ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
In February 2018, Advanced Energy acquired Trek Holding Co., LTD ("Trek"), a privately held company with operations in Tokyo, Japan and Lockport, New York, for $6.1 million, net of cash acquired. Trek has a 95% ownership interest in its U.S. subsidiary which is also its primary operation.
The components of the fair value of the total consideration transferred for our 2018 acquisitions are as follows:

                          | Trek    | Electrostatic Product Line | LumaSense | Total
------------------------- | ------- | -------------------------- | --------- | ---------
Cash paid for acquisition | $11,723 | $3,000                     | $94,946   | $ 109,669
Less cash acquired        | (5,651) | —                          | (10,262)  | (15,913)
Total purchase price      | $6,072  | $3,000                     | $84,684   | $ 93,756


NOTE 7 — PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
During fiscal years 2019, 2018, and 2017, depreciation expense was $9.7 billion, $7.7 billion, and $6.1 billion, respectively. We have committed $4.0 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2019.

(In millions)                   |           |
------------------------------- | --------- | ---------
June 30,                        | 2019      | 2018
Land                            | $ 1,540   | $ 1,254
Buildings and improvements      | 26,288    | 20,604
Leasehold improvements          | 5,316     | 4,735
Computer equipment and software | 33,823    | 27,633
Furniture and equipment         | 4,840     | 4,457
Total, at cost                  | 71,807    | 58,683
Accumulated depreciation        | (35,330)  | (29,223)
Total, net                      | $  36,477 | $  29,460


A.2.6 Calculation of return on capital employed
For purposes of calculating ROCE in interim periods, income before interest after tax is annualized. Average capital employed is determined using the average of the respective balances as of the quarterly reporting dates for the periods under review.
[1] Item Other interest expenses / income, net primarily consists of interest relating to corporate debt, and related hedging activities, as well as interest income on corporate assets.

(in millions of €)                                                         | 2019   | 2018
-------------------------------------------------------------------------- | ------ | ------
Net income                                                                 | 5,648  | 6,120
Less: Other interest expenses / income, net 1                              | (529)  | (482)
Plus: SFS Other interest expenses / income                                 | 763    | 721
Plus: Net interest expenses related to provisions for pensions and similar |        |
obligations                                                                | 148    | 164
Less: Interest adjustments                                                 |        |
(discontinued operations)                                                  | –      | –
Less: Taxes on interest adjustments                                        |        |
(tax rate (flat) 30%)                                                      | (115)  | (121)
(I) Income before interest after tax                                       | 5,916  | 6,401
(II) Average capital employed                                              | 53,459 | 50,715
(I) / (II) ROCE                                                            | 11.1 % | 12.6 %


Segment Financial Results
Revenues
The following table sets forth revenues by segment for the periods presented (in millions):
(1) Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.
Software Solutions
Revenues were $962.0 million in 2018 compared to $904.5 million in 2017, an increase of $57.5 million, or 6%. Our servicing software solutions revenues increased 7%, or $52.5 million, primarily driven by loan growth on MSP® from new and existing  clients. Our origination software solutions revenues increased 3%, or $5.0 million, primarily driven by growth in our loan origination system solutions and a software license fee in our Lending Solutions business, partially offset by the effect of lower volumes on our Exchange and eLending platforms primarily as a result of the 26% decline in refinancing originations as reported by the Mortgage Bankers Association.
Data and Analytics
Revenues were $154.5 million in 2018 compared to $151.6 million in 2017, an increase of $2.9 million, or 2%. The increase was primarily driven by growth in our property data and multiple listing service businesses, partially offset by upfront revenues from long-term strategic license deals in 2017.

                       | Year ended December 31 |          | Variance |
---------------------- | ---------------------- | -------- | -------- | --
                       | 2018                   | 2017     | $        | %
Software Solutions     | $962.0                 | $904.5   | $57.5    | 6%
Data and Analytics     | 154.5                  | 151.6    | 2.9      | 2%
Corporate and Other(1) | (2.5)                  | (4.5)    | 2.0      | NM
Total                  | $1,114.0               | $1,051.6 | $62.4    | 6%


Free Cash Flow
Free cash flow is a non-IFRS financial measure that we calculate as net cash provided by operating activities less net cash used in investing activities for capital expenditures.
Free cash flow increased by $140.9 million during the fiscal year ended June 30, 2019 due to a $154.9 million increase of net cash provided by operating activities, offset by a $14.0 million increase of capital expenditures as we continue to invest in our facilities.
For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources”.

                                          |          | Fiscal Year Ended June 30, |
----------------------------------------- | -------- | -------------------------- | --------
                                          | 2019     | 2018                       | 2017
Net cash provided by operating activities | $466,342 | $311,456                   | $199,381
Less: Capital expenditures                | (44,192) | (30,209)                   | (15,129)
Free cash flow                            | $422,150 | $281,247                   | $184,252


Note 3: Balance Sheet Components
Prepaid expenses and other consist of the following (in thousands):

December 31,                     |        |
-------------------------------- | ------ | ------
                                 | 2019   | 2018
Prepaid expenses                 | $2,303 | $1,780
Other current assets             | 193    | 167
Total prepaid expenses and other | $2,496 | $1,947


Seasonality
The Company’s sales, income and cash flow from operations vary between quarters, and are generally lowest in the first quarter of the from operations vary between quarters, and are generally lowest in the first quarter of the year and highest in the fourth quarter. This is mainly a result of the seasonal purchase patterns of network operators.

Most recent three-year average seasonality |               |                |               |
------------------------------------------ | ------------- | -------------- | ------------- | --------------
                                           | First quarter | Second quarter | Third quarter | Fourth quarter
Sequential change, sales                   | -25%          | 11%            | 4%            | 17%
Share of annual sales                      | 22%           | 24%            | 25%           | 29%


IFRS cash flow
The key drivers of the decrease in cash and cash equivalents of £35.8 million in the year are discussed below.
Cash flows from operating activities of £11.1 million were £91.5 million lower than 2018, largely due to the reduction in underlying earnings of £65.9 million (see income statement section) and the early settlement of interest rate swaps of £52.4 million, partially offset by improvements in working capital of £32.2 million.
Cash flows from investing activities mainly reflected cash inflows related to the part disposal of intu Derby of £96.7 million and other sundry disposals of £75.3 million, partially offset by capital expenditure during the year of £127.7 million.
Cash flows from financing activities primarily reflected net borrowings repaid in the year (see debt activity section on page 36).

m                                       | 2019    | 2018
--------------------------------------- | ------- | ------
Cash flows from:                        |         |
operating activities                    | 11.1    | 102.6
investing activities                    | 75.5    | (0.4)
financing activities                    | (122.4) | (90.8)
Net change in cash and cash equivalents | (35.8)  | 11.4


The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
The liability for gross unrecognized tax benefits at May 26, 2019 was $44.1 million, excluding a related liability of $11.7 million for gross interest and penalties. Included in the balance at May 26, 2019 are $1.0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Any associated interest and penalties imposed would affect the tax rate. As of May 27, 2018, our gross liability for unrecognized tax benefits was $32.5 million, excluding a related liability of $7.7 million for gross interest and penalties. Interest and penalties recognized in the Consolidated Statements of Operations was an expense of $1.2 million in fiscal 2019, an expense of $1.6 million in fiscal 2018, and a benefit of $0.3 million in fiscal 2017.
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)

                                                               | May 26, 2019 |             | May 27, 2018 |
-------------------------------------------------------------- | ------------ | ----------- | ------------ | -----------
                                                               | Assets       | Liabilities | Assets       | Liabilities
Property, plant and equipment                                  | $—           | $240.7      | $—           | $141.0
Inventory                                                      | 15.2         | —           | 2.6          | —
Goodwill, trademarks and other intangible assets               | —            | 1,187.0     | —            | 406.2
Accrued expenses                                               | 11.8         | —           | 15.5         | —
Compensation related liabilities                               | 35.9         | —           | 34.1         | —
Pension and other postretirement benefits                      | 54.6         | —           | 45.8         | —
Investment in unconsolidated subsidiaries                      | —            | 185.4       | —            | 165.8
Other liabilities that will give rise to future tax deductions | 123.5        | —           | 109.7        | —
Net capital and operating loss carryforwards                   | 766.5        | —           | 762.5        | —
Federal credits                                                | 18.0         | —           | 3.5          | —
Other                                                          | 37.6         | 24.0        | 23.6         | 9.5
                                                               | 1,063.1      | 1,637.1     | 997.3        | 722.5
Less: Valuation allowance                                      | (738.1)      | —           | (739.6)      | —
Net deferred taxes                                             | $325.0       | $1,637.1    | $257.7       | $722.5


