18. Revenue
Effective September 1, 2018, the Company adopted ASU 2014-09, Revenue Recognition (Topic 606). The new standard is a comprehensive new revenue recognition model that requires the Company to recognize revenue in a manner which depicts the transfer of goods or services to its customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
Prior to the adoption of the new standard, the Company recognized substantially all of its revenue from contracts with customers at a point in time, which was generally when the goods were shipped to or received by the customer, title and risk of ownership had passed, the price to the buyer was fixed or determinable and collectability was reasonably assured (net of estimated returns). Under the new standard, the Company recognizes revenue over time for the majority of its contracts with customers which results in revenue for those customers being recognized earlier than under the previous guidance. Revenue for all other contracts with customers continues to be recognized at a point in time, similar to recognition prior to the adoption of the standard.
Additionally, the new standard impacts the Company’s accounting for certain fulfillment costs, which include upfront costs to prepare for manufacturing activities that are expected to be recovered. Under the new standard, such upfront costs are recognized as an asset and amortized on a systematic basis consistent with the pattern of the transfer of control of the products or services to which to the asset relates.
The following table presents the effect of the adoption of the new revenue guidance on the Consolidated Balance Sheets as of August 31, 2019 (in thousands):
(1) Differences primarily relate to the timing of revenue recognition for over time customers and certain balance sheet reclassifications.
(2) Differences primarily relate to the timing of recognition and recovery of fulfillment costs and certain balance sheet reclassifications.
(3) Included within accrued expenses on the Consolidated Balance Sheets.
(4) Differences included in contract liabilities as of September 1, 2018.

                                                | August 31, 2019 |
----------------------------------------------- | --------------- | -------------------------------------------
                                                | As reported     | Balance without the adoption of ASU 2014-09
Assets                                          |                 |
Contract assets (1)                             | $911,940        | $—
Inventories, net (1)                            | $3,023,003      | $3,761,591
Prepaid expenses and other current assets(1)(2) | $501,573        | $514,769
Deferred income taxes(1)                        | $198,827        | $202,791
Liabilities                                     |                 |
Contract liabilities(2)(3)                      | $511,329        | $—
Deferred income(2)(3)(4)                        | $—              | $521,035
Other accrued expenses(3)(4)                    | $1,877,908      | $1,868,201
Deferred income taxes(1)                        | $115,818        | $111,304
Equity                                          |                 |
Retained earnings(1)(2)                         | $2,037,037      | $1,885,360


Medical Segment Results
Below is a table summarizing results for the fiscal years ended:
Net Sales. The Medical segment had $1.1 million of net sales in fiscal 2019, compared to $0.3 million of net sales in fiscal 2018. The increase was due to new business gained in fiscal 2019.
Gross Profit. Medical segment gross profit was a loss of $2.8 million in fiscal 2019, compared to a loss of $3.5 million in fiscal 2018. The improvement primarily relates to an increase in sales volumes during fiscal 2019.
Loss from Operations. Medical segment loss from operations decreased $2.8 million to $8.6 million in fiscal 2019, compared to $11.4 million in fiscal 2018. The decrease was due to an improvement in gross profit and lower selling and administrative expenses. Selling and administrative expenses were reduced by lower marketing and professional fee expenses, partially offset by initiatives to reduce overall costs and improve operational profitability of $0.9 million.

(Dollars in Millions) | April 27, 2019 | April 28, 2018 | Net Change ($) | Net Change (%)
--------------------- | -------------- | -------------- | -------------- | --------------
Net Sales             | $1.1           | $0.3           | $0.8           | 266.7 %
Gross Profit          | $(2.8)         | $(3.5)         | $0.7           | 20.0 %
Loss from Operations  | $(8.6)         | $(11.4)        | $2.8           | 24.6 %


NOTE 9 – CONTINGENT PURCHASE PRICE
Our purchase of CareSpeak Communications contains a contingent element that will be paid only if the Company achieves certain patient engagement revenues in 2019 and 2020. The total contingent payment may be up to $3.0 million. The target patient engagement revenues were achieved in 2019 and are expected to be achieved in 2020. The calculated fair value of the contingent payment was $2,365,000 at December 31, 2018 and $3,000,000 at December 31, 2019.
Our purchase of RMDY Health, Inc. also contains a contingent element that will be paid only if the Company achieves certain revenues in 2020 and 2021 related to the RMDY business. The total contingent payment may be up to $30.0 million. The minimum payment is $1.0 million in each of the two years. The calculated fair value of the contingent payment was $3,720,000 at December 31, 2019. We determined the fair value of the Contingent Purchase Price Payable at December 31, 2019 using a Geometric-Brownian motion analysis of the expected revenue and resulting earnout payment using inputs that include the spot price, a risk free rate of return of 1.4%, a term of 2 years, and volatility of 40%. Changes in the inputs could result in a different fair value measurement.
The total fair value of contingent purchase price payable at December 31, 2019 is as follows.

                                | Current    | Long-Term   | Total
------------------------------- | ---------- | ----------- | ----------
CareSpeak Communications, Inc.  | $1,500,000 | $1,500,000  | $3,000,000
RMDY Health, Inc.               | -          | 3,720,000   | 3,720,000
Total                           | $1,500,000 | $5,220,000  | $6,720,000


Recently adopted authoritative guidance
Revenue Recognition — Contracts with Customers. In May 2014, the FASB issued new authoritative guidance for revenue from contracts with customers. The standard’s core principle is that a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the company expects to receive in exchange for those goods or services. In addition, companies are required to capitalize certain contract acquisition costs, including commissions paid, when contracts are signed. The asset recognized from capitalized incremental and recoverable acquisition costs is amortized on a straight-line basis consistent with the timing of transfer of the products or services to which the asset relates.
As a result of the adoption of the new revenue recognition guidance, our net revenue for fiscal 2019 increased $47 million, and our operating expenses decreased $12 million. See Note 3 for additional information related to the impact of the new guidance on the timing and amounts of revenues recognized in fiscal 2019.
The effects of the adoption of the new revenue recognition guidance on our March 29, 2019 Consolidated Balance Sheets were as follows:
(1) As reported includes short-term deferred commissions of $92 million. The balance without adoption of new standard includes short-term deferred commissions of $81 million.
(2) As reported includes long-term deferred commissions of $93 million. The balance without adoption of new standard includes long-term deferred commissions of $44 million.

                                     |             | As of March 29, 2019                      |
------------------------------------ | ----------- | ----------------------------------------- | ----------------
(In millions)                        | As Reported | Balances Without Adoption of New Standard | Effect of Change
Accounts receivable, net             | $708        | $657                                      | $51
Other current assets (1)             | $435        | $421                                      | $14
Other long-term assets (2)           | $1,262      | $1,213                                    | $49
Total assets                         | $15,938     | $15,824                                   | $114
Short-term contract liabilities      | $2,320      | $2,437                                    | $(117)
Other current liabilities            | $533        | $494                                      | $39
Long-term contract liabilities       | $736        | $837                                      | $(101)
Deferred income tax liabilities      | $577        | $526                                      | $51
Total liabilities                    | $10,200     | $10,328                                   | $(128)
Accumulated other comprehensive loss | $(7)        | $(2)                                      | $(5)
Retained earnings                    | $933        | $686                                      | $247
Total stockholders’ equity           | $5,738      | $5,496                                    | $242


2 Investments in subsidiaries
Investments are stated at cost less provisions for any impairment in value.
Additions in the year relate to investments in Gestra Holdings Limited £1.6m and Spirax Sarco America Investments Limited £212.4m. Spirax Sarco America Investments Limited was incorporated on 24th October 2018 with the purpose of holding Group US$ investments and loans. Gestra Holdings Limited was incorporated on 9th October 2018 with the purpose of holding other Gestra Companies.
Details relating to subsidiary undertakings are given on pages 207 to 211. Except where stated all classes of shares were 100% owned by the Group at 31st December 2019. The country of incorporation of the principal Group companies is the same as the country of operation with the exception of companies operating in the United Kingdom which are incorporated in Great Britain. All operate in steam, electrical thermal energy solutions, fluid path technologies or peristaltic pumping markets except those companies identified as a holding company on pages 207 to 211.

                                                     | 2019  | 2018
---------------------------------------------------- | ----- | -----
                                                     | £m    | £m
Cost:                                                |       |
At 1st January                                       | 445.8 | 269.4
Share options issued to subsidiary company employees | 2.2   | 2.6
Additions                                            | 214.0 | 173.8
At 31st December                                     | 662.0 | 445.8


Stock-based compensation expense is included in general and administrative expense for each period as follows:
As of December 31, 2019, there was $4,801 of unrecognized stock-based compensation expense related to unvested employee stock options and $1,882 of unrecognized stock-based compensation expense related to unvested RSUs. These costs are expected to be recognized over a weighted-average period of 2.13 and 2.33 years, respectively.

