SAFEGUARD SCIENTIFICS INC 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Concerning Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about Safeguard Scientifics, Inc. (“Safeguard” or “we”), the industries in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our forward-looking statements are subject to risks and uncertainties. Factors that could cause actual results to differ materially include, among others, our ability to make good decisions about the deployment of capital, the fact that our partner companies may vary from period to period, our substantial capital requirements and absence of liquidity from our partner company holdings, our ability to service and pay the indebtedness under and remain in compliance with the terms of our credit facility, fluctuations in the market prices of our publicly traded partner company holdings, competition, our inability to obtain maximum value for our partner company holdings, our ability to attract and retain qualified employees, our ability to execute our strategy, market valuations in sectors in which our partner companies operate, our inability to control our partner companies, our need to manage our assets to avoid registration under the Investment Company Act of 1940, and risks associated with our partner companies and their performance, including the fact that most of our partner companies have a limited history and a history of operating losses, face intense competition and may never be profitable, the effect of economic conditions in the business sectors in which our partner companies operate, compliance with government regulation and legal liabilities, all of which are discussed in Item 1A. “Risk Factors.” Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report might not occur. Overview Over the recent past, Safeguard has provided capital and relevant expertise to fuel the growth of technology-driven businesses in healthcare, financial services and digital media. Throughout this document, we use the term “partner company” to generally refer to those companies in which we have a significant equity interest. In many, but not all cases, we will also be actively involved, influencing development through board representation and management support, in addition to the influence we exert through our equity ownership. From time to time, in addition to these partner companies, we also hold relatively small equity interests in other enterprises where we do not exert significant influence and do not participate in management activities. In some cases, these interests relate to former partner companies. In January 2018, Safeguard announced that we will not deploy any capital into new partner company opportunities and will focus on supporting our existing partner companies and maximizing monetization opportunities to enable returning value to shareholders. In that context, we have, are and will consider initiatives including, among others: the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. We anticipate returning value to shareholders after satisfying our debt obligations and working capital needs. Safeguard's existing group of partner companies consists principally of technology-driven businesses in healthcare, financial services and digital media that are capitalizing on the next wave of enabling technologies including enhanced security and predictive analytics. We strive to create long-term value for our shareholders by helping our partner companies to increase their market penetration, grow revenue and improve cash flow. Safeguard typically deploys up to $25 million in a company. Principles of Accounting for Ownership Interests in Partner Companies We account for our interests in our partner companies using one of the following methods: Equity or other. The accounting method applied is generally determined by the degree of our influence over the entity, primarily determined by our voting interest in the entity. Equity Method. We account for partner companies whose results are not consolidated, but over whom we exercise significant influence, using the equity method of accounting. We also account for our interests in some private equity funds 19 Table of Contents under the equity method of accounting, based on our non-controlling general and limited partner interests. Under the equity method of accounting, our share of the income or loss of the partner company is reflected in Equity income (loss) in the Consolidated Statements of Operations. We report our share of the income or loss of the equity method partner companies on a one quarter lag. We include the carrying value of equity method partner companies in Ownership interests in and advances to partner companies on the Consolidated Balance Sheets. When the carrying value of our holdings in an equity method partner company is reduced to zero, no further losses are recorded in our Consolidated Statements of Operations unless we have outstanding guarantee obligations or have committed additional funding to the equity method partner company. When the equity method partner company subsequently reports income, we will not record our share of such income until it equals the amount of our share of losses not previously recognized. Other Method. We account for our equity interests in companies which are not accounted for under the equity method or fair value method as equity securities without readily determinable fair values. We account for of these securities based on our