Long-lived assets by geographic area, which primarily include property and equipment, net, as of the periods presented were as follows (table in millions):
No individual country other than the U.S. accounted for 10% or more of these assets as of January 31, 2020 and February 1, 2019
VMware’s product and service solutions are organized into three main product groups:
• Software-Defined Data Center
• Hybrid and Multi-Cloud Computing
• Digital Workspace—End-User Computing
VMware develops and markets product and service offerings within each of these three product groups. Additionally, synergies are leveraged across these three product areas. VMware’s products and service solutions from each of its product groups may also be bundled as part of an enterprise agreement arrangement or packaged together and sold as a suite. Accordingly, it is not practicable to determine revenue by each of the three product groups described above.

              | January 1, 2020 | February 1, 2019
------------- | --------------- | ----------------
United States | $860            | $849
International | 209             | 113
Total         | $1,069          | $962


Geographic information
The Group is domiciled in the UK and the following tables detail external revenue by location of customers, trade receivables and non-current assets (excluding deferred tax) by geographic area:
Due to the large number of customers the Group serves, there are no individual customers whose revenue is greater than 10% of the Group’s total revenue in all periods presented in these financial statements.

              | 2019  | 2018
------------- | ----- | -----
Revenue       | £m    | £m
UK            | 349.9 | 324.9
Ireland       | 5.2   | 5.2
Total revenue | 355.1 | 330.1


The Systems gross profit margin increased 3.2 points to 53.1 percent in 2019 compared to the prior year. The increase was driven by actions taken in 2018 to better position the cost structure over the longer term, a mix to IBM Z hardware and operating systems and margin improvement in Storage Systems.
Pre-tax income of $701 million declined 22.4 percent and pre-tax margin of 8.4 percent decreased 1.8 points year to year driven by the declines in Power Systems and Storage Systems revenue and the continued investment in innovation across the Systems portfolio, mitigated by the benefit from the new hardware launches in the second-half 2019.

($ in millions)                                         |        |        |
------------------------------------------------------- | ------ | ------ | --------------------------------
For the year ended December 31:                         | 2019   | 2018   | Yr.-to-Yr Percent/ Margin Change
Systems                                                 |        |        |
External Systems Hardware gross profit                  | $2,622 | $2,590 | 1.2%
External Systems Hardware gross profit margin           | 44.3%  | 40.7%  | 3.6pts.
External Operating Systems Software gross profit        | $1,412 | $1,412 | 0.0%
External Operating Systems Software gross profit margin | 83.8%  | 84.5%  | (0.7)pts.
External total gross profit                             | $4,034 | $4,002 | 0.8%
External total gross profit margin                      | 53.1%  | 49.8%  | 3.2pts.
Pre-tax income                                          | $701   | $904   | (22.4)%
Pre-tax margin                                          | 8.4%   | 10.2%  | (1.8)pts.


This section presents the Group’s contractual obligation to make a payment in the future in relation to purchases of property, plant and equipment, and lease commitments.
Capital expenditure and operating lease commitments of the Group at the reporting date are as follows:
The commitments set out above do not include contingent turnover rentals, which are charged on many retail premises leased by the Group. These rentals are calculated as a percentage of the turnover of the store occupying the premises, with the percentage and turnover threshold at which the additional rentals commence varying with each lease agreement.
The Group leases retail premises and warehousing facilities which are generally for periods up to 40 years. The operating lease commitments include leases for the Norwest office and distribution centres. Generally the lease agreements are for initial terms of between five and 25 years and most include multiple renewal options for additional five to 10-year terms. Under most leases, the Group is responsible for property taxes, insurance, maintenance, and expenses related to the leased properties. However, many of the more recent lease agreements have been negotiated on a gross or semi-gross basis, which eliminates or significantly reduces the Group’s exposure to operational charges associated with the properties.
From 1 July 2019, the Group adopted AASB 16 Leases and as a result the operating lease commitments set out above have been recognised in the Consolidated Statement of Financial Position, with the exception of the service component of lease payments. Refer to Note 1.2.6 for a reconciliation between the operating lease commitments at 30 June 2019 and the lease liabilities recognised at 1 July 2019.

                                                                        | 2019   | 2018
----------------------------------------------------------------------- | ------ | ------
                                                                        | $M     | $M
Capital expenditure commitments                                         |        |
Estimated capital expenditure under firm contracts, payable:            |        |
Not later than one year                                                 | 398    | 416
Later than one year, not later than two years                           | –      | –
Later than two years, not later than five years                         | –      | –
Total capital expenditure commitments                                   | 398    | 416
Operating lease commitments                                             |        |
Future minimum rentals under non-cancellable operating leases, payable: |        |
Not later than one year                                                 | 1,998  | 2,089
Later than one year, not later than five years                          | 7,415  | 7,484
Later than five years                                                   | 12,378 | 13,331
Total operating lease commitments                                       | 21,791 | 22,904
Total commitments for expenditure                                       | 22,189 | 23,320


During the year ended December 31, 2019, the Company completed a reorganization of certain of its foreign subsidiaries that resulted in the derecognition of the related deferred tax assets for net operating losses which were subject to a valuation allowance. As a result, the Company reduced both its net operating loss deferred tax assets and valuation allowance by approximately $19.7 million.
The Company accrued $2.7 million as of both December 31, 2019 and 2018, excluding penalties and interest, for the liability for unrecognized tax benefits, which was included in “Long-term income tax liabilities” in the accompanying Consolidated Balance Sheets. Had the Company recognized these tax benefits, approximately $2.7 million, along with the related interest and penalties, would have favorably impacted the effective tax rate in both 2019 and 2018. The Company does not anticipate that any of the unrecognized tax benefits will be recognized in the next twelve months.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company had $1.1 million and $0.6 million accrued for interest and penalties as of December 31, 2019 and 2018, respectively. Of the accrued interest and penalties at December 31, 2019 and 2018, $0.6 million and $0.4 million, respectively, relate to statutory penalties. The amount of interest and penalties, net, included in the provision for income taxes in the accompanying Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 was $0.4 million, $0.7 million and $(9.5) million, respectively.
The tabular reconciliation of the amounts of unrecognized net tax benefits is presented below (in thousands):

                                                            |        | Years Ended December 31, |
----------------------------------------------------------- | ------ | ------------------------ | --------
                                                            | 2019   | 2018                     | 2017
Balance at the beginning of the period                      | $2,720 | $1,342                   | $8,531
Current period tax position increases                       | —      | 2,950                    | —
Decreases from settlements with tax authorities             | —      | (191)                    | (10,865)
Decreases due to lapse in applicable statute of limitations | —      | (1,310)                  | (466)
Foreign currency translation increases (decreases)          | (9)    | (71)                     | 4,142
Balance at the end of the period                            | $2,711 | $2,720                   | $1,342


Disaggregation of Revenue
The tables below present the Company’s revenue disaggregated by type of revenue. Refer to Note 13, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

                            | Year Ended June 30, |            |
--------------------------- | ------------------- | ---------- | ----------
                            | 2019                | 2018       | 2017
Processing                  | $594,202            | $550,058   | $506,555
Outsourcing & Cloud         | 405,359             | 361,922    | 327,738
Product Delivery & Services | 231,982             | 251,743    | 256,794
In-House Support            | 321,148             | 307,074    | 297,203
Services & Support          | 958,489             | 920,739    | $881,735
Total Revenue               | $1,552,691          | $1,470,797 | $1,388,290


Assumptions used
The last triennial actuarial valuation of the Scheme was performed by an independent professional actuary at 30 April 2018 using the projected unit method of valuation. For the purposes of IAS 19 (revised) the actuarial valuation as at 30 April 2018 has been updated on an approximate basis to 31 March 2019. There have been no changes in the valuation methodology adopted for this year’s disclosures compared to the prior year’s disclosures.
The principal financial assumptions used to calculate the liabilities under IAS 19 (revised) are as follows:
The financial assumptions reflect the nature and term of the Scheme’s liabilities.