                                          | Year Ended        | Year Ended
----------------------------------------- | ----------------- | -----------------
Stock-Based Compensation by Type of Award | December 31, 2019 | December 31, 2018
Stock options                             | $2,756            | $2,926
RSUs                                      | 955               | 1,129
Total stock-based compensation expense    | $3,711            | $4,055


ITEM 6. SELECTED FINANCIAL DATA
The following tables of selected consolidated financial data should be read in conjunction with, and are qualified by reference to, our consolidated financial statements and notes thereto in Item 8 of Part II and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this report.
The tables of selected financial data shown below are derived from our audited consolidated financial statements, which include the operating results, cash flows and financial condition of Level 3 beginning November 1, 2017. These historical results are not necessarily indicative of results that you can expect for any future period.
The following table summarizes selected financial information from our consolidated statements of operations.
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in Item 7 of Part II of this report and in our preceding annual reports on Form 10-K for a discussion of unusual items affecting the results for each of the years presented.
(2) During 2019 and 2018, we recorded non-cash, non-tax-deductible goodwill impairment charges of $6.5 billion and $2.7 billion, respectively.
(3) During 2019, 2018, 2017 and 2016, we incurred Level 3 acquisition-related expenses of $234 million, $393 million, $271 million and $52 million, respectively. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Acquisition of Level 3” and Note 2—Acquisition of Level 3 to our consolidated financial statements in Item 8 of Part II of this report.
(4) During 2019, 2018, 2017, 2016 and 2015, we recognized an incremental $157 million, $171 million, $186 million, $201 million and $215 million, respectively, of revenue associated with the Federal Communications Commission (“FCC”) Connect America Fund Phase II support program, as compared to revenue received under the previous interstate USF program.
(5) The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a re-measurement of our deferred tax assets and liabilities at the new federal corporate tax rate of 21%. The re-measurement resulted in tax expense of $92 million for 2018 and a tax benefit of approximately $1.1 billion for 2017.

                                                   |               |                  | Years Ended December 31,(1)                                             |            |
-------------------------------------------------- | ------------- | ---------------- | ----------------------------------------------------------------------- | ---------- | -------
                                                   | 2019(2)(3)(4) | 2018(2)(3)(4)(5) | 2017(3)(4)(5)                                                           | 2016(3)(4) | 2015(4)
                                                   |               |                  | (Dollars in millions, except per share amounts and shares in thousands) |            |
Operating revenue                                  | $22,401       | 23,443           | 17,656                                                                  | 17,470     | 17,900
Operating expenses                                 | 25,127        | 22,873           | 15,647                                                                  | 15,137     | 15,321
Operating (loss) income                            | $(2,726)      | 570              | 2,009                                                                   | 2,333      | 2,579
(Loss) income before income tax expense            | $(4,766)      | (1,563)          | 540                                                                     | 1,020      | 1,316
Net (loss) income                                  | $(5,269)      | (1,733)          | 1,389                                                                   | 626        | 878
Basic loss) earnings per common share              | $(4.92)       | (1.63)           | 2.21                                                                    | 1.16       | 1.58
Diluted (loss) earnings per common share           | $(4.92)       | (1.63)           | 2.21                                                                    | 1.16       | 1.58
Dividends declared per common share                | $1.00         | 2.16             | 2.16                                                                    | 2.16       | 2.16
Weighted average basic common shares outstanding   | 1,071,441     | 1,065,866        | 627,808                                                                 | 539,549    | 554,278
Weighted average diluted common shares outstanding | 1,071,441     | 1,065,866        | 628,693                                                                 | 540,679    | 555,093


5. Property and Equipment, Net
Property and equipment at March 31, 2019 and 2018 is as follows:
Total depreciation expense on property and equipment was $2.5 million, $2.6 million, and $2.4 million during fiscal 2019, 2018 and 2017, respectively.
The Company capitalizes internal-use software, including software used exclusively in providing services or that is only made available to customers as a software service, as property and equipment under ASC 350-40, Internal-Use Software. Total amortization expense on capitalized internal-use software was $2.5 million, $1.8 million and $1.4 million during fiscal 2019, 2018, and 2017, respectively.

                                          | Year ended March 31, |
----------------------------------------- | -------------------- | --------
(In thousands)                            | 2019                 | 2018
Furniture and equipment                   | $11,604              | $10,671
Software                                  | 16,427               | 11,885
Leasehold improvements                    | 6,981                | 6,819
Project expenditures not yet in use       | 1,014                | 4,187
                                          | 36,026               | 33,562
Accumulated depreciation and amortization | (20,188)             | (16,050)
Property and equipment, net               | $15,838              | $17,512


14. Earnings per share
1 Adjustment of previous year according to explanation in notes.
Earnings per share are determined by dividing profit or loss for the period attributable to the shareholders of METRO AG by the weighted number of no-par-value shares. In the calculation of earnings per ordinary share, an additional dividend for preference shares is generally deducted from profit or loss for the period attributable to the shareholders of METRO AG. There was no dilution in the reporting period or the year before from so-called potential shares.
Earnings per preference share correspond to earnings per share.

                                                                                | 2017/2018   | 2018/2019
------------------------------------------------------------------------------------ | ----------- | -----------
Weighted number of no-par-value shares                                               | 363,097,253 | 363,097,253
Profit or loss for the period attributable to the shareholders of METROAG (€million) | 333         | −126
Earnings per share in € (basic = diluted)                                            | 0.92        | −0.35
from continuing operations                                                           | (0.98)      | (1.12)
from discontinued operations                                                         | (−0.06)     | (−1.46)


Business Trends
Selected financial results for the past three fiscal years are summarized below:
(1) See the section “Non-GAAP Financial Measures” below for further discussion of these financial measures.
(2) Includes pounds from Specialty Alloys Operations segment, and certain Performance Engineered Products segment businesses including Dynamet, Carpenter Powder Products and LPW Technology Ltd.

                                                     |          | Years Ended June 30, |
---------------------------------------------------- | -------- | -------------------- | --------
($ in millions, except per share data)               | 2019     | 2018                 | 2017
Net sales                                            | $2,380.2 | $2,157.7             | $1,797.6
Net sales excluding surcharge revenue (1)            | $1,942.1 | $1,792.3             | $1,558.4
Operating income                                     | $241.4   | $189.3               | $121.5
Net income                                           | $167.0   | $188.5               | $47.0
Diluted earnings per share                           | $3.43    | $3.92                | $0.99
Purchases of property, plant, equipment and software | $180.3   | $135.0               | $98.5
Free cash flow (1)                                   | $(53.7)  | $34.7                | $(16.8)
Pounds sold (in thousands) (2)                       | 267,536  | 265,620              | 236,346


3. EARNINGS PER SHARE
Basic and diluted earnings (loss) per common share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for each class of common stock and participating securities considering dividends declared and participation rights in undistributed earnings. Certain of the Company’s restricted stock awards are considered participating securities because holders are entitled to receive non-forfeitable dividends, if declared, during the vesting term.
The potentially dilutive impact of the Company’s restricted stock awards is determined using the treasury stock method. Under the treasury stock method, if the average market price during the period exceeds the exercise price, these instruments are treated as if they had been exercised with the proceeds of exercise used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and repurchased is included in the diluted share computation.
Diluted EPS includes securities that could potentially dilute basic EPS during a reporting period. Dilutive securities are not included in the computation of loss per share when a company reports a net loss from continuing operations as the impact would be anti-dilutive.
The computation of basic and diluted EPS attributable to common shareholders computed using the two-class method is as follows:
Diluted EPS attributable to common shareholders for the years ended December 31, 2019, 2018 and 2017 excludes 1.1 million, 0.5 million and 0.3 million potential common shares, respectively, that could be issued under our share-based compensation plan, because the inclusion of the potential common shares would have an antidilutive effect.

