Quantitative effect of ASC Topics 606 and 340-40 adoption
(1) While not shown here, gross margin, loss from operations, and loss before income taxes have consequently been affected as a result of the net effect of the adjustments noted above.
(2) The impact on the Consolidated Statements of Comprehensive Loss is limited to the net effects of the impacts noted above on the Consolidated Statements of Operations, specifically on the line item "Net loss."

                                             |             | For the Fiscal Year ended January 31, 2019     |
-------------------------------------------- | ----------- | ---------------------------------------------- | -----------
                                             | As reported | Impact from the adoption of ASC 606 and 340-40 | As adjusted
Net revenue (1)                              |             |                                                |
Subscription                                 | $1,802.3    | $(16.6)                                        | $1,785.7
Maintenance                                  | 635.1       | 5.7                                            | 640.8
Other                                        | 132.4       | (11.3)                                         | 121.1
Cost of revenue (1)                          |             |                                                |
Cost of subscription and maintenance revenue | 216.0       | (0.1)                                          | 215.9
Cost of other revenue                        | 54.4        | 1.1                                            | 55.5
Operating expenses (1):                      |             |                                                |
Marketing and sales                          | 1,183.9     | (17.9)                                         | 1,166.0
Provision for income taxes                   | (38.1)      | (4.8)                                          | (42.9)
Net loss (2)                                 | $(80.8)     | $(10.1)                                        | $(90.9)
Basic net loss per share                     | $(0.37)     | $(0.05)                                        | $(0.42)
Diluted net loss per share                   | $(0.37)     | $(0.05)                                        | $(0.42)


Reconciliations between the amounts computed by applying the U.S. federal statutory tax rate to loss before income taxes, and income tax expense (benefit) follows (in thousands):
We determined no material liabilities related to uncertain income tax positions existed as of December 31, 2019 or 2018, based on our analysis of tax positions taken on income tax returns filed. Although we believe the amounts reflected in our tax returns substantially comply with applicable U.S. federal, state, and foreign tax regulations, the respective taxing authorities may take contrary positions based on their interpretation of the law. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision or benefit for income taxes in the period in which a final determination is made.

Year Ended December 31                                                    |              |
------------------------------------------------------------------------- | ------------ | --------------
                                                                          | 2019         | 2018
Income tax benefit at federal statutory rate                              | $(2,928)     | $(1,692)
Increase (decrease) resulting from:                                       |              |
State tax benefit, net of federal tax effect                              | (437)        | (184)
Effect of change in state tax rate                                        | (26)         | 146
Change in valuation allowance                                             | 3,341        | (8,474)
Expirations of net operating losses and application of IRC 382 limitation | 7            | 9,939
Adjustments to deferreds                                                  | (29)         | 321
Other                                                                     | 72           | (11)
Income tax expense                                                        | $          - | $           45


The following table summarizes our purchase commitments with contract manufacturers and suppliers as of the respective period ends (in millions):
Purchase commitments with contract manufacturers and suppliers decreased by approximately 23% compared to the end of fiscal 2018. On a combined basis, inventories and purchase commitments with contract manufacturers and suppliers decreased by 24% compared with the end of fiscal 2018.
Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of rapidly changing technology and customer requirements. We believe the amount of our inventory and purchase commitments is appropriate for our revenue levels.

Commitments by Period | July 27, 2019 | July 28, 2018
--------------------- | ------------- | -------------
Less than 1 year      | $4,239        | $5,407
1 to 3 years          | 728           | 710
3 to 5 years          | —             | 360
Total                 | $4,967        | $6,477


Unearned Revenue
Unearned revenue as of the periods presented consisted of the following (table in millions):
Unearned subscription and SaaS revenue is generally recognized over time as customers consume the services or ratably over the term of the subscription, commencing upon provisioning of the service. Previously, unearned subscription and SaaS revenue was allocated between unearned license revenue and unearned software maintenance revenue in prior periods and has been reclassified to conform with current period presentation.
Unearned software maintenance revenue is attributable to our maintenance contracts and is generally recognized over time on a ratable basis over the contract duration. The weighted-average remaining contractual term as of January 31, 2020 was approximately two years. Unearned professional services revenue results primarily from prepaid professional services and is generally recognized as the services are performed.

                                       | January 31, 2020 | February 1,2019
-------------------------------------- | ---------------- | ---------------
Unearned license revenue               | $19              | $15
Unearned subscription and SaaS revenue | 1,534            | 916
Unearned software maintenance revenue  | 6,700            | 5,741
Unearned professional services revenue | 1,015            | 767
Total unearned revenue                 | $9,268           | $7,439


Adjusted earnings per share
Basic adjusted earnings per share is defined as adjusted profit for the period attributable to equity holders divided by the weighted average number of shares. Diluted adjusted earnings per share is defined as adjusted profit for the period attributable to equity holders divided by the diluted weighted average number of shares.
Basic and diluted EPS calculated on an IFRS profit basis are included in Note 10.

                                                                                | 2019   | 2018
-------------------------------------------------------------------------------- | ------ | ------
Profit for the period attributable to equity holders as reported under IFRS (£m) | 166.6  | 223.1
Items excluded from adjusted operating profit disclosed above (£m)               | 37.7   | (34.2)
Tax effects on adjusted items (£m)                                               | (8.5)  | (5.0)
Adjusted profit for the period attributable to equity holders (£m)               | 195.8  | 183.9
Weighted average shares (million)                                                | 73.7   | 73.6
Basic adjusted earnings per share                                                | 265.7p | 250.0p
Diluted weighted average shares (million)                                        | 73.9   | 73.8
Diluted adjusted earnings per share                                              | 264.9p | 249.1p


* Recast to reflect segment changes.
The year-to-year improvements in margins and pre-tax income in GBS were the result of the shift to higher-value offerings, realignment of resources to key skill areas, increased productivity and utilization as well as a benefit from currency, due to the company’s global delivery model.

($ in millions)                 |        |        |
------------------------------- | ------ | ------ | ---------------------------------
For the year ended December 31: | 2018*  | 2017*  | Yr.-to-Yr. Percent/ Margin Change
Global Business Services        |        |        |
External gross profit           | $4,448 | $4,033 | 10.3%
External gross profit margin    | 26.8%  | 25.1%  | 1.7pts
Pre-tax income                  | $1,629 | $1,303 | 25.0%
Pre-tax margin                  | 9.6%   | 7.9%   | 1.7pts


The following table summarizes restricted stock-based award activity, including service-based awards and performance-based awards, granted pursuant to Oracle-based stock plans and stock plans assumed from our acquisitions for our last three fiscal years ended May 31, 2019 :
The total grant date fair value of restricted stock-based awards that were vested and issued in fiscal 2019, 2018 and 2017 was $1.3 billion, $1.0 billion and $715 million, respectively. As of May 31, 2019, total unrecognized stock-based compensation expense related to non-vested restricted stock-based awards was $2.8 billion and is expected to be recognized over the remaining weighted-average vesting period of 2.68 years.
No PSUs were granted in each of fiscal 2019 and 2018. In fiscal 2017, 1.7 million PSUs were granted which vest upon the attainment of certain performance metrics and service-based vesting. Based upon actual attainment relative to the “target” performance metric, certain participants have the ability to be issued up to 150% of the target number of PSUs originally granted, or to be issued no PSUs at all. In fiscal 2019, 2.4 million PSUs vested and 1.3 million PSUs remained outstanding as of May 31, 2019.