                                     | 2019 | 2018
------------------------------------ | ---- | ----
                                     | %    | %
Discount rate for scheme liabilities | 2.45 | 2.60
CPI inflation                        | 2.35 | 2.25
RPI inflation                        | 3.45 | 3.35
Pension increases                    |      |
Pre 1988 GMP                         | –    | –
Post 1988 GMP                        | 2.10 | 2.10
Pre 2004 non GMP                     | 5.00 | 5.00
Post 2004                            | 3.35 | 3.25


6. Goodwill and Other Intangible Assets
The Company completed its annual impairment test for goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2019 and determined the fair values of the reporting units and the indefinite-lived intangible assets were in excess of the carrying values and that no impairment existed as of the date of the impairment test.
The following table presents the changes in goodwill allocated to the Company’s reportable segments, Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), during the fiscal years ended August 31, 2019 and 2018 (in thousands):
(1) Includes $8.2 million of goodwill reallocated between DMS and EMS during fiscal year 2018.

                                          | EMS     | DMS      | Total
----------------------------------------- | ------- | -------- | --------
Balance as of August 31, 2017             | $52,574 | $555,610 | $608,184
Acquisitions and adjustments(1)           | 30,763  | (8,186)  | 22,577
Change in foreign currency exchange rates | (667)   | (2,349)  | (3,016)
Balance as of August 31, 2018             | 82,670  | 545,075  | 627,745
Change in foreign currency exchange rates | (702)   | (4,788)  | (5,490)
Balance as of August 31, 2019             | $81,968 | $540,287 | $622,255


Audit and Non-Audit Fees
The following table presents fees billed for professional audit services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements for the years ended June 29, 2019 and June 30, 2018 respectively, and fees billed for other services rendered by PricewaterhouseCoopers LLP and during those periods.
(1) Audit Fees are related to professional services rendered in connection with the audit of the Company’s annual financial statements, the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, reviews of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings. Audit Fees in fiscal 2019 include fees for services performed by PricewaterhouseCoopers LLP in connection with the acquisitions of RPC Photonics, Inc. (“RPC”) and 3Z Telecom, Inc. (“3Z”). Audit Fees in fiscal 2018 include fees for the acquisitions of the AvComm and Wireless businesses of Cobham plc (“AW”) and Trilithic Inc. (“Trilithic”).
(2) Audit-Related Fees are related to due diligence services for our acquisition activities incurred in fiscal 2018.
(3) Tax Fees for fiscal 2019 and 2018 include professional services rendered in connection with transfer pricing consulting, tax audits, planning services and other tax consulting.
(4) All Other Fees are related to certain software subscription fees.
For fiscal year 2019, the Audit Committee considered whether audit-related services and services other than audit-related services provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of PricewaterhouseCoopers LLP and concluded that the independence of PricewaterhouseCoopers LLP was maintained.

                       | Fiscal 2019 | Fiscal 2018
---------------------- | ----------- | -----------
Audit Fees (1)         | $3,631,575  | $3,784,488
Audit-Related Fees (2) | 0           | 359,000
Tax Fees (3)           | 169,776     | 61,592
All Other Fees (4)     | 4,500       | 3,600
Total                  | $3,805,851  | $4,208,680


21 Called up share capital and reserves
Other reserves in the Consolidated Statement of Changes in Equity on pages 151 to 152 are made up as follows:
The change in translation reserve includes a £1.4m credit transferred from retained earnings.

                               | 1st January 2019 | Change in year | 31st December 2019
------------------------------ | ---------------- | -------------- | ------------------
                               | £m               | £m             | £m
Translation reserve            | 30.3             | (45.0)         | (14.7)
Net investment hedge reserve   | (7.4)            | 12.9           | 5.5
Cash flow hedges reserve       | –                | 3.3            | 3.3
Capital redemption reserve     | 1.8              | –              | 1.8
Employee Benefit Trust reserve | (2.5)            | (4.0)          | (6.5)
Total other reserves           | 22.2             | (32.8)         | (10.6)


In November 2016, the FASB issued guidance that requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued guidance that requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than
inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods and interim periods within those annual reporting
periods beginning after December 15, 2017, our fiscal 2019. The modified retrospective transition method should be applied. We adopted this guidance in the first
quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In August 2016, the FASB issued guidance that aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
n January 2016, the FASB issued guidance that requires most equity investments be measured at fair value, with subsequent other changes in fair value recognized in net income. The guidance also impacts financial liabilities under the fair value option and the presentation and disclosure requirements on the classification and measurement of financial instruments. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. It should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, unless equity securities do not have readily determinable fair values, in which case the amendments should be applied prospectively. We adopted this guidance in the first quarter of fiscal 2019. We did not use prospective amendments for any investments and adoption did not have a material impact on our consolidated financial statements.
The following reconciliations provide the effect of the reclassification of the net periodic benefit cost from operating expenses to other (income) expense in our consolidated statements of income for fiscal year 2018 and 2017 (in millions):

Twelve Months Ended September 29, 2018: | As Previously Reported | Adjustments | As Recast
--------------------------------------- | ---------------------- | ----------- | ---------
Cost of Sales                           | $34,926                | $30         | $34,956
Selling, General and Administrative     | $2,071                 | $(7)        | $2,064
Operating Income                        | $3,055                 | $(23)       | $3,032
Other (Income) Expense                  | $310                   | $(23)       | $287
Twelve Months Ended September 30, 2017: | As Previously Reported | Adjustments | As Recast
Cost of Sales                           | $33,177                | $21         | $33,198
Selling, General and Administrative     | $2,152                 | $(11)       | $2,141
Operating Income                        | $2,931                 | $(10)       | $2,921
Other (Income) Expense                  | $303                   | $(10)       | $293


Note 14. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):

                                                | December 31, |
----------------------------------------------- | ------------ | --------
                                                | 2019         | 2018
Land                                            | $1,949       | $2,185
Buildings and leasehold improvements            | 138,755      | 129,582
Equipment, furniture and fixtures               | 307,559      | 298,537
Capitalized internally developed software costs | 38,466       | 41,883
Transportation equipment                        | 613          | 636
Construction in progress                        | 5,037        | 2,253
                                                | 492,379      | 475,076
Less: Accumulated depreciation                  | 366,389      | 339,658
                                                | $125,990     | $135,418


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
NOTE 9. ACCOUNTS AND OTHER RECEIVABLE
Accounts and other receivable are recorded at net realizable value. Components of accounts and other receivable, net of reserves, are as follows:
Amounts billed, net consist of amounts that have been invoiced to our customers in accordance with terms and conditions, and are shown net of an allowance for doubtful accounts. These receivables are all short term in nature and do not include any financing components.
Unbilled receivables consist of amounts where we have satisfied our contractual obligations related to inventory stocking contracts with customers. Such amounts are typically invoiced to the customer upon their consumption of the inventory managed under the stocking contracts. We anticipate that substantially all unbilled receivables will be invoiced and collected over the next twelve months. These contracts do not include any financing components.

                       | December 31, 2019 | December 31, 2018
---------------------- | ----------------- | -----------------
Amounts billed, net    | $227,528          | $80,709
Unbilled receivables   | 19,036            | 19,733
Total receivables, net | $246,564          | $100,442


Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the years endedD ecember 31, 2019 and 2018. A discussion of cash flows for the year ended December 31, 2017 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 5, 2019, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Cash Flows from Operating Activities
Net cash provided by operating activities was $78.3 million for the year ended December 31, 2019. Net cash provided by operating activities consisted of positive cash flow from operations including $101.1 million in non-cash expenses and $16.9 million in changes in operating assets and liabilities, partially offset by net loss of $19.9 million and deferred income taxes and excess tax benefits from stock-based compensation of $19.8 million.
Non-cash items included in net loss for the year ended December 31, 2019 primarily included depreciation and amortization of property, equipment, intangible assets and leased right-of-use assets of $66.4 million and stock-based compensation of $32.1 million.
During the year ended December 31, 2019, we also exited certain leased facilities, which resulted in impairment of leased right-of-use assets of$ 9.2 million and leasehold improvements of $1.4 million, which was partially offset by a gain on extinguishment of related lease liabilities of$ 10.4 million, all of which are non-cash items that did not affect cash flows.
Net cash provided by operating activities was $102.7 million for the year ended December 31, 2018. Net cash provided by operating activities consisted of positive cash flow from operations including $100.3 million in non-cash operating expenses and $28.6 million in changes in operating assets and liabilities, partially offset by net loss of $26.2 million.
Non-cash items included in net loss for the year ended December 31, 2018 primarily included depreciation and amortization of property, equipment and intangible assets of $79.0 million, stock-based compensation of $31.7 million, and impairment of intangible assets of $2.2 million, partially offset by deferred income taxes of $12.1 million and excess tax benefits on stock-based awards of $2.0 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $7.0 million for the year ended December 31, 2019. Net cash used in investing activities primarily consisted of $6.9 million in purchases of property and equipment. Net cash used in investing activities was $7.8 million for the year ended December 31, 2018. Net cash used in investing activities consisted entirely of $7.8 million in purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities was $53.4 million for the year ended December 31, 2019. Net cash used in financing activities consisted primarily of cash outflows from aggregate prepayments of principal of $50.0 million and $12.0 million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by cash inflows of $8.6 million in net proceeds from issuance of common stock upon exercise of stock options.
Net cash used in financing activities was $93.8 million for the year ended December 31, 2018. Net cash used in financing activities primarily consisted of cash outflows from $93.0 million in aggregate prepayments of principal on outstanding debt and $7.6 million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by cash inflows of $6.8 million in net proceeds from issuance of common stock upon exercise of stock options.
We believe that our $92.7 million of cash and cash equivalents at December 31, 2019 will be sufficient to fund our projected operating requirements for at least the next twelve months. We have repaid $213.0 million of debt to date. The credit agreement permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of $160.0 million (subject to adjustments for any voluntary prepayments), plus an unlimited amount that is subject to pro forma compliance with certain secured leverage ratio and total leverage ratio tests.
Incremental loans are subject to certain additional conditions, including obtaining additional commitments from the lenders then party to the credit agreement or new lenders. The term loan facility has a seven-year term and bears interest at either an Adjusted LIBOR or an Adjusted Base Rate, at our option, plus a fixed applicable margin.
Our cash and cash equivalents in recent years have been favorably affected by our implementation of an equity-based bonus program for our employees, including executives. In connection with that bonus program, in February 2019, we issued 0.3 million freely-tradable shares of our common stock in settlement of bonus awards for the 2018 performance period. We expect to implement a similar equity-based plan for fiscal 2019, but our compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
Notwithstanding the foregoing, we may need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we continue to pursue acquisitions.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to us or at all.
If we are unable to raise additional funds when needed, we may not be able to sustain our operations or execute our strategic plans.

                                                                              | Years Ended December 31, |
----------------------------------------------------------------------------- | ------------------------ | --------
                                                                              | 2019                     | 2018
                                                                              | (in thousands)           |
Net cash provided by operating activities                                     | $78,348                  | $102,689
Net cash used in investing activities                                         | (6,973)                  | (7,825)
Net cash used in financing activities                                         | (53,383)                 | (93,784)
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 934                      | (1,301)
Increase (decrease) in cash, cash equivalents and restricted cash             | $18,926                  | (221)


13. SHARE-BASED EMPLOYEE COMPENSATION
Stock incentive plans — We offer share-based compensation plans to attract, retain, and motivate key officers, employees, and non-employee directors to work toward the financial success of the Company.
Our stock incentive plans are administered by the Compensation Committee of the Board of Directors and have been approved by the stockholders of the Company. The terms and conditions of our share-based awards are determined by the Compensation Committee for each award date and may include provisions for the exercise price, expirations, vesting, restriction on sales, and forfeitures, as applicable. We issue new shares to satisfy stock issuances under our stock incentive plans.
Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, or performance units to key employees, directors, and other designated employees. There were 1,677,983 shares of common stock available for future issuance under this plan as of September 29, 2019.
We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer receipt of their compensation. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on the number of stock equivalents and dividend equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000 shares of common stock in connection with the crediting of stock equivalents. There were143,122 shares of common stock available for future issuance under this plan as of September 29, 2019.
Compensation expense — The components of share-based compensation expense, included within “Selling, general, and administrative expenses” in our consolidated statement of earnings, in each fiscal year are as follows (in thousands):
Nonvested restricted stock units — Nonvested restricted stock units (“RSUs”) are generally issued to executives, non-management directors and certain other members of management and employees. Prior to fiscal 2011, RSUs were granted to certain Executive and Senior Vice Presidents pursuant to our share ownership guidelines. These awards vest upon retirement or termination based on years of service. There were 60,272 of such RSUs outstanding as of September 29, 2019.

                                                | 2019   | 2018   | 2017
----------------------------------------------- | ------ | ------ | -------
Nonvested stock units                           | $5,458 | $5,737 | $5,873
Stock options                                   | 936    | 1,790  | 1,826
Performance share awards                        | 1,417  | 1,236  | 2,580
Nonvested restricted stock awards               | —      | 33     | 88
Non-management directors’ deferred compensation | 263    | 350    | 270
Total share-based compensation expense          | $8,074 | $9,146 | $10,637


Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2019 and 2018 were as follows:
As of December 31, 2019 and 2018, Teradyne evaluated the likelihood that it would realize deferred income taxes to offset future taxable income and concluded that it is more likely than not that a substantial majority of its deferred tax assets will be realized through consideration of both the positive and negative evidence. At December 31, 2019 and 2018, Teradyne maintained a valuation allowance for certain deferred tax assets of $77.2 million and $69.9 million, respectively, primarily related to state net operating losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments could be required in the future if Teradyne estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded.

                                 | 2019           | 2018
-------------------------------- | -------------- | ---------
                                 | (in thousands) |
Deferred tax assets              |                |
Tax credits                      | $79,480        | $69,091
Accruals                         | 25,424         | 23,449
Pension liabilities              | 24,459         | 20,826
Inventory valuations             | 18,572         | 18,514
Deferred revenue                 | 7,622          | 9,130
Equity compensation              | 7,042          | 7,190
Vacation accrual                 | 4,768          | 4,772
Investment impairment            | 3,292          | —
Net operating loss carryforwards | 2,705          | 3,658
Marketable securities            | —              | 962
Other                            | 1,472          | 685
Gross deferred tax assets        | 174,836        | 158,277
Less: valuation allowance        | (77,177)       | (69,852)
Total deferred tax assets        | $97,659        | $88,425
Deferred tax liabilities:        |                |
Depreciation                     | $(18,238)      | $(14,028)
Intangible assets                | (16,705)       | (24,211)
Marketable securities            | (1,601)        | —
Total deferred tax liabilities   | $(36,544)      | $(38,239)
Net deferred assets              | $61,115        | $50,186


Contract Liabilities
Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. The changes in our contract liabilities are as follows (in thousands):
The revenue recognized from amounts included in contract liabilities primarily relates to prepayment contracts with customers as well as payments of activation fees.

Year Ended December 31,                                          |         |
---------------------------------------------------------------- | ------- | -------
                                                                 | 2019    | 2018
Beginning of period balance                                      | $11,176 | $12,678
Revenue deferred and acquired in current period                  | 6,127   | 3,954
Revenue recognized from amounts included in contract liabilities | (6,805) | (5,456)
End of period balance                                            | $10,498 | $11,176


Stock-Based Compensation
The following table summarizes the components of total stock-based compensation included in VMware’s consolidated statements of income during the periods presented (table in millions):
As of January 31, 2020, the total unrecognized compensation cost for stock options and restricted stock was $1.8 billion and will be recognized through fiscal 2024 with a weighted-average remaining period of 1.5 years. Stock-based compensation related to VMware equity awards held by VMware employees is recognized on VMware’s consolidated statements of income over the awards’ requisite service periods.