(In thousands, except per share amounts)                                                                    | 2019      | 2018      | 2017
----------------------------------------------------------------------------------------------------------- | --------- | --------- | -------
Net income (loss)                                                                                | $(19,931) | $(50,571) | $65,299
Less: net income attributable to noncontrolling interest                                                    | 452       | 263       | 354
Income (loss) attributable to common shareholders before allocation of earnings to participating securities | (20,383)  | (50,834)  | 64,945
Less: earnings allocated to participating securities                                                        | 462       | 810       | 362
Net income (loss) attributable to common shareholders, after earnings allocated to participating securities | $(20,845) | $(51,644) | $64,583
Weighted-average number of common shares outstanding                                                        | 70,837    | 70,613    | 60,373
Net income (loss) per common share attributable to common shareholders - basic and diluted                  | $ (0.29)  | $ (0.73)  | $ 1.07


NOTE 24. EARNINGS PER SHARE
Basic net earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for that period. The dilutive effect is calculated using the treasury stock method. The calculation of diluted net income per share assumes the exercise of options issued under our stock option plans (and the issuance of shares under our share plans) for periods in which exercises (or issuances) would have a dilutive effect.
The calculation of basic and diluted net income per share attributable to common shareholders is based on the following data:

                                                                                | December 31, |
----------------------------------------------------------------------------------- | ------------ | -------
                                                                                | 2018         | 2019
Net earnings used for purposes of calculating net income per common share           |              |
Net earnings from operations                                                        | 157,133      | 329,013
Basic weighted average number of shares outstanding during the year (thousands)     | 52,432       | 49,418
Effect of dilutive potential common shares from stock options and restricted shares | 678          | 580
Dilutive weighted average number of shares outstanding                              | 53,110       | 49,999
Basic net earnings per share: from operations                                       | 3.00         | 6.66
Diluted net earnings per share:                                                     | 2.96         | 6.58


Effective Tax Rate
The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate were as follows:
The decrease from the federal statutory rate in fiscal year 2019 is primarily due to a $2.6 billion net income tax benefit related to intangible property transfers, and earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico. The increase from the federal statutory rate in fiscal year 2018 is primarily due to the net charge related to the enactment of the TCJA in the second quarter of fiscal year 2018, offset in part by earnings taxed at lower rates in foreign jurisdictions. The decrease from the federal statutory rate in fiscal year 2017 is primarily due to earnings taxed at lower rates in foreign jurisdictions. Our foreign regional operating centers in Ireland, Singapore and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 82%, 87%, and 76% of our foreign income before tax in fiscal years 2019, 2018, and 2017, respectively. Other reconciling items, net consists primarily of tax credits, GILTI, and U.S. state income taxes. In fiscal years 2019, 2018, and 2017, there were no individually significant other reconciling items.
The decrease in our effective tax rate for fiscal year 2019 compared to fiscal year 2018 was primarily due to the net charge related to the enactment of the TCJA in the second quarter of fiscal year 2018, and a $2.6 billion net income tax benefit in the fourth quarter of fiscal year 2019 related to intangible property transfers. The increase in our effective tax rate for fiscal year 2018 compared to fiscal year 2017 was primarily due to the net charge related to the enactment of the TCJA and the realization of tax benefits attributable to previous Phone business losses in fiscal year 2017.

Year Ended June 30,                                      | 2019   | 2018   | 2017
-------------------------------------------------------- | ------ | ------ | -------
Federal statutory rate                                   | 21.0%  | 28.1%  | 35.0%
Effect of:                                               |        |        |
Foreign earnings taxed at lower rates                    | (4.1)% | (7.8)% | (11.6)%
Impact of the enactment of the TCJA                      | 0.4%   | 37.7%  | 0%
Phone business losses                                    | 0%     | 0%     | (5.7)%
Impact of intangible property transfers                  | (5.9)% | 0%     | 0%
Foreign-derived intangible income deduction              | (1.4)% | 0%     | 0%
Research and development credit                          | (1.1)% | (1.3)% | (0.9)%
Excess tax benefits relating to stock-based compensation | (2.2)% | (2.5)% | (2.1)%
Interest, net                                            | 1.0%   | 1.2%   | 1.4%
Other reconciling items, net                             | 2.5%   | (0.8)% | (1.3)%
Effective rate                                           | 10.2%  | 54.6%  | 14.8%


Stock-based compensation expense is included in the following captions of the consolidated statements of comprehensive income (loss) (in thousands): Stock-based compensation expense is included in the following captions of the consolidated statements of comprehensive income (loss) (in thousands):
As of February 28, 2019, there was $25.5 million of unrecognized stock-based compensation cost related to non-vested equity awards, which is expected to be recognized over a weighted-average remaining vesting period of 2.8 years.

                           |         | Year Ended February 28, |
-------------------------- | ------- | ----------------------- | ------
                           | 2019    | 2018                    | 2017
Cost of revenues           | $723    | $653                    | $374
Research and development   | 2,061   | 1,471                   | 1,033
Selling and marketing      | 2,863   | 2,314                   | 1,655
General and administrative | 5,382   | 4,860                   | 4,771
                           | $11,029 | $9,298                  | $7,833


We utilized a comprehensive approach to evaluate and document the impact of the guidance on our current accounting policies and practices in order to identify material differences, if any, that would result from applying the new requirements to our revenue contracts. We did not identify any material differences resulting from applying the new requirements to our revenue contracts. In addition, we did not identify any significant changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new guidance. We adopted the provisions of Topic 606 in fiscal 2019 utilizing the modified retrospective method. We recorded a $0.5 million cumulative effect adjustment, net of tax, to the opening balance of fiscal 2019 retained earnings, a decrease to receivables of $7.6 million, an increase to inventories of $2.8 million, an increase to prepaid expenses and other current assets of $6.9 million, an increase to other accrued liabilities of $1.4 million, and an increase to other noncurrent liabilities of $0.2 million. The adjustments primarily related to the timing of recognition of certain customer charges, trade promotional expenditures, and volume discounts.
The effect of the changes made to our Consolidated Balance Sheet as of May 26, 2019 for the adoption of Topic 606 was as follows:
Notes to Consolidated Financial Statements - (Continued) Fiscal Years Ended May 26, 2019, May 27, 2018, and May 28, 2017 (columnar dollars in millions except per share amounts)

Current assets                                    | As Reported | Adjustments | Balances without Adoption of Topic 606
------------------------------------------------- | ----------- | ----------- | --------------------------------------
Receivables, less allowance for doubtful accounts | $831.7      | $8.7        | $840.4
Inventories .                                     | 1,571.7     | (3.1)       | 1,568.6
Prepaid expenses and other current assets         | 93.8        | (16.6)      | 77.2
Current liabilities                               |             |             |
Other accrued liabilities                         | 691.6       | (1.1)       | 690.5
Other noncurrent liabilities .                    | 1,951.8     | (2.5)       | 1,949.3


The deferred income tax balance sheet accounts arise from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.
Components of the deferred tax assets and liabilities at December 31 were as follows:
[1] Upon adoption of ASC 842, deferred taxes associated with previously recognized deferred rent liabilities were reclassified into deferred taxes for ROU asset and lease liability.
As of December 31, 2019, the Company had approximately $19.0 of tax-effected U.S. federal net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2021 if not utilized. The majority of the U.S. federal net operating loss carryforwards are subject to limitation under the Internal Revenue Code of 1986, as amended (“IRC”) Section 382; however, the Company expects to utilize such losses in their entirety prior to expiration. The U.S. federal net operating loss carryforwards decreased from 2018 to 2019 primarily due to current year tilization. The Company has approximately $33.7 of tax-effected state net operating loss carryforwards (without regard to federal benefit of state). Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized. The state net operating loss carryforwards are primarily related to Florida and New Jersey, but the Company has smaller net operating losses in various other states. The Company has approximately $65.6 of tax-effected foreign net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized. The foreign net operating loss carryforwards increased from 2018 to 2019 primarily due to the recognition of a discrete tax benefit of $41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses. Additionally, the Company has $5.0 of U.S. federal and state research and develop- ment tax credit carryforwards (without regard to federal benefit of state). Some of these research and development credit carry- forwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized.
As of December 31, 2019, the Company determined that a total valuation allowance of $36.3 was necessary to reduce U.S. fed- eral and state deferred tax assets by $15.4 and foreign deferred tax assets by $20.9, where it was more likely than not that all of such deferred tax assets will not be realized. As of December 31, 2019, the Company believes it is more likely than not that the remaining net deferred tax assets will be realized based on the Company’s estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions.