                                 |                  | Restricted Stock-Based Awards Outstanding
-------------------------------- | ---------------- | -----------------------------------------
(in millions, except fair value) | Number of Shares | Weighted-Average Grant Date Fair Value
Balance, May 31, 2016            | 52               | $39.29
Granted                          | 42               | $39.40
Assumed                          | 14               | $37.83
Vested and Issued                | (18)             | $40.39
Canceled                         | (7)              | $39.73
Balance, May 31, 2017            | 83               | $39.18
Granted                          | 44               | $47.42
Vested and Issued                | (27)             | $39.10
Canceled                         | (11)             | $41.97
Balance, May 31, 2018            | 89               | $42.93
Granted                          | 53               | $42.47
Vested and Issued                | (31)             | $41.85
Canceled                         | (12)             | $42.97
Balance, May 31, 2019            | 99               | $43.01


Geographic Information
Revenue based on the geographic location of our customer's headquarters was as follows:
We ship our products to locations specified by our customers and, as a result, customers may have headquarters in one location with global supply chain and operations in other locations. Our customers may request we deliver products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses. Based on the ship-to locations specified by our customers, revenue from sales into China (including Hong Kong) accounted for 53%, 57%, and 51% of total revenue in 2019, 2018, and 2017, respectively; revenue from sales into Taiwan accounted for 13%, 9%, and 13% of total revenue in 2019, 2018, and 2017, respectively; and revenue from sales into the United States accounted for 11%, 12%, and 14% of total revenue in 2019, 2018, and 2017, respectively.

For the year ended                   | 2019    | 2018    | 2017
------------------------------------ | ------- | ------- | -------
United States                        | $12,451 | $17,116 | $11,359
Mainland China (excluding Hong Kong) | 3,595   | 3,607   | 1,539
Taiwan                               | 2,703   | 3,918   | 2,892
Hong Kong                            | 1,614   | 1,761   | 1,429
Other Asia Pacific                   | 1,032   | 1,458   | 1,078
Japan                                | 958     | 1,265   | 1,042
Other                                | 1,053   | 1,266   | 983
                                     | $23,406 | $30,391 | $20,322


5. INVESTMENTS
Investments in Marketable Securities
The Company’s investments in available-for-sale marketable securities are made pursuant to its investment policy, which has established guidelines relative to the diversification of the Company’s investments and their maturities, with the principal objective of capital preservation and maintaining liquidity sufficient to meet cash flow requirements.
The following is a summary of investments, including those that meet the definition of a cash equivalent, as of December 31, 2019 (in thousands):

                                | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value
------------------------------- | -------------- | ---------------- | ----------------- | ----------
Current assets:                 |                |                  |                   |
Cash                            | $67,818        | $—               | $—                | $67,818
Cash equivalents:               |                |                  |                   |
Money market funds              | 126,075        | —                | —                 | 126,075
Corporate bonds                 | 1,000          | —                | —                 | 1,000
Agency bonds                    | 6,485          | 1                | —                 | 6,486
Commercial paper                | 9,609          | —                | (1)               | 9,608
Certificates of deposit         | 171            | —                | —                 | 171
US treasury securities          | 4,749          | —                | —                 | 4,749
Total cash equivalents          | 148,089        | 1                | (1)               | 148,089
Total cash and cash equivalents | 215,907        | 1                | (1)               | 215,907
Short-term investments:         |                |                  |                   |
Corporate bonds                 | 103,130        | 110              | (7)               | 103,233
Agency bonds                    | 3,966          | 2                | —                 | 3,968
US treasury securities          | 50,703         | 62               | (1)               | 50,764
Commercial paper                | 23,827         | 1                | —                 | 23,828
Certificates of deposit         | 3,936          | 2                | (1)               | 3,937
Asset-backed securities         | 15,837         | 12               | —                 | 15,849
Total short-term investments    | 201,399        | 189              | (9)               | 201,579
Long-term investments:          |                |                  |                   |
Corporate bonds                 | 19,407         | 12               | (4)               | 19,415
US treasury securities          | 19,300         | 25               | —                 | 19,325
Asset-backed securities         | 11,693         | 10               | (1)               | 11,702
Strategic investments           | 9,750          | —                | —                 | 9,750
Total long-term investments     | $60,150        | $47              | $(5)              | $60,192


Fiscal 2017 Plan
We initiated a restructuring plan in the first quarter of fiscal 2017 to reduce complexity by means of long-term structural improvements (the Fiscal 2017 Plan), under which we reduced headcount and closed certain facilities. These actions were completed in fiscal 2019 at a cumulative cost of $289 million.
Our restructuring, transition and other costs are presented in the table below:
Included in our fiscal 2018 other exit and disposal costs is a $29 million impairment charge related to certain land and buildings previously reported as property and equipment that were reclassified to assets held for sale.
As of March 29, 2019, the restructuring liabilities were not significant.

                                                |                | Year Ended     |
----------------------------------------------- | -------------- | -------------- | --------------
(In millions)                                   | March 29, 2019 | March 30, 2018 | March 31, 2017
Severance and termination benefit costs         | $28            | $61            | $76
Other exit and disposal costs                   | 15             | 52             | 80
Asset write-offs                                | 2              | 25             | 23
Transition costs                                | 196            | 272            | 94
Total restructuring, transition and other costs | $241           | $410           | $273


The actual return on plan assets amounted to €125 million in the reporting period (2017/ 18: €45 million).
For financial year 2019/20, the company expects employer payments to external pension providers totalling approximately €18 million and employee contributions of €9 million in plan assets, with contributions in the Netherlands, Belgium and Germany accounting for the major share of this total. Expected contributions from payment contribution commitments in Germany are not included in expected payments.
The fair value of plan assets developed as follows:
At one Dutch company, plan assets exceeded the value of commitments as of the closing date. Since the company cannot draw any economic benefits from this overfunding, the balance sheet amount was reduced to €0 in line with IAS 19.64 (b).

€ million                                                                                | 2017/2018 | 2018/2019
------------------------------------------------------------------------------------------------------------------------- | --------- | ---------
Change in plan assets                                                                                |           |
Fair value of plan assets as of beginning of period                                                                       | 905       | 940
Recognised under                                                                                | 21        | 23
Interest income                                                                                | 21        | 23
Recognised outside of profit or loss under ‘remeasurement of defined benefit pension plans’ in other comprehensive income | 24        | 102
Gains/losses from plan assets excl. interest income (+/−)                                                                 | 24        | 102
Other effects                                                                                | −10       | 0
Benefit payments (incl. tax payments)                                                                                | −34       | −27
Settlement payments                                                                                | −6        | 0
Employer contributions                                                                                | 35        | 18
Contributions from plan participants                                                                                | 11        | 9
Change in consolidation group / transfers                                                                                | 0         | 0
Reclassification in accordance with IFRS5                                                                                | −16       | 0
Currency effects                                                                                | 0         | 1
Fair value of plan assets as of end of period                                                                             | 940       | 1,066


2019 vs 2018
Cost of revenue decreased for the year ended December 31, 2019, compared to the prior year, primarily due to net revenue declining.
Gross margin decreased for the year ended December 31, 2019 compared to the prior year. Gross margin was negatively impacted by the imposition of Section 301 tariffs originally announced in late 2018 and cost inefficiencies experienced in our new manufacturing locations outside of China, an increase in channel promotional activities relative to revenue as well as foreign exchange headwinds due to the strengthening of the U.S. dollar.
2018 vs 2017
Cost of revenue decreased for the year ended December 31, 2018 primarily due to improved product margin performance, lower proportionate provisions for warranty expense, and lower air freight costs compared to the prior year.
Gross margin increased for the year ended December 31, 2018 compared to the prior year primarily due to improved product margin performance, lower proportionate provisions for sales returns and warranty expense, favorable foreign exchange rate movements and lower air freight costs compared to the prior year.
For fiscal 2020, we expect gross margins to improve from fiscal 2019 primarily as our U.S. bound inventory will primarily not be subject to Section 301 tariffs in fiscal 2020. Forecasting gross margin percentages is difficult, and there are a number of risks related to our ability to maintain or improve our current gross margin levels. Our cost of revenue as a percentage of net revenue can vary significantly based upon factors such as: uncertainties surrounding revenue levels, including future pricing and/or potential discounts as a result of the economy or in response to the strengthening of the U.S. dollar in our international markets, and related production level variances; import customs duties and imposed tariffs; competition; changes in technology; changes in product mix; variability of stockbased compensation costs; royalties to third parties; fluctuations in freight and repair costs; manufacturing and purchase price variances; changes in prices on commodity components; warranty costs; and the timing of sales, particularly to service provider customers. We expect that revenue derived from paid subscription service plans will increase in the future, which may have a positive impact on our gross margin. From time to time, however, we may experience fluctuations in our gross margin as a result of the factors discussed above.