original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Under this method, our share of the income or losses of such companies is not included in our Consolidated Statements of Operations. We include the carrying value of these investments in Ownership interests in and advances to partner companies on the Consolidated Balance Sheets. Critical Accounting Policies and Estimates Accounting policies, methods and estimates are an integral part of the Consolidated Financial Statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly important because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, methods and estimates affecting our financial statements as described in Note 1 to our Consolidated Financial Statements, the most significant relate to impairment of ownership interests in and advances to partner companies. Valuation of Credit facility repayment feature The fair value of the Credit Facility repayment feature is determined quarterly based on the present value of make-whole interest payments that are expected to be paid based on cash flow estimates that include a probability weighted estimate of exit transactions, estimated follow-on deployments, estimated quarterly operating cash flows and other cash commitments that would result in qualified cash exceeding the $50 million threshold specified in the Credit facility. Impairment of Ownership Interests In and Advances to Partner Companies On a periodic basis, but no less frequently than at the end of each quarter, we evaluate the carrying value of our interests in partner companies for possible impairment based on achievement of business plan objectives and milestones, the financial condition and prospects of the company, market conditions and other relevant factors. The business plan objectives and milestones we consider include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are not primarily financial in nature, such as hiring of key employees or the establishment of strategic relationships. We then determine whether there has been an other than temporary decline in the value of our ownership interest in the company. Any impairment to be recognized is measured as the amount by which the carrying value of an asset exceeds its fair value. The adjusted carrying value of a partner company is not increased if circumstances suggest the value of the partner company has subsequently recovered. The fair value of privately held partner companies is generally determined based on the value at which independent third parties have invested or have committed to invest in these companies, or based on other valuation methods including discounted cash flows, valuations of comparable public companies and valuations of acquisitions of comparable companies. Our partner companies operate in industries which are rapidly evolving and extremely competitive. It is reasonably possible that our accounting estimates with respect to the ultimate recoverability of the carrying value of ownership interests in and advances to partner companies could change in the near term and that the effect of such changes on our Consolidated Financial Statements could be material. While we believe that the current recorded carrying values of our equity and other method companies are not impaired, there can be no assurance that our future results will confirm this assessment or that a significant write-down or write-off will not be required in the future. Total impairment charges related to ownership interests in and advances to our equity and cost method partner companies were as follows: 20 Table of Contents Year Ended December 31, Accounting Method 2018 2017 (In thousands) Equity $ 12,626 $ 15,993 Other 1,097 216 Total $ 13,723 $ 16,209 Impairment charges related to equity method partner companies are included in Equity income (loss) in the Consolidated Statements of Operations. Impairment charges related to other investments are included in Other income (loss), net in the Consolidated Statements of Operations. In addition to ownership interests in our partner companies, we also maintain an interest in the management company and general partner of Penn Mezzanine, a mezzanine lender focused on lower middle-market, Mid-Atlantic companies. Through our relationship with Penn Mezzanine, we acquired participating interests in mezzanine loans and related equity interests of the borrowers. Penn Mezzanine is not making any new loans and we have no remaining loans in which we have participating interests. The carrying value of our remaining participating interests in debt and equity securities associated with Penn Mezzanine was zero as of December 31, 2018 and 2017. During the year ended December 31, 2017, we recorded a $0.4 million loss on impairment of our Penn Mezzanine debt and equity participations in Other income (loss), net in the Consolidated Statements of Operations. Results of Operations We operate as one operating segment based upon the similar nature of our technology-driven partner companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources. There is intense competition in the markets in which our partner companies operate. Additionally, the markets in which these companies operate are characterized by rapidly changing technology, evolving industry standards, frequent introduction of new products and services, shifting distribution channels, evolving government regulation, frequently changing intellectual property landscapes and changing customer demands. Their future success depends on each company’s ability to execute its business plan and to adapt to its respective rapidly changing market. As previously stated, throughout this document, we use the term “partner company” to generally refer to those companies in which we have an economic interest and in which we, generally, but not in all cases, are actively involved, influencing development, usually through board representation, in addition to our equity ownership. The following listing of our partner companies only include entities which were considered partner companies as of December 31, 2018 . Certain entities which may have been partner companies in previous periods are omitted if, as of December 31, 2018 , they had been sold or are no longer considered a partner company. 