                                           |                  | For the Year Ended |
------------------------------------------ | ---------------- | ------------------ | ----------------
                                           | January 31, 2020 | February 1, 2019   | February 2, 2018
Cost of license revenue                    | $1               | $1                 | $2
Cost of subscription and SaaS revenue      | 13               | 7                  | 5
Cost of services revenue                   | 83               | 58                 | 53
Research and development                   | 459              | 391                | 363
Sales and marketing                        | 293              | 226                | 205
General and administrative                 | 168              | 117                | 84
Stock-based compensation                   | 1,017            | 800                | 712
Income tax benefit                         | (347)            | (253)              | (232)
Total stock-based compensation, net of tax | $670             | $547               | $480


Results of Operations
The following describes the line items set forth in our consolidated statements of operations. A discussion of changes in our results of operations during the year ended December 31, 2018 compared to the year ended December 31, 2017 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 5, 2019, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Net Revenue. Net revenue is generated from sales of radio-frequency, analog and mixed-signal integrated circuits for the connected home, wired and wireless infrastructure, and industrial and multi-market applications. A significant portion of our sales are to distributors, which then resell our products.
Cost of Net Revenue. Cost of net revenue includes the cost of finished silicon wafers processed by third-party foundries; costs associated with our outsourced packaging and assembly, test and shipping; costs of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance; amortization of acquired developed technology intangible assets and inventory step-ups to fair value; amortization of certain production mask costs; cost of production load boards and sockets; and an allocated portion of our occupancy costs.
Research and Development. Research and development expense includes personnel-related expenses, including stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs.
Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications. All research and development costs are expensed as incurred.
Selling, General and Administrative. Selling, general and administrative expense includes personnel-related expenses, including stock-based compensation, amortization of certain acquired intangible assets, third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legal fees, depreciation expense and allocated occupancy costs. Impairment Losses. Impairment losses consist of charges resulting from the impairment of acquired intangible assets.
Restructuring Charges. Restructuring charges consist of severance, lease and leasehold impairment charges, and other charges related to restructuring plans. Interest and Other Income (Expense), Net. Interest and other income (expense), net includes interest income, interest expense and other income (expense). Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances. Interest expense consists of interest accrued on debt. Other income (expense) generally consists of income (expense) generated from non-operating transactions.
Income Tax Provision (Benefit). We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expenses for tax and financial statement purposes and the realizability of assets in future years.
The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the periods indicated:

                                               |      | Years Ended December 31,
---------------------------------------------- | ---- | ------------------------
                                               | 2019 | 2018
Net revenue                                    | 100% | 100%
Cost of net revenue                            | 47   | 46
Gross profit                                   | 53   | 54
Operating expenses:                            |      |
Research and development                       | 31   | 31
Selling, general and administrative            | 28   | 26
Impairment losses                              | -    | 1
Restructuring charges                          | 1    | 1
Total operating expenses                       | 60   | 59
Loss from operations                           | (7)  | (5)
Total interest and other income (expense), net | (3)  | (4)
Loss before income taxes                       | (10) | (9)
Income tax benefit                             | (4)  | (2)
Net loss                                       | (6)% | (7)%


Outstanding Equity Awards at Fiscal Year End
The following table summarizes the equity awards made to our named executive officers that were outstanding at December 31, 2019

Name                   | No. of Securities Underlying Unexercised Options (#) Exercisable No. of Securities Underlying Unexercised | No. of Securities Underlying Unexercised Options (#) Unexercisable No. of Securities Underlying Unexercised | Option Exercise Price | Option Expiration Date
---------------------- | --------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | --------------------- | ----------------------
Garo H. Armen (1)      | 500,000                                                                                | -                                                                                | $1.25                 | April 16, 2026
Garo H. Armen (2)      | 184,028                                                                                | 65,972                                                                                | $1.75                 | October 16, 2027
Alexander K. Arrow (3) | 100,000                                                                                | -                                                                                | $1.25                 | February 12, 2026
Alexander K. Arrow (3) | 140,000                                                                                | -                                                                                | $1.25                 | April 15, 2026
Alexander K. Arrow (4) | 55,208                                                                                | 19,792                                                                                | $1.75                 | October 16, 2027
Alexander K. Arrow (5) | 41,667                                                                                | -                                                                                | $1.00                 | February 1, 2029


12. Information about Segments of Geographic Areas
The Company operates in one segment, the development and marketing of network infrastructure equipment. Revenue is attributed to a geographical area based on the location of the customers. The Company operates in three geographic theaters: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa; and APAC which includes Asia Pacific, China, South Asia and Japan. The Company’s chief operating decision maker (“CODM”), who is its CEO, reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
See Note 3. Revenues for the Company’s revenues by geographic regions and channel based on the customers’ ship-to location.
The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):

Long-lived Assets       | June 30,
2019 | June 30,
2018
----------------------- | ------------- | -------------
Americas                | $136,035      | $178,251
EMEA                    | 28,744        | 15,106
APAC                    | 11,529        | 9,896
Total long-lived assets | $176,308      | $203,253


19 Trade and other payables
Contract liabilities relate to advance payments received from customers which have not yet been recognised as revenue. £8.3m of the contract liabilities at 31st December 2018 was recognised as revenue during 2019 (2018: £3.0m).

                               | 2019  | 2018
------------------------------ | ----- | -----
                               | £m    | £m
Trade payables                 | 57.9  | 57.4
Contract liabilities           | 8.7   | 8.9
Social security                | 5.6   | 5.1
Other payables                 | 37.8  | 37.6
Accruals                       | 64.8  | 58.0
Total trade and other payables | 174.8 | 167.0


9. Audit, audit related and other non-audit services  The following fees were paid or are payable to the company’s auditors, KPMG LLP and other firms in the KPMG network, for the year ended 31 March 2019. Figures in the table below for the years ended 31 March 2017 and 2018 are in respect of fees paid to the company’s previous auditors, PricewaterhouseCoopers LLP.
a Services in relation to the audit of the parent company and the consolidated financial statements, including fees for reports under section 404 of the Sarbanes-Oxley Act. This also includes fees payable for the statutory audits of the financial statements of subsidiary companies. This excludes amounts for the audit of BT Group Employee Share Ownership Trust and Ilford Trustees (Jersey) Limited amounting to £32,000.
b During the year a further £446,000 of fees were payable to PricewaterhouseCoopers LLP in relation to the audit of 2017/18 subsidiary accounts and the audit of our restated IAS 19 accounting valuation of retirement benefit obligations, which have not been included in the 2019 balances in the above table.
c Services in relation to other statutory filings or engagements that are required by law or regulation to be carried out by an appointed auditor. This includes fees for the review of interim results, the accrued fee for the audit of the group’s regulatory financial statements and reporting associated with the group’s US debt shelf registration. d Services relating to tax returns, tax audits, monitoring and enquiries.
e Fees payable for all taxation advisory services not falling within taxation compliance. All other assurance services include fees payable to KPMG LLP for agreed upon procedures performed on the estimated impact of the new IFRS 15 revenue accounting standard, which took effect from 1 April 2018 for the 2017/18 audit. g Fees payable for all non-audit services not covered above, principally comprising other advisory services.
f All other assurance services include fees payable to KPMG LLP for agreed upon procedures performed on the estimated impact of the new IFRS 15 revenue accounting standard, which took effect from 1 April 2018 for the 2017/18 audit.
g Fees payable for all non-audit services not covered above, principally comprising other advisory services.