                                                      | 2019        | 2018
----------------------------------------------------- | ----------- | -----------
Deferred tax assets:                                  |             |
Reserves and accrued expenses                         | $    175.2  | $    156.5
Inventories                                           | 4.3         | 4.5
Net operating loss carryforwards                      | 111.2       | 67.9
R&D credits                                           | 4.1         | 6.1
Valuation allowance                                   | (36.3)      | (26.4)
Outside basis difference on investments held for sale | —           | 2.7
Lease liability1                                      | 64.0        | —
Total deferred tax assets                             | $    322.5  | $    211.3
Deferred tax liabilities:                             |             |
Reserves and accrued expenses                         | $      15.5 | $      14.3
Amortizable intangible assets                         | 1,229.9     | 1,043.0
Plant and equipment                                   | 10.8        | 6.6
Accrued tax on unremitted foreign earnings            | 17.1        | 16.3
Outside basis difference on investments held for sale | —           | 10.0
ROU asset1                                            | 61.7        | —
Total deferred tax liabilities                        | $ 1,335.0   | $ 1,090.2


Consolidated Financial Results
Operating Expenses
The following table sets forth operating expenses by segment for the periods presented (in millions):
The increase in Operating Expenses was primarily driven by higher net personnel costs, technology-related costs and acquisition-related costs in our Software Solutions segment. The increase in our Data and Analytics segment primarily related to higher net personnel costs and higher data costs related to revenue growth. The decrease in Corporate and Other was primarily driven by lower incentive bonus expense.

                    | Year ended December 31, |        | Variance |
------------------- | ----------------------- | ------ | -------- | ----
                    | 2019                    | 2018   | $        | %
Software Solutions  | $412.7                  | $394.8 | $17.9    | 5%
Data and Analytics  | 123.4                   | 115.0  | 8.4      | 7%
Corporate and Other | 109.9                   | 115.6  | (5.7)    | (5)%
Total               | $646.0                  | $625.4 | $20.6    | 3%


Equity Method We own 20.51%of GTE Mobilnet of Texas RSA #17 Limited Partnership (“RSA #17”), 16.67% of Pennsylvania RSA 6(I) Limited Partnership (“RSA 6(I)”) and 23.67% of Pennsylvania RSA 6(II) Limited Partnership (“RSA 6(II)”). RSA #17 provides cellular service to a limited rural area in Texas.
RSA 6(I) and RSA 6(II) provide cellular service in and around our Pennsylvania service territory. Because we have significant influence over the operating and financial policies of these three entities, we account for the investments using the equity method. In connection with the adoption of ASC 606 by our equity method partnerships, the value of our combined partnership interests increased $1.8 million, which is reflected in the cumulative effect adjustment to retained earnings during the year ended December 31, 2018.
In 2019, 2018 and 2017, we received cash distributions from these partnerships totaling $19.0 million, $21.8 million and $17.2 million, respectively. The carrying value of the investments exceeds the underlying equity in net assets of the partnerships by $32.8 million as of December 31, 2019 and 2018.
The combined results of operations and financial position of our three equity investments in the cellular limited partnerships are summarized below:

(In thousands)          | 2019      | 2018      | 2017
----------------------- | --------- | --------- | ---------
Total revenues          | $ 349,640 | $ 346,251 | $ 350,611
Income from operations  | 100,182   | 100,571   | 104,973
Net income before taxes | 99,146    | 99,408    | 103,497
Net income              | 99,146    | 99,408    | 103,497
Current assets          | $ 80,655  | $ 75,040  | $ 78,782
Non-current assets      | 156,672   | 103,996   | 95,959
Current liabilities     | 33,292    | 24,719    | 22,472
Non-current liabilities | 92,477    | 51,840    | 51,463
Partnership equity      | 111,558   | 102,478   | 100,806


At December 31, 2019, the Company’s net operating losses and credit carryforwards are:
(1) Excludes federal and state net operating losses of $60.2 million and $0.8 million, respectively, from prior acquisitions that the Company expects will expire unutilized
(2) Excludes federal and state tax credits of $0.1 million and $8.3 million, respectively, that the Company expects will expire unutilized
Carryforward losses and credits expire between 2020 and 2038, except for the 2019 federal net operating loss of $43.9 million and $1 million of state credits, which both have unlimited carryforward periods.
The Company’s India subsidiary is primarily located in Special Economic Zones (“SEZs”) and is entitled to a tax holiday in India. The tax holiday reduces or eliminates income tax in India. The tax holiday in the Hyderabad SEZ is scheduled to expire in 2024. The tax holiday in the Bangalore SEZ is scheduled to expire in 2022. For 2019, 2018 and 2017, the income tax holiday reduced the Company’s provision for income taxes by $1.9 million, $1.3 million, and $1 million, respectively.

(in thousands)                               | Federal  | State
-------------------------------------------- | -------- | ------
Net operating losses (1)                     | $120,722 | $3,337
Net operating losses due to acquisitions (1) | $76,827  | $778
Credit carryforwards (2)                     | $8,202   | $1,958
Credit carryforwards due to acquisitions     | $640     | $227


Uncertain Tax Positions
As of December 31, 2019, 2018 and 2017, we had gross unrecognized tax benefits of $4.4 million, $4.2 million
and $3.8 million, respectively. Accrued interest expense related to unrecognized tax benefits is recognized as part of
our income tax provision in our consolidated statements of operations and is immaterial for the years ended
December 31, 2019 and 2018. Our policy for classifying interest and penalties associated with unrecognized income
tax benefits is to include such items in income tax expense.
The activity related to the unrecognized tax benefits is as follows (in thousands):
These amounts are related to certain deferred tax assets with a corresponding valuation allowance. As ofDecember 31, 2019, the total amount of unrecognized tax benefits, if recognized, that would affect the effective taxrate is $1.0 million. We do not anticipate a material change to our unrecognized tax benefits over the next twelvemonths. Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinarycourse of business.
We are subject to taxation in the United States, various states, and several foreign jurisdictions. Because we havenet operating loss and credit carryforwards, there are open statutes of limitations in which federal, state and foreigntaxing authorities may examine our tax returns for all years from 2005 through the current period. We are notcurrently under examination by any taxing authorities.

                                                                 | Years Ended December 31, |        |
---------------------------------------------------------------- | ------------------------ | ------ | ------
                                                                 | 2019                     | 2018   | 2017
Gross unrecognized tax benefits —beginning balance               | $4,191                   | $3,782 | $3,360
Increases (decrease) related to tax positions from prior years   | (280)                    | (266)  | (151)
Increases related to tax positions taken during current year     | 530                      | 675    | 573
Decreases related to tax positions taken during the current year | —                        | —      | —
Gross unrecognized tax benefits —ending balance                  | $4,441                   | $4,191 | $3,782


On a worldwide basis, the Company's defined benefit pension plans were 88% funded as of January 31, 2019.
As of January 31, 2019, the aggregate accumulated benefit obligation was $85.1 million for the defined benefit pension plans compared to $139.5 million as of January 31, 2018. Included in the aggregate data in the following tables are the amounts applicable to the Company's defined benefit pension plans, with accumulated benefit obligations in excess of plan assets, as well as plans with projected benefit obligations in excess of plan assets. Amounts related to such plans at the end of each period were as follows: because their exercise prices are higher than the average market value of Autodesk’s stock during the fiscal year.

                                                                     | Fiscal Year Ended January 31, |
-------------------------------------------------------------------- | ----------------------------- | ------
                                                                     | 2019                          | 2018
Plans with accumulated benefit obligations in excess of plan assets: |                               |
Accumulated benefit obligations                                      | $75.6                         | $130.7
Plan assets                                                          | 70.0                          | 112.1
Plans with projected benefit obligations in excess of plan assets:   |                               |
Projected benefit obligations                                        | $91.6                         | $158.1
Plan assets                                                          | 80.8                          | 121.1


16. INCOME TAXES
The provision for (benefit from) income taxes on income from continuing operations before income taxes consists of the following (in thousands):

                           | 2019    | 2018     | 2017
-------------------------- | ------- | -------- | --------
Currently payable:         |         |          |
Federal                    | $1,995  | $1,163   | $5,617
State                      | 557     | 114      | 1,022
Foreign                    | 13,448  | 107,487  | 116,022
                           | 16,000  | 108,764  | 122,661
Deferred and other:        |         |          |
Federal                    | (407)   | 26,334   | 1,413
State                      | 516     | (489)    | (153)
Foreign                    | (9,886) | (20,414) | (30,510)
                           | (9,777) | 5,431    | (29,250)
Provision for income taxes | $6,223  | $114,195 | $93,411


Option Exercises and Stock Vested
The table below sets forth information concerning the number of shares acquired on exercise of option awards and vesting of stock awards in 2019 and the value realized upon vesting by such officers.
(1) Amounts realized from the vesting of stock awards are calculated by multiplying the number of shares that vested by the fair market value of a share of our common stock on the vesting date.

                | Option Awards                             |                                | Stock Awards                             |
--------------- | ----------------------------------------- | ------------------------------ | ---------------------------------------- | -----------------------------
Name            | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)
Jon Kirchner    | —                                         | —                              | 153,090                                  | 3,428,285
Robert Andersen | —                                         | —                              | 24,500                                   | 578,806
Paul Davis      | —                                         | —                              | 20,500                                   | 482,680
Murali Dharan   | —                                         | —                              | 15,000                                   | 330,120
Geir Skaaden    | —                                         | —                              | 21,100                                   | 500,804


A. Operating Results
YEAR ENDED DECEMBER 31, 2019 COMPARED TO YEAR ENDED DECEMBER 31, 2018
Management believes that net voyage revenue, a non-GAAP financial measure, provides additional meaningful information because it enables us to compare the profitability of our vessels which are employed under bareboat charters, spot related time charters and spot charters. Net voyage revenues divided by the number of days on the charter provides the Time Charter Equivalent (TCE) Rate. Net voyage revenues and TCE rates are widely used by investors and analysts in the tanker shipping industry for comparing the financial performance of companies and for preparing industry averages. We believe that our method of calculating net voyage revenue is consistent with industry standards. The table below reconciles our net voyage revenues to voyage revenues.