21 Table of Contents Safeguard Primary Ownership as of December 31, Partner Company 2018 2017 Accounting Method Aktana, Inc. 18.9% 24.5% Equity Brickwork *** 20.3% 20.3% Equity Clutch Holdings, Inc. 41.2% 42.7% Equity Flashtalking * 10.1% N/A Other Hoopla Software, Inc. 25.5% 25.5% Equity InfoBionic, Inc. 25.4% 39.5% Equity Lumesis, Inc. 43.7% 43.8% Equity MediaMath, Inc. ** 13.4% 20.5% Other meQuilibrium 33.1% 36.2% Equity Moxe Health Corporation 32.4% 32.4% Equity NovaSom, Inc. 31.7% 31.7% Equity Prognos Health Inc. 28.7% 28.7% Equity Propeller *** 19.5% 24.0% Equity QuanticMind, Inc. 24.2% 24.7% Equity Sonobi, Inc. 21.6% 21.6% Equity Syapse, Inc. 20.0% 20.1% Equity T-REX Group, Inc. 21.1% 21.1% Equity Transactis, Inc. 23.7% 23.8% Equity Trice Medical, Inc. 17.4% 24.8% Equity WebLinc, Inc. 38.5% 38.0% Equity Zipnosis, Inc 34.7% 25.4% Equity * Spongecell, Inc. merged into Flashtalking in January 2018. ** The Company sold 39.1% of its ownership interest back to MediaMath, Inc. for $45 million of proceeds in July 2018. *** The Company's ownership interests in Brickwork and Propeller Health were both disposed of, in separate transactions, in January 2019. Year ended December 31, 2018 versus year ended December 31, 2017 Year Ended December 31, 2018 2017 Variance (In thousands) General and administrative expense (16,871 ) $ (17,131 ) $ 260 Other loss, net (5,158 ) (339 ) (4,819 ) Interest income 2,806 3,876 (1,070 ) Interest expense (16,067 ) (8,620 ) (7,447 ) Equity income (loss) 19,661 (66,358 ) 86,019 Net loss $ (15,629 ) $ (88,572 ) $ 72,943 General and Administrative Expense. Our general and administrative expenses consist primarily of employee compensation, insurance, travel-related costs, depreciation, office rent and professional services such as consulting, legal, and accounting. General and administrative expense also includes stock-based compensation expense which consists primarily of expense related to grants of stock options, restricted stock and deferred stock units to our employees and directors. General and administrative expense decreased $0.3 million for the year ended December 31, 2018 compared to the prior year primarily due to a $4.1 million decrease in employee compensation from reduced staffing levels and a decrease of $0.2 million in stock-based compensation mostly related to performance-based awards, which was offset by an increase in severance benefits of $3.3 million, an increase of $0.4 million for depreciation of our leasehold improvements, and higher professional fees of $1.6 22 Table of Contents million related primarily to responding to shareholder proposals. The accelerated depreciation in the fourth quarter of 2018 of approximately $0.5 million is the result of our expectation to exit our current facility by June 2019. Other Loss, net. Other loss, net increased $4.8 million for the year ended December 31, 2018, compared to the prior year. Other loss, net for the year ended December 31, 2018 consists of a $4.5 million loss related to the increase in the fair value of the amended credit facility repayment feature liability derivative and a $1.2 million loss from the decrease in the fair value of escrow shares of Invitae Corporation common stock obtained in connection with the sale of Good Start Genetics in August 2017. These losses were partially offset by a $1.4 million gain on the increase in the value of certain non-partner company equity securities based upon an observable price change. Other loss, net for the year ended December 31, 2017 consists of a $0.5 million decrease in the fair value of escrow shares of Invitae Corporation common stock and a $0.2 million impairment of an interest in a legacy private equity fund, net of a $0.4 million gain on legacy Penn Mezzanine debt and equity participations. Interest Income. Interest income includes all interest earned on available cash and marketable security balances as well as interest earned on notes receivable from our partner companies. Interest income decreased $1.1 million compared to the prior year due to lower average notes receivable from our partner companies partially offset by higher average investment balances in marketable securities during the fourth quarter of 2018. Interest Expense. Interest expense is primarily related to our credit facility and convertible senior debentures. Interest expense increased $7.4 million compared to the prior year primarily due to accelerated interest resulting from the make-whole interest provisions of the credit facility and accelerated debt issue cost amortization both related to the prepayment of debt associated with the credit facility. Equity Income (Loss). Equity income (loss) fluctuates with the number of partner companies accounted for under the equity method, our