                                                                          | 2019   | 2018   | 2017
------------------------------------------------------------------------- | ------ | ------ | ------
Year ended 31 March                                                       | £000   | £000   | £000
Fees payable to the company’s auditors and its associates for:            |        |        |
Audit services a,b                                                        |        |        |
The audit of the parent company and the consolidated financial statements | 8,165  | 5,418  | 4,316
The audit of the company’s subsidiaries                                   | 6,061  | 5,877  | 5,675
                                                                          | 14,226 | 11,295 | 9,991
Audit related assurance services c                                        | 2,236  | 1,771  | 1,865
Other non-audit services                                                  |        |        |
Taxation compliance services d                                            | –      | –      | 366
Taxation advisory services e                                              | –      | –      | 111
All other assurance services f                                            | 748    | 211    | 200
All other services g                                                      | 210    | 592    | 2,332
                                                                          | 958    | 803    | 3,009
Total services                                                            | 17,420 | 13,869 | 14,865


30. Financial instruments and financial risk management
The main purpose of the Group’s financial instruments, other than trade and other receivables, trade and other payables, contractual provisions and lease liabilities, is to fund the Group’s liquidity requirements.
All of the Group’s financial assets and liabilities are categorised as financial assets/liabilities stated at amortised cost, except for forward foreign currency exchange contracts, included within current other financial assets, that are designated as financial assets at fair value through profit or loss and corporate owned life insurance, amounting to $3.0 million (2018 $2.4 million), included within non-current trade and other receivables, that is designated as financial assets at fair value through profit or loss. These are shown in the below table:
The Group enters into derivative transactions, forward foreign currency exchange contracts, for the management of the Group’s foreign currency exposures when deemed appropriate.
The key objective of the Group’s treasury department is to manage the financial risks of the business and to ensure that sufficient liquidity is available to the Group. All treasury activity operates within a formal control framework. The Board has approved treasury policies and guidelines and periodically reviews treasury activities. Additionally, it is the Group’s policy that speculative treasury transactions are expressly forbidden.

                                                        |       | 2019      | 2018
------------------------------------------------------- | ----- | --------- | ---------
                                                        | Notes | $ million | $ million
Non-current trade and other receivables                 | 20    | 5.7       | 3.5
Cash and cash equivalents                               | 22    | 183.2     | 121.6
Current trade and other receivables                     | 20    | 133.2     | 126.9
Current other financial assets                          | 20    | 0.1       | –
Financial assets                                        |       | 322.2     | 252.0
Non-current other payables, excluding government grants | 23    | 0.8       | 4.4
Current trade payables, other payables and accruals     | 23    | 75.4      | 57.1
Lease liabilities, current and non-current              | 26    | 33.0      | –
Contractual provisions                                  | 28    | 3.6       | 3.6
Financial liabilities                                   |       | 112.8     | 65.1


The following are the significant assumptions adopted in measuring the Company’s pension and other benefit obligations:
For certain Canadian post-retirement plans the above trend rates are applicable for 2019 to 2024 which will increase linearly to 4.75% in 2029 and grading down to an ultimate rate of 3.57% per annum in 2040 and thereafter.

As at December 31,               | Pension 2019 | Other 2019     | Pension 2018 | Other 2018
-------------------------------- | ------------ | -------------- | ------------ | --------------
Actuarial benefit obligation     |              |                |              |
Discount rate                    | 3.20%        | 2.95% to 3.20% | 3.80%        | 3.80% to 4.00%
Benefit costs for the year ended |              |                |              |
Discount rate                    | 3.90%        | 3.90% to 4.00% | 3.60%        | 3.25% to 3.60%
Future salary growth             | 2.50%        | N/A            | 2.50%        | N/A
Health care cost trend rate      | N/A          | 3.49% to 5.49% | N/A          | 4.50%
Other medical trend rates        | N/A          | 4.00% to 4.56% | N/A          | 4.50%


The following table summarizes stock-based compensation expense in the Company’s consolidated statements of operations:
For the year ended September 30, 2019, the Company granted 33,000 nonvested shares to certain key employees, 55,000 nonvested shares to certain officers including 35,000 shares granted to the Chief Executive Officer, and 20,000 nonvested shares
to its non-employee directors. For the year ended September 30, 2018, the Company granted 12,000 nonvested shares to certain key employees, 40,000 nonvested shares to certain officers including 30,000 to its Chief Executive Officer and 20,000 nonvested
shares to its non-employee directors.
The Company measures the fair value of nonvested stock awards based upon the market price of its common stock as of the date of grant. The Company used the Black-Scholes option-pricing model to value stock options. The Black-Scholes model requires the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate and the weighted average expected life of the options, at the time of grant. The expected dividend yield is equal to the divided per share declared, divided by the closing share price on the date the options were granted. All equity compensation awards granted for the years ended September 30, 2019 and September 30, 2018 were nonvested stock awards.

                                    | Years Ended            |
----------------------------------- | ---------------------- | ------------------
                                    | September 30, 2019     | September 30, 2018
                                    | (Amounts in thousands) |
Cost of sales                       | $7                     | $5
Engineering and development         | 49                     | 32
Selling, general and administrative | 736                    | 654
Total                               | $792                   | $691


Equity in net earnings of affiliates:
The decrease in the share of net earnings in Golar Partners is as a result of a decrease in the underlying performance of Golar Partners in 2018. As a result, during the year ended December 31, 2018, we recognized an impairment charge of $149.4 million. The year ended December 31, 2017 included a deemed loss on disposal of $17.0 million as a result of a dilution in our holding in Golar Partners due to further issuances of common units by Golar Partners in February 2017. As of December 31, 2018, we held a 32.0% (2017: 31.8%) ownership interest in Golar Partners (including our 2% general partner interest) and 100% of IDRs.
The share of net earnings in other affiliates represents our share of equity in Egyptian Company for Gas Services S.A.E ("ECGS") and Avenir LNG Limited ("Avenir"). During the year ended December 31, 2018 we recognized negative goodwill of $3.8 million in equity in net earnings of affiliates to reflect our bargain purchase of Avenir. Refer to note 14 "Investment in Affiliates" of our consolidated financial statements included herein for further details.

                                                             |           | December 31, |           |
------------------------------------------------------------ | --------- | ------------ | --------- | --------
(in thousands of $)                                          | 2018      | 2017         | Change    | % Change
Share of net earnings in Golar Partners                      | 7,001     | 17,702       | (10,701)  | (60)%
Impairment of investment in Golar Partners                   | (149,389) | —            | (149,389) | 100%
Net loss on deemed disposal of investments in Golar Partners | —         | (16,992)     | 16,992    | 100%
Share of net earnings in other affiliates                    | 3,711     | 793          | 2,918     | 368%
                                                             | (138,677) | 1,503        | (140,180) | (9,327)%


Selected financial information from our consolidated balance sheets is as follows:
(1) During 2016, as a result of our then pending sale of a portion of our colocation business and data centers, we reclassified $1.1 billion in net property, plant and equipment and $1.1 billion of goodwill to assets held for sale which is included in other current assets on our consolidated balance sheet. See Note 3—Sale of Data Centers and Colocation Business to our consolidated financial statements in Item 8 of Part II of this report, for additional information.
(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) In 2015, we adopted both ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs” and ASU 2015-17 “Balance Sheet Classification of Deferred Taxes” by retrospectively applying the requirements of the ASUs to our previously issued consolidated financial statements.
(4) In 2019, we adopted ASU 2016-02 “Leases (ASC 842)” by using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842.
(5) Total long-term debt includes current maturities of long-term debt and finance lease obligations of $305 million for the year ended December 31, 2016 associated with assets held for sale. For additional information on our total long-term debt, see Note 7— Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of this report. For total contractual obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Future Contractual Obligations” in Item 7 of Part II of this report.