                                      |           | Years Ended December 31,     |
------------------------------------- | --------- | ---------------------------- | ---------
All figures in USD ‘000               | 2019      | 2018                         | Variance
Voyage Revenue                        | 317,220   | 289,016                      | 9.8%
Voyage Expenses                       | (141,770) | (165,012)                    | (14.1%)
Vessel Operating Expenses             | (66,033)  | (80,411)                     | (17.9%)
Impairment Loss on Vessels            | -         | (2,168)                      | N/A
Impairment Loss on Goodwill           | -         | -                            | N/A
Loss from Disposal of Vessels         | -         | (6,619)                      | N/A
General and Administrative Expenses   | (13,481)  | (12,727)                     | 5.9%
Depreciation Expenses                 | (63,965)  | (60,695)                     | 5.4%
Net Operating (Loss) Income           | 31,971    | (38,616)                     | (182.8%)
Interest Income                       | 298       | 334                          | (10.8%)
Interest Expenses                     | (38,390)  | (34,549)                     | 11.1%
Other Financial Expenses              | (4,231)   | (14,808)                     | (71.4%)
Equity Loss from Associate            | -         | (7,667)                      | N/A
Net (Loss) Income                     | (10,352)  | (95,306)                     | (89.1%)


A reconciliation of the gross unrecognized tax benefit is as follows (in thousands):
The unrecognized tax benefits, if recognized, would not impact the Company's effective tax rate as the recognition of these tax benefits would be offset by changes in the Company's valuation allowance. The Company does not believe there will be any material changes in its unrecognized tax benefits over the next twelve months.
As of December 31, 2019 and 2018, the Company had no accrued interest or penalties related to uncertain tax positions. Due to the Company’s historical loss position, all tax years from inception through December 31, 2019 remain open due to unutilized net operating losses.
The Company files income tax returns in the United States and various states and foreign jurisdictions and is subject to examination by various taxing authorities including major jurisdiction like the United States. As such, all its net operating loss and research credit carryforwards that may be used in future years are subject to adjustment, if and when utilized.
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before their utilization.

                                                       | Year Ended December 31, |        |
------------------------------------------------------ | ----------------------- | ------ | ------
                                                       | 2019                    | 2018   | 2017
Unrecognized tax benefit - beginning balance           | $8,217                  | $7,527 | $6,447
Increases for tax positions taken in prior years  —    | —                       | —      | 16
Decreases for tax positions taken in prior years  —    | __                      | (242)  | —
Increases for tax positions taken in current year  623 | 623                     | 932    | 1,064
Unrecognized tax benefit - ending balance              | $8,840                  | $8,217 | $7,527


DEPRECIATION AND AMORTIZATION
1 See “Accounting Policies” for more information.
1 See “Accounting Policies” for more information. Total depreciation and amortization increased this year primarily as a result of depreciation of right-of-use assets due to our adoption of IFRS 16 on January 1, 2019 and higher capital expenditures over the past several years. See “Capital Expenditures” for more information.

(In millions of dollars)                                                 | Years ended December 31 |       |
------------------------------------------------------------------------ | ----------------------- | ----- | ----
                                                                         | 2019                    | 2018  | %Chg
Depreciation                                                             | 2,297                   | 2,174 | 6
Amortization                                                             | 16                      | 37    | (57)
Depreciation and amortization before depreciation of right-of-use assets | 2,313                   | 2,211 | 5
Depreciation of right-of-use assets 1                                    | 175                     | -     | n/m
Total depreciation and amortization                                      | 2,488                   | 2,211 | 13


Selling, General and Administrative
Selling, general and administrative expense decreased $13.0 million to $88.8 million for the year ended December 31, 2019, as compared to $101.8 million for the year ended December 31, 2018. The decrease was primarily due to a decrease in intangible asset amortization of $8.9 million as certain assets reached the end of their useful lives, as well as decreases in payroll-related expense of $1.7 million due to lower headcount, professional fees of $1.3 million, outside services of $0.5 million, and travel-related expenses of $0.3 million.
We expect selling, general and administrative expenses to remain relatively flat in the near-term; however, our expenses may increase in the future as we expand our sales and marketing organization to enable market expansion.

                                    | Year Ended December 31, |                        | % Change
----------------------------------- | ----------------------- | ---------------------- | --------
                                    | 2019                    | 2018                   | 2019
                                    |                         | (dollars in thousands) |
Selling, general and administrative | $88,762                 | $101,789               | (13)%
% of net revenue                    | 28%                     | 26%                    |


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Note 6. Property, Equipment and Software
Property, equipment and software were as follows as of the dates indicated.

                                                | December 31, |
----------------------------------------------- | ------------ | -------
                                                | 2019         | 2018
Furniture                                       | $2,907       | $2,813
Leasehold improvements                          | 4,902        | 4,171
Computer hardware                               | 2,494        | 2,923
Software                                        | 20,126       | 8,344
Total property, equipment and software, at cost | 30,429       | 18,251
Less: accumulated depreciation                  | (5,701)      | (5,462)
Less: accumulated amortization                  | (6,419)      | (2,557)
Total property, equipment and software, net     | $18,309      | $10,232


Activity under our stock option plans is summarized as follows:
(a) Weighted-average exercise price
(b) Weighted-average contractual life remaining
The total aggregate intrinsic value of options exercised is $2,149, $1,724, and $1,944 for fiscal years ended March 31, 2017, 2018, and 2019, respectively.

                              | Number of Shares | Average Price (a) | Average Life (years) (b) | Aggregate Intrinsic Value
----------------------------- | ---------------- | ----------------- | ------------------------ | -------------------------
Outstanding at March 31, 2018 | 1,894            | $12.90            | -                        | -
Options granted               | -                | -                 | -                        | -
Options exercised             | (326)            | 13.11             | -                        | $1,944
Options cancelled/forfeited   | (122)            | 13.22             | -                        | 295
Outstanding at March 31, 2019 | 1,446            | $12.82            | 3.29                     | $6,528
Exercisable at March 31, 2019 | 1,347            | $12.70            | 3.08                     | $6,253


2.1 Segment information
Segment information is based on the information that management uses to make decisions about operating matters and allows users to review operations through the eyes of management. We present our reportable segments and measure our segment results on continuing operations basis, i.e. the same basis as our internal management reporting structure.
We have four reportable segments which offer a service that includes comparison, purchase support and lead referrals across:
• Health (private health insurance),
• Life and General Insurance,
• Energy and Telecommunications, and
• Other, predominately offering financial service products including home loans in Australia and Asia.
In the current year, unallocated corporate costs include costs associated with the business restructure and other one-off transactions.
1 Non-current assets other than financial instruments and deferred tax assets.

                    | AUSTRALIA | ASIA   | TOTAL
------------------- | --------- | ------ | -------
                    | $’000     | $’000  | $’000
30 June 2019        |           |        |
Revenue             | 149,295   | 4,864  | 154,159
Non-current assets1 | 44,061    | 15,899 | 59,960
30 June 2018        |           |        |
Revenue             | 174,776   | 2,155  | 176,931
Non-current assets1 | 49,235    | 15,245 | 64,480


Certain information regarding our initial distribution rights to films initially released in the three fiscal years 2019, 2018 and 2017 is set forth below:
We distribute content in over 50 countries through our own offices located in key strategic locations across the globe. In response to Indian cinemas’ continued growth in popularity across the world, especially in non-English speaking markets, including Germany, Poland, Russia, Southeast Asia and Arabic speaking countries, we offer dubbed and/or subtitled content in over 25 different languages.
In addition to our internal distribution resources, our global distribution network includes relationships with distribution partners, sub-distributors, producers, directors and prominent figures within the Indian film industry and distribution arena.