voting ownership percentage in these partner companies and the net results of operations of these partner companies. We recognize our share of losses to the extent we have cost basis in the equity of the partner company or we have outstanding commitments or guarantees. Certain amounts recorded to reflect our share of the income or losses of our partner companies accounted for under the equity method are based on estimates and on unaudited results of operations of those partner companies and may require adjustments in the future when audits of these entities are made final. We report our share of the results of our equity method partner companies on a one quarter lag basis. Equity income (loss) increased $86.0 million for the year ended December 31, 2018 compared to the prior year. The components of equity income (loss) for the years ended December 31, 2018 and 2017 were as follows: Year ended December 31: 2018 2017 Gain on the sale of partner interests $ 64,172 $ 4,358 Unrealized dilution gains on the decrease of our percentage ownership in partner companies 9,154 5,877 Gain on Spongecell's merger into Flashtalking 3,808 — Gain on proceeds received from escrow 1,838 1,445 Loss on impairment of partner companies (12,626 ) (15,739 ) Share of losses of our equity method partner companies (46,685 ) (62,299 ) $ 19,661 $ (66,358 ) The gain on sale of partner interests for the year ended December 31, 2018 is comprised of MediaMath of $45.0 million, Nexxt (fka Beyond.com) of $9.5 million, AdvantEdge Healthcare Solutions of $5.5 million and Cask Data of $4.2 million. The gain on sale of partner interests for the year ended December 31, 2017 is comprised of Good Start Genetics for $4.3 million and Nexxt (fka Beyond.com) for $0.1 million. The loss on impairment of partner companies for the year ended December 31, 2018 is comprised of Apprenda of $6.6 million, CloudMine of $4.8 million and Brickwork for $1.2 million. The loss on impairment of partner companies for the year ended December 31, 2017 is comprised of Spongecell of $3.6 million, Pneuron of $5.2 million and Full Measure of $7.0 million. The decrease in our share of losses of our equity method partner companies was due to a decrease in the number of partner companies and a decrease in losses associated with our partner companies. 23 Table of Contents Income Tax Benefit (Expense) Income tax benefit (expense) was $0.0 million for the years ended December 31, 2018 and 2017 . We have recorded a valuation allowance to reduce our net deferred tax asset to an amount that is more likely than not to be realized in future years. Accordingly, the benefit of the net operating loss that would have been recognized in each year was offset by changes in the valuation allowance. Liquidity And Capital Resources As of December 31, 2018, the Company had $7.7 million of cash and cash equivalents and $38.0 million of marketable securities for a total of $45.7 million . As of December 31, 2018, the Company had $ 68,600,000.0 million of principal outstanding on its Amended Credit Facility (as defined below) due in May 2020. In January 2018, the Company announced that, from that date forward, we will not deploy any capital into new partner company opportunities and will focus on supporting our existing partner companies and maximizing monetization opportunities to return value to shareholders. In that context, we have, are and will consider initiatives including, among others: the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. We anticipate returning value to shareholders from the sale of partner companies or partner company interests, as applicable, after satisfying our debt obligations and working capital needs. In connection with our change in strategy, in January 2018, we implemented an initiative to reduce the operating costs of the Company. In April 2018, the Company announced additional management changes intended to further streamline the Company's organizational structure and further reduce its operating costs. In connection with the changes that the Company has implemented, the Company has incurred approximately $2.8 million of severance payments to terminated employees and will pay an additional $1.2 million in 2019. As of December 31, 2018, the Company had $68.6 million of principal outstanding on its revolving credit facility with HPS Investment Partners, LLC ("Lender") due in May 2020. The Credit Facility requires the Company to maintain (i) a liquidity threshold of at least $20 million of unrestricted cash; (ii) a minimum aggregate appraised value of ownership interests in its partner companies, plus unrestricted cash in excess of the liquidity threshold, of at least $350 million less the aggregate amount of all prepayments of the Term Loan; (iii) limit deployments to only existing partner companies and such deployments may not exceed, when combined with deployments after January 1, 2018, $40 million in the aggregate through the maturity date; (iv) limit certain expenses (which shall exclude severance payments, interest expense, depreciation and stock-based compensation) incurred or paid to no more than $11.5 million in any twelve-month period after the date of the amendment (or such shorter period as has elapsed since the date of the amendment). Additionally, the Company is restricted from repurchasing shares of its outstanding common stock and/or issuing dividends until such time as the Credit Facility is repaid in full. As of the date these consolidated financial