                        |          |          | Year Ended December 31                 |          |
----------------------- | -------- | -------- | -------------------------------------- | -------- | --------
                        | 2019     | % Change | 2018                                   | % Change | 2017
                        |          |          | (In thousands, except percentage data) |          |
Cost of revenue         | $704,535 | (1.8)%   | $717,118                               | (2.0)%   | $731,453
Gross margin percentage | 29.5%    |          | 32.3%                                  |          | 29.6%


Other (Income) and Expense
NM—Not meaningful
Total consolidated other (income) and expense was income of $968 million in 2019 compared to expense of $1,152 million in 2018. The year-to-year change was primarily driven by: • Lower non-operating retirement-related costs ($957 million). Refer to “Retirement-Related Plans” for additional information. • Higher gains from divestitures ($833 million) reflected in Other; and • Higher net exchange gains (including derivative instruments) ($272 million). The company’s hedging programs help mitigate currency impacts in the Consolidated Income Statement.
Operating (non-GAAP) other (income) and expense was $1,431 million of income in 2019 and increased $1,010 million compared to the prior-year period. The year-to-year change was primarily driven by the same factors excluding lower non-operating retirement-related costs.

($ in millions)                                          |          |         |
-------------------------------------------------------- | -------- | ------- | -------------------------
For the year ended December 31:                          | 2019     | 2018    | Yr.-to-Yr. Percent Change
Other (income) and expense                               |          |         |
Foreign currency transaction losses/(gains)              | $(279)   | $(427)  | (34.6)%
(Gains)/losses on derivative instruments                 | 15       | 434     | (96.6)
Interest income                                          | (349)    | (264)   | 32.2
Net (gains)/losses from securities and investment assets | (32)     | (101)   | (67.9)
Retirement-related costs/(income)                        | 615      | 1,572   | (60.9)
Other                                                    | (937)    | (63)    | NM
Total consolidated other (income) and expense            | $(968)   | $1,152  | NM
Non-operating adjustments                                |          |         |
Amortization of acquired intangible assets               | (2)      | (2)     | 50.0%
Acquisition-related charges                              | 154      | 0       | NM
Non-operating retirement related costs/(income)          | (615)    | (1,572) | (60.9)%
Operating (non-GAAP) other (income) and expense          | $(1,431) | $(422)  | 239.4%


Fiscal 2017 acquisitions
On August 1, 2016, we acquired all of the outstanding common stock of Blue Coat, Inc. (Blue Coat), a provider of advanced web security solutions for global enterprises and governments. The addition of Blue Coat’s suite of network and cloud security products to our innovative Enterprise Security product portfolio has enhanced our threat protection and information protection products while providing us with complementary products, such as advanced web and cloud security solutions, that address the network and cloud security needs of enterprises.
On February 9, 2017, we completed the acquisition of LifeLock, Inc. (LifeLock) a provider of proactive identity theft protection services for consumers and consumer risk management services for enterprises. LifeLock’s services are provided on a monthly or annual subscription basis and provide identification and notification of identity-related and other events and assist users in remediating their impact.
The total consideration for the acquisitions, net of cash acquired, consisted of the following:

(In millions)           | Blue Coat | LifeLock | Total
----------------------- | --------- | -------- | -------
Goodwill                | $4,084    | $1,397   | $5,481
Intangible assets       | 1,608     | 1,247    | 2,855
Net liabilities assumed | (1,019)   | (361)    | (1,380)
Total purchase price    | $4,673    | $2,283   | $6,956


We have included Adjusted EBITDA in this report because it is a key measure that our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions. We also use certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures under our executive bonus plan. Further, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does  may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, you should consider Adjusted EBITDA alongside our other GAAP-based financial performance measures, our net income and our other GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands).

                                                        |          |         | Year Ended December 31, |         |
------------------------------------------------------- | -------- | ------- | ----------------------- | ------- | -------
                                                        | 2019     | 2018    | 2017                    | 2016    | 2015
Adjusted EBITDA:                                        |          |         |                         |         |
Net income                                              | $53,330  | $21,524 | $29,251                 | $10,154 | $11,768
Adjustments:                                            |          |         |                         |         |
Interest expense, interest income and other income, net | (8,483)  | 503     | 1,133                   | (323)   | 526
Provision for / (benefit from) income taxes             | 5,566    | (9,825) | 2,990                   | 4,227   | 5,697
Amortization and depreciation expense                   | 22,134   | 21,721  | 17,734                  | 6,490   | 5,808
Stock-based compensation expense                        | 20,603   | 13,429  | 7,413                   | 4,001   | 4,124
Acquisition-related expense                             | 2,403    | —       | 5,895                   | 11,098  | 100
Litigation expense                                      | 12,754   | 45,729  | 7,212                   | 13,387  | 6,347
Total adjustments                                       | 54,977   | 71,557  | 42,377                  | 38,880  | 22,602
Adjusted EBITDA                                         | $108,307 | $93,081 | $71,628                 | $49,034 | $34,370


The components of the provision for income tax expense are as follows:
Included in the Company's current income tax expense are provisions for uncertain tax positions relating to freight taxes. The Company does not presently anticipate that its provisions for these uncertain tax positions will significantly increase in the next 12 months; however, this is dependent on the jurisdictions of the trading activity of its vessels.
The Company reviews its freight tax obligations on a regular basis and may update its assessment of its tax positions based on available information at the time. Such information may include legal advice as to the applicability of freight taxes in relevant jurisdictions. Freight tax regulations are subject to change and interpretation; therefore, the amounts recorded by the Company may change accordingly. The tax years 2008 through 2019 remain open to examination by some of the major jurisdictions in which the Company is subject to tax.

                   | Year Ended   | Year Ended   | Year Ended
------------------ | ------------ | ------------ | ------------
                   | December 31, | December 31, | December 31,
                   | 2019         | 2018         | 2017
                   | $            | $            | $
Current            | (25,563)     | (17,458)     | (11,997)
Deferred           | 81           | (2,266)      | (235)
Income tax expense | (25,482)     | (19,724)     | (12,232)


Fees Billed by Ernst & Young LLP
The table below shows the fees billed by EY for audit and other services provided to the Company in fiscal years 2019 and 2018.
Figure 48. FY2019/2018 Fees Billed by Ernst & Young LLP
(1) Audit Fees represent fees for professional services provided in connection with the audits of annual financial statements. Audit Fees also include reviews of quarterly financial statements, audit services related to other statutory or regulatory filings or engagements, and fees related to EY’s audit of the effectiveness of the Company’s internal control over financial reporting pursuant to section 404 of the Sarbanes-Oxley Act.
(2) Audit-Related Fees represent fees for assurance and related services that are reasonably related to the audit or review of the Company’s financial statements and are not reported above under “Audit Fees”. These fees principally include due diligence and accounting consultation fees in connection with our acquisition of Coventor, Inc. in 2018 and an information systems audit in 2019.
(3) Tax Fees represent fees for professional services for tax planning, tax compliance and review services related to foreign tax compliance and assistance with tax audits and appeals.
The audit committee reviewed summaries of the services provided by EY and the related fees during fiscal year 2019 and has determined that the provision of non-audit services was compatible with maintaining the independence of EY as the Company’s independent registered public accounting firm. The audit committee or its delegate approved 100% of the services and related fee amounts for services provided by EY during fiscal year 2019.