                                       |      | Year ended March 31, |
-------------------------------------- | ---- | -------------------- | ----
                                       | 2019 | 2018                 | 2017
Global (India and International)       |      |                      |
Hindi films                            | 7    | 10                   | 8
Regional films (excluding Tamil films) | 49   | 3                    | 12
Tamil films                            | 3    | 1                    | 3
International Only                     |      |                      |
Hindi films                            | 7    | 1                    | 3
Regional films (excluding Tamil films) | —    | —                    | —
Tamil films                            | —    | —                    | 12
India Only                             |      |                      |
Hindi films                            | 1    | 3                    | 1
Regional films (excluding Tamil films) | 5    | 6                    | 5
Tamil films                            | —    | 0                    | 1
Total                                  | 72   | 24                   | 45


Sales and marketing expenses consist primarily of personnel expenses and costs associated with advertising, marketing events and trade shows.
Sales and marketing expenses decreased by $11.1 million during the year ended June 30, 2019 as compared to the prior fiscal year. This was primarily due to (i) a decrease in commissions expense of $6.6 million, of which approximately $8.9 million is the net result of the Company capitalizing more commission expense under Topic 606, whereas previously, under Topic 605, such costs would have been expensed as incurred, (ii) a decrease in marketing expenses of $5.7 million and (iii) a decrease in travel and communication expenses of $1.1 million. These were partially offset by (i) an increase in bad debt expense of $3.5 million as certain low dollar receivables were provided for entirely as they became aged greater than one year. Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to approximately 18% from approximately 19% in the prior fiscal year.
Our sales and marketing labour resources increased by 103 employees, from 1,948 employees at June 30, 2018 to 2,051 employees at June 30, 2019.

increase (decrease)                          | Change between Fiscal increase (decrease) |
-------------------------------------------- | ----------------------------------------- | -------------
(In thousands)                               | 2019 and 2018                             | 2018 and 2017
Payroll and payroll-related benefits         | $(48)                                     | $48,717
Commissions                                  | (6,588)                                   | 16,993
Contract labour and consulting               | (871)                                     | 609
Share-based compensation                     | (752)                                     | (454)
Travel and communication                     | (1,113)                                   | 271
Marketing expenses                           | (5,742)                                   | 3,880
Facilities                                   | 808                                       | 8,373
Bad debt expense                             | 3,519                                     | 4,013
Other miscellaneous                          | (319)                                     | 2,285
Total change in sales and marketing expenses | $(11,106)                                 | $84,687


17. Income Taxes
Income before income taxes for the Company’s domestic and foreign operations was as follows:

                           |        | Years Ended June 30, |
-------------------------- | ------ | -------------------- | -----
($ in millions)            | 2019   | 2018                 | 2017
Domestic                   | $204.2 | $140.3               | $56.0
Foreign                    | 11.8   | 19.9                 | 14.2
Income before income taxes | $216.0 | $160.2               | $70.2


7. Employee numbers and costs
The average monthly number of employees (including Executive Directors but excluding third-party contractors) employed by the Group was as follows:

                       | 2019   | 2018
---------------------- | ------ | ------
                       | Number | Number
Customer operations    | 370    | 380
Product and technology | 317    | 312
Corporate              | 115    | 130
Total                  | 802    | 822


5. Balance Sheet Components
Deferred Revenue
Deferred revenue relates to performance obligations for which payments have been received by the customer prior to revenue recognition. Deferred revenue primarily consists of deferred software, or amounts allocated to mobile dashboard and on-line apps and unspecified upgrade rights. Deferred revenue also includes deferred subscription-based services. The deferred software and deferred subscription-based service performance obligations are anticipated to be recognized over the useful life or service periods of one to eighteen months.
Changes in the total short-term and long-term deferred revenue balance were as follows (in thousands):

                                |          | December 31, |
------------------------------- | -------- | ------------ | --------
                                | 2019     | 2018         | 2017
Beginning balances              | $36,836  | $42,432      | $49,904
Deferral of revenue             | 45,040   | 40,003       | 46,193
Recognition of deferred revenue | (41,034) | (45,599)     | (53,665)
Ending balances                 | $40,842  | $36,836      | $42,432


NAVIOS MARITIME HOLDINGS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in thousands of U.S. dollars — except share data)
NOTE 8: INTANGIBLE ASSETS/LIABILITIES OTHER THAN GOODWILL
Net Book Value of Intangible Assets other than Goodwill as at December 31, 2018
(**) During the year ended December 31, 2018, acquisition costs of $1,150 of favorable lease terms were capitalized as part of the cost of one vessel due to the exercise of the purchase option (See also Note 2(n)). As of December 31, 2018, intangible assets associated with the favorable lease terms included an amount of $31,342 associated with the favorable lease terms of certain charter out contracts of Navios Containers which were recognized as of November 30, 2018 (see Note 3). During the year ended December 31, 2017, acquisition costs of $10,398 and accumulated amortization of $7,001 of favorable lease terms were considered impaired and were written off resulting in a loss of $3,397 included in the statement of comprehensive (loss)/income within the caption of “Impairment loss/ loss on sale of vessels, net”.

                               | Acquisition Cost | Accumulated Amortization | Transfer/ Write off | Net Book Value December 31, 2018
------------------------------ | ---------------- | ------------------------ | ------------------- | --------------------------------
Trade name                     | $100,420         | $(47,966)                | $—                  | $52,454
Port terminal operating rights | 53,152           | (11,838)                 | —                   | 41,314
Customer relationships         | 35,490           | (19,520)                 | —                   | 15,970
Favorable lease terms(**)      | 32,492           | (2,143)                  | (1,150)             | 29,199
Total Intangible assets        | $221,554         | $(81,467)                | $(1,150)            | $138,937


Dividends and Share Repurchases
Following is a summary of the dividends and share repurchases for the fiscal years ended August 31, 2019, 2018, 2017 and 2016 (in thousands):
(1) The difference between dividends declared and dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest.
(2) Excludes commissions.
We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board each quarter following its review of our financial performance.
In June 2018, the Board authorized the repurchase of up to $350.0 million of our common stock. As of August 31, 2019, the total amount authorized by the Board of Directors had been repurchased.
In September 2019, the Board authorized the repurchase of up to $600.0 million of our common stock as part of a two-year capital allocation framework. From September 24, 2019 through October 14, 2019, we repurchased 874,475 shares, utilizing a total of $30.8 million of the $600.0 million authorized by the Board.

                 | Dividends Paid(1) | Share Repurchases(2) | Total
---------------- | ----------------- | -------------------- | ----------
Fiscal year 2016 | $62,436           | $148,185             | $210,621
Fiscal year 2017 | $59,959           | $306,397             | $366,356
Fiscal year 2018 | $57,833           | $450,000             | $507,833
Fiscal year 2019 | $52,004           | $350,000             | $402,004
Total            | $232,232          | $1,254,582           | $1,486,814


Stock-Based Compensation
The Company recognizes stock-based compensation expense in the consolidated statements of operations, based on the department to which the related employee reports, as follows: The Company recognizes stock-based compensation expense in the consolidated statements of operations, based on the department to which the related employee reports, as follows:
The total unrecognized compensation cost related to performance-based restricted stock units as of December 31, 2019 was $3.6 million, and the weighted average period over which these equity awards are expected to vest is 1.6 years. The total unrecognized compensation cost related to unvested stock options as of December 31, 2019 was $2.0 million, and the weighted average period over which these equity awards are expected to vest is 2.30 years.

                                    |         | Years Ended December 31, |
----------------------------------- | ------- | ------------------------ | -------
                                    | 2019    | 2018                     | 2017
                                    |         | (in thousands)           |
Cost of net revenue                 | $577    | $489                     | $332
Research and development            | 16,545  | 17,953                   | 16,190
Selling, general and administrative | 14,938  | 13,279                   | 11,016
Restructuring expense               | —       | —                        | 5,130
                                    | $32,060 | $31,721                  | $32,668