                                     |         |        | As of December 31,    |        |
------------------------------------ | ------- | ------ | --------------------- | ------ | ------
                                     | 2019    | 2018   | 2017                  | 2016   | 2015
                                     |         |        | (Dollars in millions) |        |
Net property, plant and equipment(1) | $26,079 | 26,408 | 26,852                | 17,039 | 18,069
Goodwill(1)(2)                       | 21,534  | 28,031 | 30,475                | 19,650 | 20,742
Total assets(3)(4)                   | 64,742  | 70,256 | 75,611                | 47,017 | 47,604
Total long-term debt(3)(5)           | 34,694  | 36,061 | 37,726                | 19,993 | 20,225
Total stockholders’ equity           | 13,470  | 19,828 | 23,491                | 13,399 | 14,060


Disaggregation of revenue
To provide visibility into our transition from older products to our newer, higher growth products and clarity into the dynamics of our product revenue, we have historically grouped our products by “Strategic” and “Mature” solutions. Strategic solutions include Clustered ONTAP, branded E-Series, SolidFire, converged and hyper-converged infrastructure, ELAs and other optional add-on software products. Mature solutions include 7-mode ONTAP, add-on hardware and related operating system (OS) software and original equipment manufacturers (OEM) products. Both our Mature and Strategic product lines include a mix of disk, hybrid and all flash storage media. Additionally, we provide a variety of services including software maintenance, hardware maintenance and other services including professional services, global support solutions, and customer education and training.
The following table depicts the disaggregation of revenue by our products and services (in millions):
Revenues by geographic region are presented in Note 16 – Segment, Geographic, and Significant Customer Information

                                                 |                | Year Ended     |
------------------------------------------------ | -------------- | -------------- | --------------
                                                 | April 26, 2019 | April 27, 2018 | April 28, 2017
Product revenues                                 | $ 3,755        | $  3,525       | $  3,060
Strategic                                        | 2,709          | 2,468          | 2,000
Mature                                           | 1,046          | 1,057          | 1,060
Software maintenance revenues                    | 946            | 902            | 905
Hardware maintenance and other services revenues | 1,445          | 1,492          | 1,526
Hardware maintenance support contracts           | 1,182          | 1,214          | 1,258
Professional and other services                  | 263            | 278            | 268
Net revenues                                     | $ 6,146        | $  5,919       | $  5,491


Restricted Stock Units
RSU activity is summarized as follows (shares in thousands):
The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2019, 2018, and 2017 was $55.69, $46.17, and $37.99, respectively. The total fair value of RSUs vested as of the vesting dates during the years ended December 31, 2019, 2018, and 2017 was $58.4 million, $49.9 million, and $37.2 million, respectively.
Unrecognized compensation expense related to unvested RSUs was $127.2 million at December 31, 2019, which is expected to be recognized over a weighted-average period of 2.6 years.

                                     | Number of Shares | Weighted- Average Grant Date Fair Value
------------------------------------ | ---------------- | ---------------------------------------
Unvested shares at December 31, 2018 | 4,117            | $41.94
Granted                              | 1,589            | 55.69
Forfeited                            | (510)            | 45.72
Vested                               | (1,440)          | 40.61
Unvested shares at December 31, 2019 | 3,756            | $47.76


Contractual Obligations
Our contractual obligations as of December 31, 2019, were:
We have no off-balance sheet arrangements that have a material current effect or are reasonably likely to have a material future effect on our financial condition or changes in our financial condition.
Management believes that existing capital resources and funds generated from operations are sufficient to finance anticipated capital requirements.

                                   |          |        | Payments due by period |           |
---------------------------------- | -------- | ------ | ---------------------- | --------- | -----------
                                   | Total    | 2020   | 2021-2022              | 2023-2024 | 2025-beyond
Long-term debt, including interest | $111,586 | $2,807 | $5,876                 | $102,903  | $—
Operating lease payments           | 37,610   | 4,467  | 8,764                  | 7,813     | 16,566
Retirement obligations             | 6,447    | 757    | 1,429                  | 1,328     | 2,933
Total                              | $155,643 | $8,031 | $16,069                | $112,044  | $19,499


Note 9. Non-current assets - property, plant and equipment
Property, plant and equipment secured under finance leases
Refer to note 24 for further information on property, plant and equipment secured under finance leases.
Accounting policy for property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.
Plant and equipment are depreciated and leasehold improvements are amortised over their estimated useful lives using the straightline method. Assets held under finance lease are depreciated over their expected useful lives as owned assets or, where shorter, the term of the relevant lease.

Consolidated                     |         |
-------------------------------- | ------- | -------
                                 | 2019    | 2018
                                 | US$000  | US$000
Leasehold improvements - at cost | 7,754   | 5,181
Less: Accumulated depreciation   | (3,648) | (2,501)
                                 | 4,106   | 2,680
Plant and equipment - at cost    | 6,472   | 5,298
Less: Accumulated depreciation   | (2,827) | (2,278)
                                 | 3,645   | 3,020
Plant and equipment under lease  | 15      | 27
Less: Accumulated depreciation   | (4)     | (15)
                                 | 11      | 12
                                 | 7,762   | 5,712


Streamlined Energy and Carbon Reporting
We have decided to voluntarily comply with the UK government’s Streamlined Energy and Carbon Reporting (SECR) policy a year early. The table below represents Unilever’s energy use and associated GHG emissions from electricity and fuel in the UK for the 2018 and 2019 reporting years (1 October to 30 September), with scope calculations aligned to the Greenhouse Gas Protocol. The scope of this data includes 8 manufacturing sites and 11 non-manufacturing sites based in the UK. The UK accounts for 5% of our global total Scope 1 and 2 emissions, outlined in our mandatory GHG reporting also on this page.
(a) Fleet and associated diesel use excluded. Transportation is operated by a
third party and accounted for under Scope 3.
(b) Carbon emission factors for grid electricity calculated according to the marketbased method'
For further information on energy efficiency measures taken to reduce our carbon
emissions, please see page 19.

K operations                             | 2019    | 2018
---------------------------------------- | ------- | -------
Biogas (MWh)                             | 17,045  | 15,958
Natural gas (MWh)                        | 238,081 | 278,849
PG (MWh)                                 | 866     | 1,513
Fuel oils (MWh)                          | 580     | 648
Coal (MWh)                               | 0       | 0
Electricity (MWh)                        | 195,796 | 196,965
Heat and steam (MWh)                     | 212,482 | 272,985
Total energy (MWh)(a)                    | 408,280 | 469,950
Total Scope 1 emissions (tonnes CO2e)    | 48,178  | 56,533
Total Scope 2 emissions (tonnes COe)(b)2 | 702     | 3,067


iv) Shareholding Pattern of top ten shareholders (other than Directors, Promoters and holder of GDRs and ADRs):
* The shares of the Company are traded on daily basis and hence the datewise increase/decrease in shareholding is not indicated. Shareholding is consolidated based on permanent account number (PAN) of the shareholder.

Top Ten Shareholders*                                                                                | Shareholding at the beginning of the year April 1, 2018 |                                  | Cumulative shareholding at end of the year March 31, 2019 |
---------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | -------------------------------- | --------------------------------------------------------- | --------------------------------
                                                                                | No. of shares                                           | % of total shares of the Company | No. of shares                                             | % of total shares of the Company
1. Life Insurance Corporation of India                                                               | 75,384,947                                              | 3.9                              | 152,493,927                                               | 4.1
2. SBI Mutual Fund                                                                                | 7,056,720                                               | 0.4                              | 21,680,561                                                | 0.6
3. First State Investments Icvc- Stewart Investors Asia Pacific Leaders Fund                         | 15,054,489                                              | 0.8                              | 19,248,438                                                | 0.5
4. Government of Singapore                                                                           | 6,497,754                                               | 0.3                              | 18,028,475                                                | 0.5
5.Oppenheimer Developing Markets Fund                                                                | 7,996,009                                               | 0.4                              | 16,731,906                                                | 0.5
6.ICICI Prudential Life Insurance Company Ltd                                                        | 3,886,141                                               | 0.2                              | 16,139,316                                                | 0.4
7.Axis Mutual Fund Trustee Limited                                                                   | 4,055,256                                               | 0.2                              | 15,244,614                                                | 0.4
8.Abu Dhabi Investment Authority                                                                     | 6,296,384                                               | 0.3                              | 15,036,984                                                | 0.4
9. Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds | 7,595,080                                               | 0.4                              | 14,112,213                                                | 0.4
10. Vanguard Total International Stock Index Fund                                                    | 6,179,273                                               | 0.3                              | 13,978,944                                                | 0.4


(a) GitHub has been included in our consolidated results of operations starting on the October 25, 2018 acquisition date.
(b) Includes a $2.6 billion net income tax benefit related to intangible property transfers and a $157 million net charge related to the enactment of the Tax Cuts and Jobs Act (“TCJA”), which together increased net income and diluted earnings per share (“EPS”) by $2.4 billion and $0.31, respectively. Refer to Note 12 – Income Taxes of the Notes to Financial Statements for further discussion.
(c) Includes a $13.7 billion net charge related to the enactment of the TCJA, which decreased net income and diluted EPS by $13.7 billion and $1.75, respectively. Refer to Note 12 – Income Taxes of the Notes to Financial Statements for further discussion.
(d) Reflects the impact of the adoption of new accounting standards in fiscal year 2018 related to revenue recognition and leases.
(e) LinkedIn has been included in our consolidated results of operations starting on the December 8, 2016 acquisition date.
(f) Includes $306 million of employee severance expenses primarily related to our sales and marketing restructuring plan, which decreased operating income, net income, and diluted EPS by $306 million, $243 million, and $0.04, respectively.
(g) Includes $630 million of asset impairment charges related to our Phone business and $480 million of restructuring charges associated with our Phone business restructuring plans, which together decreased operating income, net income, and diluted EPS by $1.1 billion, $895 million, and $0.11, respectively.
(h) Includes $7.5 billion of goodwill and asset impairment charges related to our Phone business and $2.5 billion of integration and restructuring expenses, primarily associated with our Phone business restructuring plans, which together decreased operating income, net income, and diluted EPS by $10.0 billion, $9.5 billion, and $1.15, respectively.