                     | Fiscal Year 2019 ($) | Fiscal Year 2018 ($)
-------------------- | -------------------- | --------------------
AuditFees(1)         | 4,703,830            | 4,605,495
Audit-RelatedFees(2) | 27,000               | 90,500
TaxFees(3)           | 194,170              | 34,888
AllOtherFees         | —                    | —
TOTAL                | 4,925,000            | 4,730,883


The table below details the percentage of the number of investment properties subject to internal and external valuations during the current and comparable reporting periods
The Group also obtained external valuations on 31 freehold investment properties acquired during the year ended 30 June 2019 (year ended 30 June 2018: 19 freehold investment properties). These external valuations provide the basis of the Directors’ valuations applied to these properties at 30 June 2019 and 30 June 2018. Including these valuations, 51% of freehold investment properties were subject to external valuations during the year (year ended 30 June 2018: 43% of freehold investment properties).

                        | External valuation % | Internal valuation %
----------------------- | -------------------- | --------------------
Year ended 30 June 2019 |                      |
Leasehold               | 23%                  | 77%
Freehold                | 38%                  | 62%
Year ended 30 June 2018 |                      |
Leasehold               | 60%                  | 40%
Freehold                | 27%                  | 73%


Earnings per share for the periods indicated were computed as follows (in thousands except per share amounts):
Our weighted average shares outstanding has decreased due to the repurchase of our outstanding common stock through a modified Dutch auction tender offer (the “Tender Offer”) and the stock repurchase program announced on October 29, 2018.
11.     Earnings Per Share

                                                       | Year ended December 31, |
------------------------------------------------------ | ----------------------- | ------
                                                       | 2019                    | 2018
Numerators                                             |                         |
Numerator for basic and diluted earnings per share:    |                         |
Net income                                             | $13,267                 | $3,654
Denominators                                           |                         |
Denominators for basic and diluted earnings per share: |                         |
Weighted average shares outstanding - basic            | 17,424                  | 20,721
Dilutive potential common shares                       |                         |
Stock options and awards                               | 1,101                   | 296
Denominator for diluted earnings per share             | 18,525                  | 21,017
Net income per common share - basic                    | $0.76                   | $0.18
Net income per common share – diluted                  | $0.72                   | $0.17


3.2 Capital risk management
The Group’s objectives on managing capital are to safeguard the Group’s ability to continue as a going concern and support the sustainable growth of the Group in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long term.
Capital refers to equity and external debts (including borrowings and notes payable). In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, repurchase the Company’s shares or raise/repay debts.
The Group monitors capital by regularly reviewing debts to adjusted earnings before interest, tax, depreciation and amortisation (“EBITDA”) (Note) ratio, being the measure of the Group’s ability to pay off all debts that reflects financial health and liquidity position. The total debts/adjusted EBITDA ratio calculated by dividing the total debts by adjusted EBITDA is as follows:
Note: Adjusted EBITDA represents operating profit less interest income and other gains/(losses), net, and adding back depreciation of property, plant and equipment, investment properties as well as right-of-use assets, amortisation of intangible assets and equitysettled share-based compensation expenses.

                                  | As at 31 December |
--------------------------------- | ----------------- | -----------
                                  | 2019              | 2018
                                  | RMB’Million       | RMB’Million
Borrowings (Note 35)              | 126,952           | 114,271
Notes payable (Note 36)           | 93,861            | 65,018
Total debts                       | 220,813           | 179,289
Adjusted EBITDA (Note)            | 147,395           | 118,273
Total debts/Adjusted EBITDA ratio | 1.50              | 1.52


NOTE 21. REVENUE
Geographical information is summarized as follows:
For geographical reporting, the revenue is attributed to the geographical location in which the customer’s facilities are located.

               | Year ended December 31, |
-------------- | ----------------------- | ---------
               | 2018                    | 2019
(EUR thousand) | Revenue                 | Revenue
United States  | 175,855                 | 339,463
Europe         | 165,602                 | 126,203
Asia           | 476,624                 | 818,194
Total          | 818,081                 | 1,283,860


Cost of Revenue:
The $29.3 million increase in our cost of license and subscription revenue was primarily attributable to increases of $14.9 million in personnel expenses, $8.6 million in cloud infrastructure costs incurred in order to support the growth of our subscription offerings, $3.3 million in royalties, $1.8 million in professional services, and $0.9 million related to the amortization of internal-use software development and acquired intangible assets.
Cloud infrastructure costs include $9.5 million of hosting related costs that were recorded in cost of services revenue in fiscal year 2018. The treatment of these hosting related costs is consistent with the treatment of the related revenue in each fiscal year.
We anticipate higher cost of license and subscription revenue as we continue to invest in our cloud operations to increase operational efficiency and scale while growing our customer base. Cost of maintenance revenue increased by $1.7 million primarily due to the increase in personnel required to support our term and perpetual license customers.
Our cost of services revenue would have increased if cloud infrastructure costs totaling $9.5 million were not reclassified to cost of license and subscription revenue, consistent with the treatment of the related revenue. Excluding the impact of this reclassification, third-party consultants billable to customers primarily for InsuranceNow implementation engagements increased by $3.2 million and personnel expenses related to new and existing employees increased by $2.8 million.
We had 781 professional service employees and 198 technical support and licensing operations employees at July 31, 2019 compared to 838 professional services employees and 121 technical support and licensing operations employees at July 31, 2018.

                                         | Fiscal years ended July 31, |                    |                                    |                    |         |
---------------------------------------- | --------------------------- | ------------------ | ---------------------------------- | ------------------ | ------- | ---
                                         | 2019                        |                    | 2018                               |                    | Change  |
                                         | Amount                      | % of total revenue | Amount                             | % of total revenue | ($)     | (%)
                                         |                             |                    | (In thousands, except percentages) |                    |         |
Cost of revenue:                         |                             |                    |                                    |                    |         |
License and subscription                 | $ 64,798                    | 9%                 | $ 35,452                           | 5%                 | 29,346  | 83
Maintenance                              | 16,499                      | 2                  | 14,783                             | 2                  | 1,716   | 12
Services                                 | 243,053                     | 34                 | 246,548                            | 38                 | (3,495) | (1)
Total cost of revenue                    | $ 324,350                   | 45%                | 296,783                            | 45%                | 27,567  | 9
Includes stock-based compensation of:    |                             |                    |                                    |                    |         |
Cost of license and subscription revenue | $ 3,011                     |                    | $ 1,002                            |                    | 2,009   |
Cost of maintenance revenue              | 1,820                       |                    | 1,886                              |                    | (66)    |
Cost of services revenue                 | 22,781                      |                    | 21,856                             |                    | 925     |
Total                                    | $ 27,612                    |                    | $ 24,744                           |                    | 2,868   |


Note 12. Current liabilities - trade and other payables
Accounting policy for trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Deferred consideration

The payable represents the obligation to pay consideration following the acquisition of a business or assets and is deferred based on passage of time. It is measured at the present value of the estimated liability.