A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest expense) is as follows (in thousands):
Our effective income tax rates were 9.5%, (84.0)% and 9.3% for the years ended December 31, 2019, 2018 and 2017, respectively. Our effective tax rates were below the statutory rate primarily due to the tax windfall benefits from employee stockbased payment transactions, foreign derived intangible income deductions and research and development tax credits claimed, partially offset by the impact of non-deductible meal and entertainment expenses and state taxes.
We recognize a valuation allowance if, based on the weight of available evidence, both positive and negative, it is more likely than not that some portion, or all, of net deferred tax assets will not be realized. Due to the uncertainty of realization of  and development tax credits totaling $0.3 million, we established a valuation allowance of $0.3 million during the second quarter of 2019, which remained at $0.3 million as of December 31, 2019. As of December 31, 2018, based on our historical and expected future taxable earnings, we believed it was more likely than not that we would realize all of the benefit of the existing deferred tax assets. Accordingly, we did not record a valuation allowance as of December 31, 2018.
We apply guidance for uncertainty in income taxes that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, this guidance permits us to recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is more likely than not to be realized upon settlement. We recorded unrecognized tax benefits of $0.6 million, $0.8 million and $1.0 million for research and development tax credits claimed during the years ended December 31, 2019, 2018 and 2017, respectively.
As of December 31, 2019 and 2018, we accrued $0.2 million and $0.1 million of total interest related to unrecognized tax benefits, respectively. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.
We are not aware of any events that make it reasonably possible that there would be a significant change in our unrecognized tax benefits over the next twelve months. Our cumulative liability for uncertain tax positions was $3.1 million and $2.8 million as of December 31, 2019 and 2018, respectively, and if recognized, would reduce our income tax expense and the effective tax rate.
We file income tax returns in the United States and Canada. We are no longer subject to U.S. income tax examinations for years prior to 2016, with the exception that operating loss carryforwards generated prior to 2016 may be subject to tax audit adjustment. We are generally no longer subject to state and local income tax examinations by tax authorities for years prior to 2016.
As of December 31, 2019, we had federal net operating loss carryforwards of $4.9 million, which are scheduled to begin to expire in 2030. As of December 31, 2019, we had state net operating loss carryforwards of $1.7 million, which are scheduled to begin to expire in 2027. As of December 31, 2019, we had federal research and development tax credit carryforwards of $5.2 million, which are scheduled to begin to expire in 2038. As of December 31, 2019, we had state research and development tax credit carryforwards of $4.3 million, which are scheduled to begin to expire in 2021. The federal net operating loss carryforward arose in connection with the 2013 acquisition of EnergyHub. Utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change limitations as provided by the Internal Revenue Code of 1986, as amended.

                                                            |        | Year Ended December 31, |
----------------------------------------------------------- | ------ | ----------------------- | ------
                                                            | 2019   | 2018                    | 2017
Beginning balance                                           | $2,801 | $1,973                  | $681
Additions based on tax positions of the current year        | 718    | 857                     | 718
Additions based on tax positions of prior year              | 18     | 147                     | 373
Decreases based on tax positions of prior year              | (253)  | —                       | —
Additions resulting from acquisitions                       | —      | —                       | 277
Decreases due to lapse of applicable statute of limitations | (219)  | (176)                   | (76)
Ending balance                                              | $3,065 | $2,801                  | $1,973


Note 3 – Net Income per Share
Reconciliation of net income per common share:

                                                            |                    | Fiscal Year Ended  |
----------------------------------------------------------- | ------------------ | ------------------ | -----------------
                                                            | December 27, 2019  | December 28, 2018  | December 29, 2017
Numerator:                                                  |                    |                    |
Net income                                                  | $24,193            | $20,402            | $14,366
Add effect of dilutive securities                           |                    |                    |
Interest on convertible notes, net of tax                   | 207                | 362                | 536
Adjusted net income                                         | $24,400            | $20,764            | $14,902
Denominator:                                                |                    |                    |
Weighted average basic common shares outstanding            | 29,532,342         | 28,703,265         | 26,118,482
Dilutive effect of stock options and unvested common shares | 211,050            | 270,520            | 68,670
Dilutive effect of convertible notes                        | 329,946            | 705,134            | 1,237,374
Weighted average diluted common shares outstanding          | 30,073,338         | 29,678,919         | 27,424,526


NOTE 14 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period plus the dilutive effect of outstanding stock options and restricted stock-based awards using the treasury stock method. The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):
All outstanding stock options and restricted stock-based awards in the amount of 1.0 million and 1.2 million, respectively, were excluded from the computation of diluted earnings per share for the fiscal year ended February 28, 2017 because the effect of inclusion would be antidilutive. Shares subject to anti-dilutive stock options and restricted stock-based awards of 1.9 million and 0.2 million for the fiscal years ended February 28, 2019 and 2018, respectively, were excluded from the calculations of diluted earnings per share for the years then ended.
We have the option to pay cash, issue shares of common stock or any combination thereof for the aggregate amount due upon conversion of the Notes. It is our intent to settle the principal amount of the convertible senior notes with cash, and therefore, we use the treasury stock method for calculating any potential dilutive effect of the conversion option on diluted net income (loss) per share. From the time of the issuance of the Notes, the average market price of our common stock has been less than the initial conversion price of the Notes, and consequently no shares have been included in diluted earnings per share for the conversion value of the Notes.

                                                               |         | Year Ended February 28, |
-------------------------------------------------------------- | ------- | ----------------------- | --------
                                                               | 2019    | 2018                    | 2017
Net income (loss)                                              | $18,398 | $16,617                 | $(7,904)
Basic weighted average number of common shares outstanding     | 34,589  | 35,250                  | 35,917
Effect of stock options and restricted stock units computed on |         |                         |
treasury stock method                                          | 705     | 889                     | -
Diluted weighted average number of common shares outstanding   | 35,294  | 36,139                  | 35,917
Earnings (loss) per share:                                     |         |                         |
Basic                                                          | $0.53   | $0.47                   | $(0.22)
Diluted                                                        | $0.52   | $0.46                   | $(0.22)


NOTE 9. GOODWILL AND INTANGIBLES
A summary of goodwill activity follows (in thousands).

Year Ended December 31        |               |
----------------------------- | ------------- | -------------
                              | 2019          | 2018
Goodwill, beginning of period | $       3,178 | $           -
Golden Ridge acquisition      | -             | 3,178
MGI acquistion                | 737           | -
Goodwill, end of period       | $3,915        | $3,178


9. Pensions continued
Defined benefit plans continued
iii) Amount, timing and uncertainty of future cash flows continued
The liability has the following duration and maturity:

                                                                         | 2019  | 2018
------------------------------------------------------------------------ | ----- | -----
Weighted average duration of the defined benefit obligation (years)      | 14    | 15
Maturity analysis of benefit payments (non-discounted amounts) $ million |       |
Maturity ≤ 1 year                                                        | 10.8  | 10.4
Maturity > 1 ≤ 5 years                                                   | 45.6  | 43.2
Maturity > 5 ≤ 10 years                                                  | 61.7  | 119.0
Maturity > 10 ≤ 20 years                                                 | 114.3 | 103.0
Maturity > 20 ≤ 30 years                                                 | 81.7  | 68.0
Maturity > 30 years                                                      | 63.0  | 42.9


FRT Term Loan
On October 25, 2019, we entered into a $23.4 million three-year credit facility loan agreement (the "FRT Term Loan") with HSBC Trinkaus & Burkhardt AG, Germany, to fund the acquisition of FRT GmbH, which we acquired on October 9, 2019. See Note 4 for further details of the acquisition.
The FRT Term Loan bears interest at a rate equal to the Euro Interbank Offered Rate ("EURIBOR") plus 1.75 % per annum and will be repaid in quarterly installments of approximately $1.9 million plus interest beginning January 25, 2020.
The obligations under the FRT Term Loan are fully and unconditionally guaranteed by FormFactor, Inc.
The Credit Facility contains negative covenants customary for financing of this type, including covenants that place limitations on the incurrence of additional indebtedness, the creation of liens, the payment of dividends; dispositions; fundamental changes, including mergers and acquisitions; loans and investments; sale leasebacks; negative pledges; transactions with affiliates; changes in fiscal year; sanctions and anti-bribery laws and regulations, and modifications to charter documents in a manner materially adverse to the Lenders.
The FRT Term Loan also contains affirmative covenants and representations and warranties customary for financing of this type.
Future principal and interest payments on our term loans as of December 28, 2019, based on the interest rate in effect at that date were as follows (in thousands):
(1) Represents our minimum interest payment commitments at 1.35% per annum for the FRT Term Loan and 3.71% per annum for the CMI Term Loan.

                                  |         | Payments Due In Fiscal Year |        |
--------------------------------- | ------- | --------------------------- | ------ | -------
                                  | 2020    | 2021                        | 2022   | Total
Term loans - principal payments   | $42,838 | $7,838                      | $7,838 | $58,514
Term loans - interest payments(1) | 777     | 155                         | 47     | 979
Total                             | $43,615 | $7,993                      | $7,885 | $59,493


Revenues, Cost of Revenues and Gross Margin by Product Type
1) License: Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (on-premise). Our license revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products, and our acquisitions. Cost of license revenues consists primarily of royalties payable to third parties.
License revenues decreased by $9.4 million or 2.2% during the year ended June 30, 2019 as compared to the prior fiscal year; up 0.4% after factoring the impact of $11.2 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $8.2 million, offset by a decrease in Asia Pacific of $10.6 million and a decrease in EMEA of $7.0 million.
During Fiscal 2019, we closed 153 license deals greater than $0.5 million, of which 49 deals were greater than $1.0 million, contributing approximately $144.1 million of license revenues. This was compared to 140 deals greater than $0.5 million during Fiscal 2018, of which 58 deals were greater than $1.0 million, contributing $152.2 million of license revenues.
Cost of license revenues increased by $0.7 million during the year ended June 30, 2019 as compared to the prior fiscal year. The gross margin percentage on license revenues remained at approximately 97%.
For illustrative purposes only, had we accounted for revenues under proforma Topic 605, license revenues would have been $390.4 million for the year ended June 30, 2019, which would have been lower by approximately $47.1 million or 10.8% as compared to the prior fiscal year; and would have been lower by 8.4% after factoring the impact of $10.4 million of foreign exchange rate changes. Geographically, the overall change would have been attributable to a decrease in Americas of $17.7 million, a decrease in EMEA of $15.7 million and a decrease in Asia Pacific of $13.7 million.
The $37.7 million difference between license revenues recognized under Topic 606 and those proforma Topic 605 license revenues described above is the result of timing differences, where under Topic 605, revenues would have been deferred and recognized over time, but under Topic 606 these revenues are recognized up front. For more details, see note 3 "Revenues" to our Consolidated Financial Statements.