statements were issued, the Company was in compliance with all of these covenants. Repayment terms under the Credit Facility include a make-whole interest provision equal to the interest that would have been payable had the principal amount subject to repayment been outstanding through the maturity date. If the aggregated amount of the Company's qualified cash at any quarter end exceeds $50.0 million, the Company will be required to prepay outstanding principal amounts, plus any applicable accrued and make-whole interest, in an amount equal to 100% of such excess. The Company anticipates exceeding the qualified cash threshold at March 31, 2019 and making an applicable required prepayment during the second quarter of 2019. The Company funds its operations with cash and marketable securities on hand as well as proceeds from the sales of its interests in its partner companies. Due to the nature of the mergers and acquisitions market, and the developmental cycle of companies like the Company's partner companies, the Company's ability to generate specific amounts of liquidity from sales of its partner company interests in any given period of time cannot be assured. Accordingly, the forecasts which the Company utilizes for projecting future compliance with covenants related to its Credit Facility include significantly discounted probability-weighted proceeds from the sales of its interests in its partner companies. Based on these forecasts, management believes the Company will remain in compliance with all its debt covenants. Non-compliance with any of the covenants would constitute an event of default under the Credit Facility, and the Lender could choose to accelerate the maturity of the indebtedness. If the Lender chose not to provide a waiver and were to accelerate the maturity of the indebtedness, the Company would not have sufficient liquidity to repay the entire balance of its outstanding borrowings and other obligations under the Credit Facility. In order for the Company to maintain compliance with these covenants, the Company's plan includes selling certain of its partner company interests in the ordinary course of its business and limiting capital deployments to existing partner companies. Should the Company not be in compliance with any of its debt covenants and be unable to obtain waivers for such events of default, management would pursue one of a number of potential alternatives to satisfy the obligations, including completing an 24 Table of Contents equity offering or obtaining a new debt facility to refinance its existing debt. The Company believes that its cash, cash equivalents and marketable securities at December 31, 2018 will be sufficient to fund operations past one year from the issuance of these financial statements. In 2017, we repurchased on the open market, and retired, an aggregate of $14.0 million face value of 2018 Debentures at a cost of $14.5 million, including transaction fees. In connection with the repurchase of these 2018 Debentures, we recognized a $0.8 million reduction in equity which is included in Accumulated Paid-In Capital in the Consolidated Balance Sheet as of December 31, 2017 and a $29 thousand loss on extinguishment of the liability which is included in Other income (loss), net in the Consolidated Statements of Operations for the twelve months ended December 31, 2017. In 2018, we extinguished the remaining $41.0 million face value of 2018 Debentures outstanding. We previously provided a $6.3 million letter of credit to the landlord of CompuCom Systems, Inc.’s Dallas headquarters as required in connection with the sale of CompuCom Systems in 2004. The letter of credit was secured by cash and was classified as Long-term restricted cash equivalents on the Consolidated Balance Sheet as of December 31, 2017. During the first quarter of 2018, the restriction on the cash lapsed in connection with the termination of the related letter of credit. In 2015, the Company's Board of Directors authorized us, from time to time and depending on market conditions, to repurchase up to $25.0 million of the Company's outstanding common stock. During the years ended December 31, 2018 and 2017, we did not repurchase any shares under this authorization. We are required to return a portion or all the distributions we received as a general partner of a private equity fund for further distribution to such fund's limited partners (“clawback”). Our ownership in the fund is 19%. The clawback liability is joint and several, such that we may be required to fund the clawback for other general partners should they default. We were notified by the fund's manager that the fund is being dissolved and $1.0 million of our clawback liability was paid in the first quarter of 2017. The maximum additional clawback liability is $0.3 million which was reflected in Other long-term liabilities on the Consolidated Balance Sheet at December 31, 2018 . Our ability to generate liquidity from sales of partner companies, sales of marketable securities and from equity and debt issuances has been adversely affected from time to time by adverse circumstances in the U.S. capital markets and other factors. Our current strategy could increase or decrease our liquidity at any point in time. As we seek to provide additional funding to existing partner companies or commit capital to other initiatives, we may be required to expend our cash or incur debt, which will decrease our liquidity. Conversely, as we dispose of our interests