Consolidated           |         |
---------------------- | ------- | -------
                       | 2019    | 2018
                       | US$’000 | US$’000
Trade payables         | 3,492   | 2,016
Deferred consideration | 888     | 643
Other payables         | 11,898  | 9,488
                       | 16,278  | 12,147


OTHER INCOME (EXPENSE), NET
The components of other income (expense), net were as follows:
We use derivative instruments to: manage risks related to foreign currencies, equity prices, interest rates, and credit; enhance investment returns; and facilitate portfolio diversification. Gains and losses from changes in fair values of derivatives that are not designated as hedging instruments are primarily recognized in other income (expense), net.
Fiscal Year 2019 Compared with Fiscal Year 2018 Interest and dividends income increased primarily due to higher yields on fixed-income securities. Interest expense decreased primarily driven by a decrease in outstanding long-term debt due to debt maturities, offset in part by higher finance lease expense. Net recognized gains on investments decreased primarily due to lower gains on sales of equity investments. Net gains on derivatives includes gains on foreign exchange and interest rate derivatives in the current period as compared to losses in the prior period.
Fiscal Year 2018 Compared with Fiscal Year 2017 Dividends and interest income increased primarily due to higher average portfolio balances and yields on fixed-income securities. Interest expense increased primarily due to higher average outstanding long-term debt and higher finance lease expense. Net recognized gains on investments decreased primarily due to higher losses on sales of fixed-income securities, offset in part by higher gains on sales of equity securities. Net losses on derivatives decreased primarily due to lower losses on equity, foreign exchange, and commodity derivatives, offset in part by losses on interest rate derivatives in the current period as compared to gains in the prior period.

(In millions)                                 |            |            |
--------------------------------------------- | ---------- | ---------- | ---------
Year Ended June 30,                           | 2019       | 2018       | 2017
Interest and dividends income                 | $    2,762 | $    2,214 | $   1,387
Interest expense                              | (2,686)    | (2,733)    | (2,222)
Net recognized gains on investments           | 648        | 2,399      | 2,583
Net gains (losses) on derivatives             | 144        | (187)      | (510)
Net losses on foreign currency remeasurements | (82)       | (218)      | (111)
Other, net                                    | (57)       | (59)       | (251)
Total                                         | $  729     | $ 1,416    | $  876


Note 21. Quarterly Results (Unaudited)
The following table presents the Company's selected unaudited quarterly operating results for the eight quarters ended March 31, 2019. The Company believes that all adjustments of a normal recurring nature have been made to present fairly the related quarterly results (in millions, except per share amounts). Amounts may not add to the total due to rounding:
Refer to Note 11, Income Taxes, for an explanation of the one-time transition tax recognized in the third quarter of fiscal 2018. Refer to Note 4, Special Charges and Other, Net, for an explanation of the special charges included in operating income in fiscal 2019 and fiscal 2018. Refer to Note 12, Debt and Credit Facility, for an explanation of the loss on settlement of debt included in other (loss) income, net of $4.1 million during the second quarter, $0.2 million during the third quarter, and $8.3 million during the fourth quarter of fiscal 2019 and $13.8 million and $2.1 million for the first quarter and third quarter of fiscal 2018, respectively. Refer to Note 5, Investments, for an explanation of the impairment recognized on available-for-sale securities in the fourth quarter of fiscal 2018.

Fiscal 2019                           | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total
------------------------------------- | ------------- | -------------- | ------------- | -------------- | --------
Net sales                             | $1,212.5      | $1,432.5       | $1,374.7      | $1,329.8       | $5,349.5
Gross profit                          | $642.0        | $689.3         | $779.6        | $820.5         | $2,931.3
Operating income                      | $132.3        | $102.7         | $194.7        | $284.6         | $714.3
Net income from continuing operations | $35.7         | $96.3          | $49.2         | $174.7         | $355.9
Diluted net income per common share   | $0.14         | $0.38          | $0.20         | $0.70          | $1.42


The following table details our restructuring activities as reflected in the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017:
(1) Other associated costs excludes non-cash cost of $1.9 million for the year ended December 31, 2018 related to sharebased compensation expense.

                                            |         | Year Ended December 31, |
------------------------------------------- | ------- | ----------------------- | ------
(In millions)                               | 2019    | 2018                    | 2017
Continuing operations:                      |         |                         |
Other associated costs(1)                   | $ 60.3  | $ 13.9                  | $ 14.3
Restructuring charges                       | 41.9    | 47.8                    | 12.1
Total charges from continuing operations    | 102.2   | 61.7                    | 26.4
Charges included in discontinued operations | 2014    | 2014                    | 2.4
Total charges                               | $ 102.2 | $ 61.7                  | $ 28.8
Capital expenditures                        | $ 3.4   | $ 1.0                   | $ 21.3


NOTE 21 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summarizes certain quarterly statement of operations data for each of the quarters in fiscal years 2019 and 2018 (in thousands, except percentages and per share data). The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period. We derived this data from the unaudited consolidated interim financial statements that, in our opinion, have been prepared on substantially the same basis as the audited financial statements contained elsewhere in this report and include all normal recurring adjustments necessary for a fair presentation of the financial information for the periods presented. These unaudited quarterly results should be read in conjunction with the financial statements and notes thereto included elsewhere in this report.
The net income (loss) in the fiscal 2019 first, third and fourth quarter included a gain from legal settlement of $13.3 million, $2.5 million and $2.5 million, respectively. Substantially all of the previously reserved legal provision of $19.1 million as of November 30, 2018 relating to an alleged patent infringement was reversed in the fourth quarter of the current fiscal year. The settlement was described in Note 19 – Legal Proceedings. The net loss in fiscal 2019 second quarter included a loss of $2.0 million from extinguishment of debt. The loss was described in Note 10 – Financing Arrangements. As of February 28, 2019, we determined that our investment in Smart Driver Club was subject to other than temporary impairment of $5.0 million, which is reported as part of impairment loss and equity in net loss of affiliate in our consolidated statement of comprehensive income. The impairment was described in Note 9 – Other Assets.
The net loss in the fiscal 2018 first quarter included a litigation provision of $6.1 million. The net income in the fiscal 2018 second quarter and third quarter included a gain from legal settlement of $15.0 million and $13.3 million, respectively. All of these events were described in Note 19 – Legal Proceedings.

                                  |          |          |          | Fiscal 2019 |
--------------------------------- | -------- | -------- | -------- | ----------- | --------
                                  | First    | Second   | Third    | Fourth      |
                                  | Quarter  | Quarter  | Quarter  | Quarter     | Total
Revenues                          | $ 94,888 | $ 96,037 | $ 88,495 | $84,380     | $363,800
Gross profit                      | 38,091   | 39,821   | 36,381   | 33,471      | 147,764
Gross margin                      | 40.1%    | 41.5%    | 41.1%    | 39.7%       | 40.6%
Net income (loss)                 | 8,511    | (854)    | (522)    | 11,263      | 18,398
Earnings (loss) per diluted share | $0.23    | $(0.02)  | $(0.02)  | $0.33       | $0.52
                                  |          |          |          | Fiscal 2018 |
                                  | First    | Second   | Third    | Fourth      |
                                  | Quarter  | Quarter  | Quarter  | Quarter     | Total
Revenues                          | $88,081  | $89,767  | $93,669  | $94,395     | $365,912
Gross profit                      | 37,443   | 36,838   | 38,187   | 38,422      | 150,890
Gross margin                      | 42.5%    | 41.0%    | 40.8%    | 40.7%       | 41.2%
Net income (loss)                 | (2,654)  | 12,232   | 11,806   | (4,767)     | 16,617
Earnings (loss) per diluted share | $(0.08)  | $0.34    | $0.33    | $(0.13)     | $0.46


Consolidated Statements of Operations Data
The following table sets forth consolidated statements of operations data for the periods indicated (amounts in millions) and as a percentage of total net revenues, except for cost of revenues, which are presented as a percentage of associated revenues:
(1) During the three months ended March 31, 2019, we identified an amount which should have been recorded in the three months and year ended December 31, 2018 to reduce income tax expense by $35 million. Our statement of operations for the year ended December 31, 2018, as presented above, has been revised to reflect the correction. See further discussion in Note 2 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(2) Represents the loss on extinguishment of debt we recognized in connection with our debt financing activities during the year ended December 31, 2018. The loss on extinguishment is comprised of a $25 million premium payment and a $15 million write-off of unamortized discount and deferred financing costs.