                                  |          |                             | Year Ended June 30, |                            |
--------------------------------- | -------- | --------------------------- | ------------------- | -------------------------- | --------
(In thousands)                    | 2019     | Change increase (decrease)) | 2018                | Change increase (decrease) | 2017
License Revenues:                 |          |                             |                     |                            |
Americas                          | $215,871 | $8,216                      | $207,655            | $29,257                    | $178,398
EMEA                              | 163,622  | (7,009)                     | 170,631             | 23,788                     | 146,843
Asia Pacific                      | 48,599   | (10,627)                    | 59,226              | 15,323                     | 43,903
Total License Revenues            | 428,092  | (9,420)                     | 437,512             | 68,368                     | 369,144
Cost of License Revenues          | 14,347   | 654                         | 13,693              | 61                         | 13,632
GAAP-based License Gross Profit   | $413,745 | $(10,074)                   | $423,819            | $68,307                    | $355,512
GAAP-based License Gross Margin % | 96.6%    |                             | 96.9%               |                            | 96.3%
% License Revenues by Geography:  |          |                             |                     |                            |
Americas                          | 50.4%    |                             | 47.5%               |                            | 48.3%
EMEA                              | 38.2%    |                             | 39.0%               |                            | 39.8%
Asia Pacific                      | 11.4%    |                             | 13.5%               |                            | 11.9%


Other Key Financial Measures
The following is a summary of our other key financial measures for fiscal 2019 compared with fiscal 2018 (in millions):
(1) Deferred revenue decreased primarily due to the adoption of ASC 606 in the beginning of our first quarter of fiscal 2019. See Note 2 to the Consolidated Financial Statements for the impact of this adoption.

                                                     | Fiscal 2019 | Fiscal 2018
---------------------------------------------------- | ----------- | -----------
Cash and cash equivalents and investments            | $33,413     | $46,548
Cash provided by operating activities                | $15,831     | $13,666
Deferred revenue (1)                                 | $18,467     | $19,685
Repurchases of common stock—stock repurchase program | $20,577     | $17,661
Dividends                                            | $5,979      | $5,968
Inventories                                          | $1,383      | $1,846


Non-GAAP Financial Measures
Management believes that certain non-GAAP financial measures may be useful to investors in certain instances to provide additional meaningful comparisons between current

results and results in prior operating periods. Adjusted earnings before interest, taxes, depreciation, amortization and stock-based compensation (“Adjusted EBITDA”) is a

metric used by management and frequently used by the financial community. Adjusted EBITDA from operations provides insight into an organization’s operating trends and

facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and stock-based compensation can differ greatly between organizations as a

result of differing capital structures and tax strategies. Adjusted EBITDA from operations is one of the measures used for determining our debt covenant compliance. Adjusted

EBITDA from operations excludes certain items that are unusual in nature or not comparable from period to period. While management believes that non-GAAP measurements

are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results. Adjusted EBITDA from operations is not, and should not be

considered, an alternative to net income (loss), operating income (loss), or any other measure for determining operating performance or liquidity, as determined under

accounting principles generally accepted in the United States (GAAP). In assessing the overall health of its business for the years ended December 31, 2019 and 2018, the

Company excluded items in the following general categories described below:
Stock-based compensation: The Company believes that because of the variety of equity awards used by companies, varying methodologies for determining stock-based compensation and the assumptions and estimates involved in those determinations, the exclusion of non-cash stock-based compensation enhances the ability of management and investors to understand the impact of non-cash stock-based compensation on our operating results. Further, the Company believes that excluding stockbased compensation expense allows for a more transparent comparison of its financial results to the previous year.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA FOR THE YEARS ENDED DECEMBER 31,
Liquidity and Capital Resources
For the year ended December 31, 2019, the Company reported a net loss of $1,934,133 and had cash used in operating activities of $1,875,846, and ended the year with an

accumulated deficit of $125,105,539 and total current assets in excess of current liabilities of $4,187,449. At December 31, 2019, the Company had $3,300,600 of cash and

approximately $424,000 of availability on its credit facility. The credit facility is a $2,000,000 line of credit, which is subject to a borrowing base calculation based on the

Company’s eligible accounts receivable and eligible inventory each- multiplied by an applicable advance rate, with an overall limitation tied to the Company’s eligible accounts

receivable. As of December 31, 2019, we had borrowing capacity of $1,102,917 and an outstanding balance of $624,347, resulting in the approximate availability of $424,000

on the credit facility. During the twelve-month period between January 1, 2019 and December 31, 2019, the Company’s cash balance decreased from $4,678,891 to $3,300,600,

or approximately $115,000 per month. In comparison, during the twelve-month period between January 1, 2018 and December 31, 2018, the Company’s cash balance decreased

from $8,385,595 to $4,678,891, or approximately $309,000 per month. This improvement is the result of improved revenues and cost management efforts.

                               | 2019         | 2018
------------------------------ | ------------ | ------------
Net loss                       | $(1,934,133) | $(3,016,750)
Interest (income) expense, net | 53,139       | (13,622)
Income tax provision (benefit) | (100,363)    | 9,623
Depreciation and amortization  | 66,082       | 67,107
EBITDA                         | (1,915,275)  | (2,953,642)
Adjustments:                   |              |
Stock-based compensation       | 7,261        | 6,404
Adjusted EBITDA                | $(1,908,014) | $(2,947,238)


The following table presents unaudited supplemental pro forma results for fiscal 2019 and 2018 as if both the Grakon acquisition had occurred as of the beginning of fiscal 2018 and the Pacific Insight acquisition had occurred as of the beginning of fiscal 2017. The unaudited pro forma information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at such times.
The unaudited pro forma results presented below primarily include amortization charges for acquired intangible assets, depreciation adjustments for property, plant and equipment that has been revalued, interest expense adjustments due to an increased debt level, adjustments for certain acquisition-related charges and related tax effects.

                      | Fiscal Year Ended |
--------------------- | ----------------- | --------------
(Dollars in Millions) | April 27, 2019    | April 28, 2018
Revenues              | $1,073.3          | $1,095.0
Net Income            | $106.4            | $70.5


ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from our audited consolidated financial statements. This data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
(1) We elected to early adopt Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”) in 2016, which requires us, among other things, to prospectively record excess tax benefits as a reduction of the provision for income taxes in the consolidated statement of operations, whereas they were previously recognized in equity.
(2) We retrospectively adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” in 2018. As a result, we have adjusted balances for 2017 and 2016. We have not adjusted 2015 for ASU 2014-09.

(in thousands, except per share amounts)            | 2019       | 2018      | 2017    | 2016    | 2015
--------------------------------------------------- | ---------- | --------- | ------- | ------- | -------
Consolidated Statements of Operations Data (1) (2): |            |           |         |         |
Revenue:                                            |            |           |         |         |
Perpetual license                                   | $80,015    | 109,863   | 132,883 | 145,053 | 166,305
Term license                                        | 199,433    | 178,256   | 206,411 | 152,231 | 109,283
Maintenance                                         | 280,580    | 263,875   | 242,320 | 218,635 | 202,802
Cloud                                               | 133,746    | 82,627    | 51,097  | 40,647  | 30,626
Consulting                                          | 217,609    | 256,960   | 255,756 | 205,663 | 173,679
Total revenue                                       | $911,383   | 891,581   | 888,467 | 762,229 | 682,695
(Loss) income from operations                       | $(134,878) | $(17,032) | $93,177 | $50,644 | $64,661
Net (loss) income                                   | $(90,433)  | $10,617   | $98,548 | $45,015 | $36,322
(Loss) earnings per share                           |            |           |         |         |
Basic                                               | $(1.14)    | $0.14     | $1.27   | $0.59   | $0.47
Diluted                                             | $(1.14)    | $0.13     | $1.19   | $0.56   | $0.46
Cash dividends declared per common share            | $0.12      | $0.12     | $0.12   | $0.12   | $0.12