(In millions, except per share amounts) |           |           |             |            |
--------------------------------------- | --------- | --------- | ----------- | ---------- | ---------
Year Ended June 30,                     | 2019 (a)  | 2018      | 2017 (d)(e) | 2016 (d)   | 2015
Revenue                                 | $ 125,843 | $ 110,360 | $ 96,571    | $ 91,154   | $ 93,580
Gross margin                            | 82,933    | 72,007    | 62,310      | 58,374     | 60,542
Operating income                        | 42,959    | 35,058    | 29,025 (f)  | 26,078 (g) | 18,161(h)
Net income                              | 39,240(b) | 16,571(c) | 25,489 (f)  | 20,539 (g) | 12,193(h)
Diluted earnings per share              | 5.06 (b)  | 2.13(c)   | 3.25 (f)    | 2.56 (g)   | 1.48(h)
Cash dividends declared per share       | 1.84      | 1.68      | 1.56        | 1.44       | 1.24
Cash, cash equivalents, and short-term  |           |           |             |            |
investments                             | 133,819   | 133,768   | 132,981     | 113,240    | 96,526
Total assets                            | 286,556   | 258,848   | 250,312     | 202,897    | 174,303
Long-term obligations                   | 114,806   | 117,642   | 106,856     | 66,705     | 44,574
Stockholders’ equity                    | 102,330   | 82,718    | 87,711      | 83,090     | 80,083


The following table presents each NEO’s base salary for FY19.
(1) Mr. Kapuria was named an executive officer during FY19 and received a salary increase in connection with his promotion. His salary increased from $390,000 to $440,000 effective May 8, 2018.
As presented in the table above, our named executive officers did not receive an increase in annual base salary other than in connection with a promotion for Mr. Kapuria. Our former CEO determined that none of our other NEOs would receive a base salary increase for FY19. In addition, our Board also determined that Mr. Clark would not receive a salary increase in FY19.

                        | FY18              | Change in  | FY19
----------------------- | ----------------- | ---------- | -------------
NEO                     | Annual Salary ($) | Salary (%) | Annual Salary
Gregory S. Clark        | 1,000,000         | —          | 1,000,000
Nicholas R. Noviello    | 650,000           | —          | 650,000
Amy L. Cappellanti-Wolf | 440,000           | —          | 440,000
Samir Kapuria(1)        | 390,000(1)        | 60,000(1)  | 450,000
Scott C. Taylor         | 600,000           | —          | 600,000


Vesting of Equity Awards During 2019
The following table provides details regarding the equity awards held by our named executives that vested during 2019. Restricted stock and restricted stock units were the only equity awards held by our named executives during 2019.
(1) Represents both time-vested and performance-based equity awards that vested during 2019. For details on the payout of our performance-based equity awards, please see “Compensation Discussion and Analysis—Our 2019 Compensation Program and Components of Pay—Grants of Long Term Incentive Compensation—Long Term Incentive Performance Updates” and “—Our Compensation Philosophy Objectives and Linkage to Corporate Strategy—Overview of Pay Elements and Linkage to Compensation Philosophy and Corporate Strategy.”
(2) Based on the closing trading price of the Common Shares on the applicable vesting date.

            | Stock Vested During 2019                |
----------- | --------------------------------------- | ----------------------------
Name        | Number of Shares Acquired on Vesting(1) | Value Realized on Vesting(2)
Mr. Storey  | 1,063,929                               | $13,479,617
Mr. Dev     | 55,490                                  | 749,737
Mr. Goff    | 114,167                                 | 1,338,934
Mr. Trezise | 71,576                                  | 812,600
Mr. Andrews | 16,678                                  | 221,859


FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Certain fair value estimates are affected by assumptions we make about the amount and timing of future cash flows and discount rates, all of which reflect varying degrees of risk. Income taxes and other expenses that would be incurred on disposition of financial instruments are not reflected in the fair values. As a result, the fair values are not the net amounts that would be realized if these instruments were settled.
The carrying values of our cash and cash equivalents, trade and other receivables, dividends payable, trade payables and accruals, compensation payable, severance and other costs payable, interest payable, notes payable and loans secured by trade receivables approximate fair value as they are short-term.
The following table provides the fair value details of financial instruments measured at amortized cost in the statements of financial position.
(1) Upon adoption of IFRS 16 on January 1, 2019, fair value disclosures are no longer required for leases

                                  |                                                                        |                                                                                | DECEMBER 31, 2019 |            | DECEMBER 31, 2018 |
--------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ----------------- | ---------- | ----------------- | ----------
                                  | CLASSIFICATION                                                         | FAIR VALUE METHODOLOGY                                                                         | CARRYING VALUE    | FAIR VALUE | CARRYING VALUE    | FAIR VALUE
CRTC tangible benefits obligation | Trade payables and other liabilities and other non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 29                | 29         | 61                | 61
CRTC deferral account obligation  | Trade payables and other liabilities and other non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 82                | 85         | 108               | 112
Debt securities and other debt    | Debt due within one year and long-term debt                            | Quoted market price of debt                                                                    | 18,653            | 20,905     | 18,188            | 19,178
Finance leases (1)                | Debt due within one year and long-term debt                            | Present value of future cash flows discounted using observable market interest rates           | -                 | -          | 2,097             | 2,304


10. Creditors: amounts falling due within one year
Trade creditors are non-interest bearing and are normally settled on 30 to 60-day terms. Other creditors are non-interest bearing.
The Directors consider that the carrying amount of trade creditors approximates their fair value.

                                      |       | 2019      | 2018
------------------------------------- | ----- | --------- | ---------
                                      | Notes | £ million | £ million
Trade creditors                       |       | 2.3       | 1.4
Owed to subsidiaries                  |       | 90.4      | 84.8
Accruals                              |       | 5.1       | 4.5
Deferred income                       |       | 3.2       | 4.4
Lease liabilities                     | 14    | 0.1       | –
Other taxes and social security costs |       | 0.4       | 0.5
Government grants                     | 12    | 0.7       | 0.3
                                      |       | 102.2     | 95.9


Reconciliation of segment EBITDA to total adjusted EBITDA is below:
For additional information on our reportable segments and product and services categories, see Note 17— Segment Information to our consolidated financial statements in Item 8 of Part II of this report.

                                  |         | Year Ended December 31, |
--------------------------------- | ------- | ----------------------- | -------
                                  | 2019    | 2018                    | 2017
                                  |         | (Dollars in millions)   |
Adjusted EBITDA                   |         |                         |
International and Global Accounts | $2,286  | 2,341                   | 821
Enterprise                        | 3,490   | 3,522                   | 2,456
Small and Medium Business         | 1,870   | 2,013                   | 1,581
Wholesale                         | 3,427   | 3,666                   | 2,566
Consumer                          | 4,914   | 5,105                   | 5,136
Total segment EBITDA              | $15,987 | 16,647                  | 12,560
Operations and Other EBITDA       | (7,216) | (8,045)                 | (6,504)
Total adjusted EBITDA             | $8,771  | 8,602                   | 6,056