                                                                     | For the Years |     | Ended December 31, |
-------------------------------------------------------------------- | ------------- | --- | ------------------ | ---
                                                                     | 2019          |     | 2018(1)            |
Net revenues                                                         |               |     |                    |
Product sales                                                        | $1,975        | 30% | $2,255             | 30%
Subscription, licensing, and other revenues                          | 4,514         | 70  | 5,245              | 70
Total net revenues                                                   | 6,489         | 100 | 7,500              | 100
Costs and expenses                                                   |               |     |                    |
Cost of revenues—product sales:                                      |               |     |                    |
Product costs                                                        | 656           | 33  | 719                | 32
Software royalties, amortization, and intellectual property licenses | 240           | 12  | 371                | 16
Cost of revenues—subscription, licensing, and other                  |               |     |                    |
Game operations and distribution costs                               | 965           | 21  | 1,028              | 20
Software royalties, amortization, and intellectual property licenses | 233           | 5   | 399                | 8
Product development                                                  | 998           | 15  | 1,101              | 15
Sales and marketing                                                  | 926           | 14  | 1,062              | 14
General and administrative                                           | 732           | 11  | 822                | 11
Restructuring and related costs                                      | 132           | 2   | 10                 | —
Total costs and expenses                                             | 4,882         | 75  | 5,512              | 73
Operating income                                                     | 1,607         | 25  | 1,988              | 27
Interest and other expense (income), net                             | (26)          | —   | 71                 | 1
Loss on extinguishment of debt (2)                                   | —             | —   | 40                 | 1
Income before income tax expense                                     | 1,633         | 25  | 1,877              | 25
Income tax expense                                                   | 130           | 2   | 29                 | —
Net income                                                           | $1,503        | 23% | $1,848             | 25%


Accounts Receivable, Net
Accounts receivable, net, consisted of the following as of January 31:
(1) Autodesk adopted ASU No. 2014-09, “Revenue from Contracts with Customers" regarding Accounting Standards Codification (ASC Topic 606) during the first quarter of fiscal 2019. As such, current year balances are shown under ASC Topic 606 and prior year balances are shown under ASC Topic 605. See Note 1, "Business and Summary of Significant Accounting Policies-Accounting Standards Adopted", of our consolidated financial statements for additional information.
Allowances for uncollectible trade receivables are based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with problem accounts.
As part of the indirect channel model, Autodesk has a partner incentive program that uses quarterly attainment of monetary rewards to motivate distributors and resellers to achieve mutually agreed upon business goals in a specified time period. A portion of these incentives reduce maintenance and other revenue in the current period. The remainder, which relates to incentives on our Subscription Program, is recorded as a reduction to deferred revenue in the period the subscription transaction is billed and subsequently recognized as a reduction to subscription revenue over the contract period. These incentive balances do not require significant assumptions or judgments. Depending on how the payments are made, the reserves associated with the partner incentive program are treated on the balance sheet as either contra accounts receivable or accounts payable

(in million)                           | 2019   | 2018
-------------------------------------- | ------ | ------
Trade accounts receivable              | $526.6 | $469.2
Less: Allowance for doubtful accounts  | (2.2)  | (2.3)
Product returns reserve                | (0.3)  | (0.2)
Partner programs and other obligations | (49.8) | (28.5)
Accounts receivable, net (1)           | $474.3 | $438.2


Net debt
Net debt is a measure that provides valuable additional information on the summary presentation of the Group’s net financial liabilities and is a measure in common use elsewhere.
Prior to this quarter, all financial asset derivatives were current financial assets and so reduced net debt. Following a recent review we now also have financial asset derivatives that are non-current in nature. As all of these derivatives relate to financial liabilities, we continue to exclude them for the purposes of our net debt calculation and have expanded our definition to reflect this.
Net debt is now defined as the excess of total financial liabilities, excluding trade payables and other current liabilities, over cash, cash equivalents and other current financial assets, excluding trade and other current receivables, and non-current financial asset derivatives that relate to financial liabilities.
(a) Restated following adoption of IFRS 16. See note 1 and note 24 for further details.

                                                                              | € million | € million
----------------------------------------------------------------------------- | --------- | -------------
                                                                              | 2019      | 2018
                                                                              |           | (Restated)(a)
Total financial liabilities                                                   | (28,257)  | (26,738)
Current financial liabilities                                                 | (4,691)   | (3,613)
Non-current financial liabilities                                             | (23,566)  | (23,125)
Cash and cash equivalents as per balance sheet                                | 4,185     | 3,230
Cash and cash equivalents as per cash flow statement                          | 4,116     | 3,090
Add bank overdrafts deducted therein                                          | 69        | 140
Other current financial assets                                                | 907       | 874
Non-current financial assets derivatives that relate to financial liabilities | 114       | –
Net debt                                                                      | (23,051)  | (22,634)


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Note 18. Quarterly Consolidated Results of Operations Data (Unaudited)
The following table sets forth our quarterly consolidated results of operations data for each of the eight quarters in the period ended December 31, 2019. GS Holdings is our predecessor for accounting purposes and, accordingly, amounts prior to the Reorganization Transactions and IPO represent the historical consolidated operations of GS Holdings and its subsidiaries. The amounts during the period from May 24, 2018 through December 31, 2018 represent those of consolidated GreenSky, Inc. and its subsidiaries. Basic and diluted earnings per share of Class A common stock is applicable only for the period from May 24, 2018 through December 31, 2018, which is the period following the Reorganization Transactions and IPO. Prior to the Reorganization Transactions and IPO, GreenSky, Inc. did not engage in any business or other activities except in connection with its formation and initial capitalization. See Note 1 for further information on our organization and see Note 2 for further information on our earnings per share.
(1) Year-to-date results may not agree to the sum of individual quarterly results due to rounding.

                                                             |               |                | Year Ended December 31, 2019 |                |
------------------------------------------------------------ | ------------- | -------------- | ---------------------------- | -------------- | --------
                                                             | First
Quarter | Second Quarter | Third Quarter                | Fourth Quarter | Total
Total revenue                                                | $103,700      | $138,695       | $153,415                     | $133,836       | $529,646
Cost of revenue (exclusive of depreciation and
amortization) | 58,037        | 56,228         | 64,957                       | 69,358         | 248,580
Total costs and expenses                                     | 92,212        | 92,189         | 101,017                      | 123,275        | 408,693
Operating profit                                             | 11,488        | 46,506         | 52,398                       | 10,561         | 120,953
Total other income (expense), net                            | (4,682)       | (11,779)       | (6,790)                      | (8,854)        | (32,105)
Income before income tax expense (benefit)                   | 6,806         | 34,727         | 45,608                       | 1,707          | 88,848
Net income                                                   | 7,401         | 39,193         | 44,075                       | 5,304          | 95,973
Less: Net income attributable to noncontrolling
interests    | 4,502         | 26,877         | 29,349                       | 3,265          | 63,993
Net income attributable to GreenSky, Inc.                    | 2,899         | 12,316         | 14,726                       | 2,039          | 31,980
Earnings per share of Class A common stock:                  |               |                |                              |                |
Basic                                                        | $0.05         | $0.20          | $0.24                        | $0.03          | $0.52
Diluted(1)                                                   | $0.05         | $0.19          | $0.23                        | $0.03          | $0.49


Recently Adopted Accounting Standards
In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 – Intra-Entity Transfers Other Than Inventory ("ASU 2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted this ASU in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below.
In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. We adopted this ASU in the first quarter of 2019 under the modified retrospective method, with prospective adoption for amendments related to equity securities without readily determinable fair values. The adoption of this ASU did not have a material impact on our financial statements.
In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (as amended, "ASC 606"), which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of ASC 606 is that an entity should recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We adopted ASC 606 in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below. We applied ASC 606 to contracts with customers that had not yet been completed as of the adoption date.
The following table summarizes the effects of adopting ASU 2016-16 and ASC 606:
As a result of the adoption of ASC 606, the opening balances as of August 31, 2018 for receivables, other current assets, and other current liabilities increased due to the reclassification of allowances for rebates, pricing adjustments, and returns to conform to the new presentation requirements. In addition, the margin from previously deferred sales to distributors was reclassified from other current liabilities to retained earnings. The tax effects of the adoption of ASC 606 were recorded primarily as a reduction of net deferred tax assets, substantially as a result of recognizing income for accounting purposes earlier under ASC 606 than for tax purposes in various jurisdictions.

