Net Realized Investment Gain Other Income (Expense), net Income Taxes Net Income Liquidity Liquidity and Capital Resources Operating Activities ADTRAN 2013 Annual Report 28 Quarterly inventory turnover increased from 2.8 turns as of December 31, 2012 to 3.6 turns as of December 31, 2013. Inventory decreased 11.1% from December 31, 2012 to December 31, 2013. We expect inventory levels to fluctuate as we  Net accounts receivable increased 7.7% from $79.7 million at December 31, 2012 to $85.8 million at December 31, 2013.  Our allowance for doubtful accounts increased from $6 thousand at December 31, 2012 to $130 thousand at December 31,  2013. Quarterly accounts receivable days sales outstanding (DSO) decreased from 52 days as of December 31, 2012 to 50 days  as of December 31, 2013. The change in net accounts receivable and DSO is due to changes in customer mix and the timing of  sales and collections during the quarter. Certain international customers can have longer payment terms than U.S. customers.  Other receivables increased from $16.3 million at December 31, 2012 to $18.2 million at December 31, 2013. At December 31,  2013 and 2012, other receivables included an estimated receivable due from NSN related to working capital adjustments under  negotiation. Other receivables will also fluctuate due to the timing of shipments and collections for materials supplied to our  contract manufacturers during the quarter. Our working capital, which consists of current assets less current liabilities, decreased 17.9% from $338.0 million as of December 31, 2012 to $277.3 million as of December 31, 2013. The quick ratio, defined as cash and cash equivalents, short- term investments, and net accounts receivable, divided by current liabilities, decreased from 2.93 as of December 31, 2012 to  2.44 as of December 31, 2013. The current ratio, defined as current assets divided by current liabilities, decreased from 4.20 as  of December 31, 2012 to 3.71 as of December 31, 2013. The changes in our working capital, quick ratio and current ratio are  primarily attributable to a decrease in short-term investments, which proceeds were primarily used to fund share repurchases  during the year.  At December 31, 2013, cash on hand was $58.3 million and short-term investments were $105.8 million, which placed our short-term liquidity at $164.1 million. At December 31, 2012, our cash on hand of $68.5 million and short-term investments of $160.5 million placed our short-term liquidity at $228.9 million. The decrease in short-term liquidity from  2012 to 2013 primarily reflects funds used for share repurchases, shareholder dividends, and equipment acquisitions, partially  offset by funds provided by our operating activities, and proceeds from stock option exercises. We intend to finance our operations with cash flow from operations. We have used, and expect to continue to use, the cash generated from operations for working capital, purchases of treasury stock, shareholder dividends, and other general  corporate purposes, including (i) product development activities to enhance our existing products and develop new products  and (ii) expansion of sales and marketing activities. We believe our cash and cash equivalents, investments and cash generated  from operations to be adequate to meet our operating and capital needs for at least the next 12 months. As a result of the above factors, net income decreased from $138.6 million in 2011 to $47.3 million in 2012. As a percentage of sales, net income decreased from 19.3% in 2011 to 7.6% in 2012. Our effective tax rate increased from 32.8% in 2011 to 35.2% in 2012. This increase is primarily attributable to the exclusion  of the research tax credit in 2012 and our inability to utilize losses generated by our foreign subsidiaries where a full valuation  allowance was provided. These tax rate increases were partially offset by increased state tax incentives in 2012. In 2013, we will  recognize a benefit from the research tax credit related to 2012 and 2013, of which we estimate $3.1 million will be attributable  to 2012. Other income (expense), net, comprised primarily of miscellaneous income, gains and losses on foreign currency transactions,  investment account management fees, and gains or losses on the disposal of property, plant and equipment occurring in the  normal course of business, changed from $0.7 million of expense in 2011 to $0.2 million of income in 2012. Net realized investment gain decreased from $12.5 million in 2011 to $9.6 million in 2012. This change is primarily related to  a $1.3 million decrease related to sales of marketable equity securities and impaired marketable equity securities, a $0.6 million  decrease in distributions from two private equity funds, and a $0.6 million increase in impairment of deferred compensation  plan assets. See “Investing Activities” in “Liquidity and Capital Resources” below for additional information.