twelve months ended december 31 , 2012 , the company incurred $ 4,200 of rent expense for the lease . this lease terminated on july 31 , 2012 and was not renewed . on september 27 , 2011 , the company entered into another commercial lease agreement with sanders properties , llc for additional office space located in seattle , wa . story_separator_special_tag total cost of revenue was $ 35,745 , primarily attributable to cost of diagnostic testing services performed , which consisted of $ 35,745 in payments to doctors for their time administering the forecyte testing service . since the inventory of masct system was recorded at zero net realizable value as a result of the lower of cost or market analysis performed at december 31 , 2011 , no corresponding cost of goods sold was recorded for the sales of masct system for the twelve months ended december 31 , 2012. gross profit was $ 439,657 for the diagnostic testing service and $ 6,440 for the product sales of masct system with no corresponding cost of goods sold . loss on reduction of inventory to lower of cost or market was $ 29,884 for the twelve months ended december 31 , 2012 , primarily due to write-off of parts purchased during the year for the assembly of masct system , which was determined at zero net realizable value as a result of lower of cost or market analysis performed at december 31 , 2012. our masct system is currently sold at a price substantially lower than its cost to encourage sales and because the masct system is currently manufactured by our suppliers only in small quantities . for these reasons , the manufacturing cost allocated to each inventory unit is high . for 2012 , total operating expenses were $ 5,485,243 , consisting of g & a expenses of $ 5,018,422 and selling expenses of $ 466,821 , which included $ 55,282 of cost of forecyte and arguscyte testing specimen collection kits that were immediately expensed upon purchase during the quarter . during the initial marketing phase , the company has decided to distribute the kits to customers at no cost and bundle them with the masct system and has not intended to deem the kits as a primary product line due to their nominal cost and value per unit . the selling expenses also included $ 266,698 in salaries and $ 114,822 in advertising . the g & a expenses consisted primarily of $ 350,914 in salaries and bonus expense , $ 1,072,992 in legal expense , $ 229,838 in consulting expense , $ 232,291 in accounting expense , $ 40,868 in travel expense , $ 86,489 in payroll taxes , $ 166,614 in professional fees , $ 84,624 in health insurance expense and $ 113,400 in business insurance . also included in g & a expense is $ 1,976,638 in research and development expense , consisting primarily of $ 645,901 in salaries and bonus expense , $ 246,950 in rent expense , $ 27,853 in laboratory supplies , $ 130,040 in masct system development , $ 244,203 in masct system service development , $ 489,778 in ductal lavage product development , $ 39,789 in ductal lavage service development and $ 34,649 in circulating tumor cells service development . 45 comparison of the twelve months ended december 31 , 2012 and 2011 revenue and cost of goods sold . for the twelve months ended december 31 , 2012 , we had total revenue of $ 481,842 , consisting of $ 6,440 product revenue from sales of masct systems and $ 475,402 diagnostic testing service revenue from our forecyte and arguscyte testing services performed . this compares to total revenue of $ 1,500 for the twelve months ended december 31 , 2011. total cost of goods sold was $ 5,164 and consisted of $ 4,158 in direct costs related to the production of the masct systems which were sold , and $ 1,006 in costs of goods sold for items expensed when purchased . since the inventory of masct system was recorded at zero net realizable value as a result of the lower of cost or market analysis performed at december 31 , 2011 , no corresponding cost of goods sold was recorded for the sales of masct system for the twelve months ended december 31 , 2012. gross profit for the twelve months ended december 31 , 2012 was $ 416,213 for the diagnostic testing service and $ 6,440 for the product sales of masct system with no corresponding cost of goods sold . this compares to gross profit of ( $ 95,690 ) for the twelve months ended december 31 , 2011. loss on reduction of inventory to lower of cost or market was $ 29,884 for the twelve months ended december 31 , 2012 , primarily due to write-off of parts purchased during the year for the assembly of masct system which was determined at zero net realizable value as a result of lower of cost or market analysis at december 31 , 2011 and december 31 , 2012. our masct system is currently sold at a price substantially lower than its cost to encourage sales and because the masct system is currently manufactured by our suppliers only in small quantities . for these reasons , the manufacturing cost allocated to each inventory unit is high . as discussed below , we expect that our r & d and g & a expenses will continue to increase in the foreseeable future , and that if we successfully launch the masct system and our related laboratory service offerings , we would also begin to incur sales and marketing expenses as we build a regional , and ultimately national , sales force . we may limit our fixed sales and marketing costs initially by using third party distributors and employing temporary workers or those who are compensated on a commission basis . however , we expect our expenditures to increase significantly in future periods . operating expenses . total operating expenses were $ 5,485,243 for the twelve months ended december 31 , 2012 , consisting of g & a expenses of $ 5,018,422 and selling expenses of $ 466,821 , which included $ 55,282 of cost of forecyte and arguscyte testing specimen collection kits that were immediately expensed upon purchase

debt and capital lease principal payments during the year ended december 31 , 2018 , the company made debt and capital lease principal payments of $ 1.9 billion . significant financing events in 2017 were as follows : share repurchases the company used $ 1.8 billion of cash to purchase approximately 27.8 million shares of its common stock during 2017 , completing its july 2016 repurchase authorization . in december 2017 , ual 's board of directors authorized a new $ 3.0 billion share repurchase program to acquire ual 's common stock . as of december 31 , 2017 , the company had approximately $ 3.0 billion remaining to purchase shares under its share repurchase program . debt issuances during 2017 , united received and recorded $ 1.8 billion of proceeds as debt related to enhanced equipment trust certificate ( `` eetc '' ) offerings created in 2016 and 2017 to finance the purchase of aircraft . in 2017 , ual issued , and united guaranteed , ( i ) $ 400 million aggregate principal amount of unsecured 4.25 % senior notes due october 1 , 2022 , and ( ii ) $ 300 million aggregate principal amount of unsecured 5 % senior notes due february 1 , 2024. in 2017 , united and ual , as borrower and guarantor , respectively , increased the term loan under the credit agreement by approximately $ 440 million . during 2017 , united borrowed approximately $ 497 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2017. debt and capital lease principal payments during the year ended december 31 , 2017 , the company made debt and capital lease principal payments of $ 1.0 billion .