                             | Ending Balance as of August 30, 2018 | ASU 2016-16 | ASC 606 | Opening Balance as of August 31, 2018
---------------------------- | ------------------------------------ | ----------- | ------- | -------------------------------------
Receivables                  | $5,478                               | $—          | $114    | $5,592
Inventories                  | 3,595                                | —           | (5)     | 3,590
Other current assets         | 164                                  | (14)        | 30      | 180
Deferred tax assets          | 1,022                                | 56          | (92)    | 986
Other current liabilities    | 521                                  | —           | (4)     | 517
Other noncurrent liabilities | 354                                  | —           | 1       | 355
Retained earnings            | 24,395                               | 42          | 50      | 24,487


Unaudited Pro Forma Information - OpenEye
The following unaudited pro forma data is presented as if OpenEye were included in our historical consolidated statements of operations beginning January 1, 2018. These pro forma results do not necessarily represent what would have occurred if all the business combination had taken place on January 1, 2018, nor do they represent the results that may occur in the future.
This pro forma financial information includes our historical financial statements and those of our OpenEye business combination with the following adjustments: (i) we adjusted the pro forma amounts for income taxes, (ii) we adjusted for amortization expense assuming the fair value adjustments to intangible assets had been applied beginning January 1, 2018, and (iii) we adjusted for transaction fees incurred and reclassified them to January 1, 2018.
The pro forma adjustments were based on available information and upon assumptions that we believe are reasonable to reflect the impact of these acquisitions on our historical financial information on a supplemental pro forma basis, as follows (in thousands, except per share data):

                                                                   | Pro Forma               |
------------------------------------------------------------------ | ----------------------- | --------
                                                                   | Year Ended December 31, |
                                                                   | 2019                    | 2018
Revenue                                                            | $527,550                | $451,013
Net income attributable to common stockholders                     | 51,075                  | 13,264
Net income attributable to common stockholders per share - basic   | $1.05                   | $0.27
Net income attributable to common stockholders per share - diluted | $1.02                   | $0.26


Major components of the Company’s deferred tax assets (liabilities) are as follows (in thousands):
At December 31, 2019, the Company had federal, state, and foreign net operating losses of approximately $256.8 million, $275.5 million, and $89.7 million, respectively. The federal net operating loss carryforward will begin expiring in 2022, the state net operating loss carryforward will begin expiring in 2020, and the foreign net operating loss has an unlimited carryforward period. The Internal Revenue Code of 1986, as amended, imposes substantial restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Due to the effects of historical equity issuances, the Company has determined that the future utilization of a portion of its net operating losses is limited annually pursuant to IRC Section 382. The Company has determined that none of its net operating losses will expire because of the annual limitation.
The Company has recorded a full valuation allowance against its otherwise recognizable US, UK, New Zealand, Hong Kong, and Brazil deferred income tax assets as of December 31, 2019. Management has determined, after evaluating all positive and negative historical and prospective evidence, that it is more likely than not that these assets will not be realized. The net (decrease) increase to the valuation allowance of $(0.1) million, $(1.5) million, and $6.8 million for the years ended December 31, 2019, 2018, and 2017, respectively, was primarily due to additional net operating losses generated by the Company.
Deferred income taxes have not been provided on the undistributed earnings of the Company’s foreign subsidiaries because the Company’s practice and intent is to permanently reinvest these earnings. The cumulative amount of such undistributed earnings was $5.3 million and $3.1 million at December 31, 2019 and December 31, 2018, respectively. Any future distribution of these non-US earnings may subject the Company to state income taxes, as adjusted for tax credits, and foreign withholding taxes that the Company estimates would be $0.1 million and $0.1 million at December 31, 2019 and 2018, respectively.

                                                                 | December 31, |
---------------------------------------------------------------- | ------------ | ---------
                                                                 | 2019         | 2018
Deferred tax assets:                                             |              |
Accrued expenses                                                 | $2,427       | $2,353
Long-lived intangible assets and fixed assets - basis difference | 25,178       | 22,947
Net operating loss carryforwards                                 | 81,575       | 82,017
Stock-based compensation                                         | 15,398       | 15,172
Operating lease liabilities                                      | 17,281       | —
Deferred revenue                                                 | 3,258        | 2,861
Other                                                            | 5,100        | 4,557
Total deferred tax assets                                        | 150,217      | 129,907
Valuation allowance                                              | (116,915)    | (117,058)
Deferred tax assets, net of valuation allowance                  | 33,302       | 12,849
Deferred tax liabilities:                                        |              |
Prepaid expenses and deferred commissions                        | (14,502)     | (10,831)
Operating right-of-use assets                                    | (16,960)     | —
Other                                                            | (795)        | (976)
Total deferred tax liabilities                                   | (32,257)     | (11,807)
Net deferred tax assets                                          | $1,045       | $1,042


Financing and cash flow
The Group delivered very strong cash generation in 2019, driven by higher operating profit and effective working capital management. Changes in working capital, reflected within cash flow from operations, benefited from:
• our continued focus on improving trade receivables collection; • a reduction in inventory levels due to a high level of shipments at the end of 2019; and • growth in payables, resulting from the increase in activity levels and emphasis on extending supplier payment terms.
Free cash flow for 2019 almost doubled year-on-year coming in at $100.1 million, compared to $50.9 million in 2018, resulting in a free cash flow conversion which represented 123 per cent of adjusted earnings (2018 77 per cent).
Free cash flow is set out below:
Note
1. Spirent adopted IFRS 16 on 1 January 2019; in prior periods operating lease payments were included within cash flow from operations.
Free cash flow includes a net cash outflow in respect of exceptional items in 2018 and 2019 of $5.5 million (2018 $3.6 million in respect of exceptional items charged in 2017 and 2018).
Tax payments of $5.6 million made in 2019 were consistent with the prior year (2018 $5.7 million). Net capital expenditure of $11.9 million was also broadly consistent with the prior year (2018 $10.6 million), with the incremental spend of $1.3 million primarily related to investment in 5G. We continue to exercise careful management of capital investment to ensure efficient use of capital and maximise return on investment.
Following the adoption of IFRS 16 on 1 January 2019, the payment of lease liabilities, both the principal and interest elements, are shown separately from net cash flow from operating activities. In previous periods they would have been reflected in that number. There is no overall impact in comparing free cash flow year-on-year.
In 2019, the final dividend for 2018 and an interim dividend for 2019 totalling $28.6 million were paid. This compared to total dividends of $54.8 million paid in 2018, including a special dividend of $29.9 million. In addition, 4.0 million shares were purchased and placed into the Employee Share Ownership Trust at a cost of $8.6 million (2018 1.5 million shares at a net cost of $2.5 million) and $1.9 million of cash consideration was paid to acquire the business of a navigation systems company based in the United Kingdom.
Following these payments, cash and cash equivalents closed at $183.2 million at 31 December 2019, compared with $121.6 million at 31 December 2018. There continues to be no bank debt.