in partner companies from time to time, we may receive proceeds from such sales, which could increase our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Analysis of Consolidated Cash Flows Cash flow activity was as follows: Year Ended December 31, 2018 2017 (In thousands) Net cash used in operating activities $ (26,035 ) $ (20,805 ) Net cash provided by (used in) investing activities 32,103 (10,127 ) Net cash provided by (used in) financing activities (24,952 ) 29,625 $ (18,884 ) $ (1,307 ) Net Cash Used In Operating Activities Year ended December 31, 2018 versus year ended December 31, 2017. Net cash used in operating activities increased by $5.2 million for the year ended December 31, 2018 compared to the prior year. The change was primarily due to the decrease in net loss, resulting from gains on the sales of our interests in partner companies, the decrease of our share of losses of our equity method partner companies, the non-cash gain from an observable price change in an investment, and the non-cash loss from the increase in the fair value of the Credit Facility repayment feature. Net Cash Provided by (Used In) Investing Activities Year ended December 31, 2018 versus year ended December 31, 2017. Net cash provided by (used in) investing activities increased by $42.2 million for the year ended December 31, 2018 compared to the prior year. The increase primarily related to a $50.8 million increase in proceeds from the sales of and distributions from companies, a $10.5 million repayment of principal outstanding on a note from Nexxt, Inc. and a $40.9 million decrease in cash proceeds from the net change in marketable 25 Table of Contents securities. We also invested $21.6 million less in acquisitions of our ownership interests and advances and loans to partner companies. Cash proceeds from the sales of and distributions from companies were $67.4 million for the year ended December 31, 2018 which related primarily to: • In July 2018, we sold 39.13% of our ownership interest in MediaMath back to MediaMath and received $45.0 million of proceeds from the partial sale. • In July 2018, we received $10.0 million of proceeds from the sale of our interest in AdvantEdge Healthcare Solutions, Inc. • In May 2018, we received $11.5 million of proceeds from the sale of substantially all of the assets of Cask Data, Inc. • In January 2018, we received $0.6 million of proceeds from the sale of the assets of Aventura, Inc., a former partner company that ceased operations and was fully impaired in 2016. The Company also received shares of Invitae in August 2017 when Invitae, a public company, acquired former partner company Good Start Genetics, Inc. In February 2018 and October 2018, we sold 414,237 shares and 78,103 shares, respectively, of Invitae Corporation ("Invitae") common stock on the open market for aggregate proceeds of $3.7 million after transaction fees. Net Cash Provided by (Used In) Financing Activities Year ended December 31, 2018 versus year ended December 31, 2017. Net cash provided by (used in) financing activities decreased by $54.6 million for the year ended December 31, 2018 compared to the prior year. The primary financing activities in 2018 were the repayment of $41.0 million of our 2018 Debentures on their maturity date of May 15, 2018, $32.7 million of net proceeds from additional borrowings under our Amended Credit Facility and the $16.4 million credit facility payment in the fourth quarter. The primary financing activities in 2017 were net proceeds of $44.3 million from borrowing under the credit facility we entered into in May 2017 and $14.5 million paid to repurchase and retire $14.0 million face value of the 2018 Debentures, including transaction fees. Contractual Cash Obligations and Other Commercial Commitments The following table summarizes our contractual obligations and other commercial commitments as of December 31, 2018 , by period due or expiration of the commitment. Payments Due by Period Total 2019 2020 and 2021 2022 and 2023 After 2023 (In millions) Contractual Cash Obligations: Credit Facility $68.6 22.1 46.5 — — Interest payments on debt 10.9 8.4 2.5 — — Operating leases (a) 4.4 0.6 1.2 1.2 1.4 Severance payments 1.2 1.2 — — — Potential clawback liabilities (b) 0.3 — 0.3 — — Other obligations (c) 2.2 0.8 1.4 — — Total Contractual Cash Obligations $ 87.6 $ 33.1 $ 51.9 $ 1.2 $ 1.4 (a) In 2015, we entered into an agreement for the lease of our principal executive offices which expires in April 2026. (b) We are required to return a portion or all the distributions we received as a general partner of a private equity fund for further distribution to such fund's limited partners (“clawback”). Our ownership in the fund is 19%. The clawback liability is joint and several, such that we may be required to fund the clawback for other general partners should they default. We were notified by the fund's manager that the fund is being dissolved and $1.0 million of our clawback 26 Table of Contents liability was paid in the first quarter of 2017. The maximum clawback liability is $0.3 million which was reflected in Other long-term liabilities on the Consolidated Balance Sheets at December 31, 2018. (c) Reflects the estimated amount payable to a former Chairman and CEO under an ongoing agreement. We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position or results of operations. 27 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable for a smaller reporting company. 28 Table of Contents