$ million                                             | 2019   | 2018
----------------------------------------------------- | ------ | ------
Cash flow from operations                             | 124.9  | 65.9
Tax paid                                              | (5.6)  | (5.7)
Net cash inflow from operating activities             | 119.3  | 60.2
Interest received                                     | 2.6    | 1.3
Net capital expenditure                               | (11.9) | (10.6)
Payment of lease liabilities, principal and interest1 | (10.3) | —
Lease payments received from finance leases           | 0.4    | —
Free cash flow                                        | 100.1  | 50.9


During fiscal year 2019, the following activity occurred under our stock plans:
(a) Includes 2 million, 3 million, and 2 million of PSUs granted at target and performance adjustments above target levels for fiscal years 2019, 2018, and 2017, respectively.
As of June 30, 2019, there was approximately $8.6 billion of total unrecognized compensation costs related to stock awards. These costs are expected to be recognized over a weighted average period of 3 years. The weighted average grant-date fair value of stock awards granted was $107.02, $75.88, and $55.64 for fiscal years 2019, 2018, and 2017, respectively. The fair value of stock awards vested was $8.7 billion, $6.6 billion, and $4.8 billion, for fiscal years 2019, 2018, and 2017, respectively.

                                     | Shares | Weighted Average Grant-Date Fair Value
------------------------------------ | ------ | --------------------------------------
(In millions)                        |        |
Stock Awards                         |        |
Nonvested balance, beginning of year | 174    | $  57.85
Granted (a)                          | 63     | 107.02
Vested                               | (77)   | 57.08
Forfeited                            | (13)   | 69.35
Nonvested balance, end of year       | 147    | $ 78.49


Issuer Purchases of Equity Securities
In March 2011, our Board of Directors approved a stock repurchase program, pursuant to which we are authorized to repurchase up to $1.5 billion of our common stock (the “2011 Buyback”). In addition to the 2011 Buyback, in December 2017, our Board of Directors approved an additional stock repurchase program, pursuant to which we are authorized to repurchase up to $2.0 billion of our common stock (the “2017 Buyback”, and together with the 2011 Buyback the “Buyback Programs”).
During the three months ended December 31, 2019, we repurchased a total of 93,654 shares of our common stock for an aggregate of $19.6 million, including commissions and fees, pursuant to the 2011 Buyback. There were no repurchases under the 2017 Buyback. The table below sets forth details of our repurchases under the 2011 Buyback during the three months ended December 31, 2019.
(1) Repurchases made pursuant to the 2011 Buyback
(2) Average price paid per share is a weighted average calculation using the aggregate price, excluding commissions and fees.
(3) Remaining under the 2011 Buyback.
We have repurchased a total of 14.1 million shares of our common stock under the 2011 Buyback for an aggregate of $1.4 billion, including commissions and fees. We expect to continue to manage the pacing of the remaining $2.1 billion under the Buyback Programs in response to general market conditions and other relevant factors. We expect to fund any further repurchases of our common stock through a combination of cash on hand, cash generated by operations and borrowings under our credit facilities. Purchases under the Buyback Programs are subject to our having available cash to fund repurchases.
Under the Buyback Programs, our management is authorized to purchase shares from time to time through open market purchases or in privately negotiated transactions not to exceed market prices and subject to market conditions and other factors. With respect to open market purchases, we may use plans adopted in accordance with Rule 10b5-1 under the Exchange Act in accordance with securities laws and other legal requirements, which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. These programs may be discontinued at any time.

Period                               | Total Number of Shares Purchased (1) | Average Price Paid per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
------------------------------------ | ------------------------------------ | -------------------------------- | -------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------
                                     |                                      |                                  |                                                                                | (in millions)
October 1, 2019 - October 31, 2019   | —                                    | $                                | —                                                                                | $
November 1, 2019 - November 30, 2019 | 42,800                               | $209.74                          | 42,800                                                                           | $103.1
December 1, 2019 - December 31, 2019 | 50,854                               | $209.59                          | 50,854                                                                           | $92.4
Total Fourth Quarter                 | 93,654                               | $209.66                          | 93,654                                                                           | $92.4


Retail TV
(1) As of January 1, 2019, we are no longer reporting wholesale subscribers in our TV subscriber base reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability.
Retail IPTV net subscriber activations decreased by 17.4% in 2019, compared to last year, resulting from the impact of a maturing Fibe TV market, slower new service footprint growth and greater substitution of traditional TV services with OTT services, partly offset by higher Alt TV activations.
Retail satellite TV net customer losses improved by 4.3% compared to 2018, attributable to lower deactivations, reflecting a more mature subscriber base geographically better-suited for satellite TV service.
Total retail TV net subscriber activations (IPTV and satellite TV combined) decreased by 71.9% in 2019, compared to last year, due to lower IPTV net activations, moderated by fewer satellite TV net losses.
Retail IPTV subscribers at December 31, 2019 totaled 1,767,182, up 5.5% from 1,675,706 subscribers reported at the end of 2018.
Retail satellite TV subscribers at December 31, 2019 totaled 1,005,282, down 7.8% from 1,090,705 subscribers at the end of last year.
Total retail TV subscribers (IPTV and satellite TV combined) at December 31, 2019 were 2,772,464, representing a 0.2% increase since the end of 2018.

                                               | 2019      | 2018      | CHANGE   | % CHANGE
---------------------------------------------- | --------- | --------- | -------- | --------
Retail net subscriber activations (losses) (1) | 6,053     | 21,559    | (15,506) | (71.9%)
IPTV                                           | 91,476    | 110,790   | (19,314) | (17.4%)
Satellite                                      | (85,423)  | (89,231)  | 3,808    | 4.3%
Total retail subscribers (1)                   | 2,772,464 | 2,766,411 | 6,053    | 0.2%
IPTV                                           | 1,767,182 | 1,675,706 | 91,476   | 5.5%
Satellite                                      | 1,005,282 | 1,090,705 | (85,423) | (7.8%)


Factors affecting the tax expense for the year
The table below explains the differences between the expected tax expense, being the aggregate of the Group’s geographical split of profits multiplied by the relevant local tax rates and the Group’s total tax expense for each year.
Notes: 1 See note below regarding deferred tax asset recognition in Luxembourg and Spain on pages 140 and 141
2 2018 includes the impact of closing tax audits across the Group during the year, including in Germany and Romania
3 Includes a €42 million credit (2018: €15 million charge, 2017 €95 million charge) relating to the combination of Vodafone India with Idea Cellular

                                                                                | 2019 €m | 2018 €m | 2017 €m
-------------------------------------------------------------------------------------------- | ------- | ------- | -------
Continuing (loss)/profit before tax as shown in the consolidated income statement            | (2,613) | 3,878   | 2,792
Aggregated expected income tax (credit)/expense                                              | (457)   | 985     | 795
Impairment losses with no tax effect                                                         | 807     | –       | –
Disposal of Group investments                                                                | –       | 55      | (271)
Effect of taxation of associates and joint ventures, reported within profit before tax       | 262     | 90      | 23
(Recognition)/derecognition of deferred tax assets for losses in Luxembourg and Spain1       | 1,186   | (1,583) | 1,603
Deferred tax following revaluation of investments in Luxembourg1                             | (488)   | (330)   | (329)
Previously unrecognised temporary differences we expect to use in the future                 | –       | –       | (15)
Previously unrecognised temporary differences utilised in the year                           | –       | (29)    | (11)
Current year temporary differences (including losses) that we currently do not expect to use | 78      | 20      | 139
Adjustments in respect of prior year tax liabilities2                                        | (94)    | (244)   | (107)
Revaluation of assets for tax purposes                                                       | –       | –       | (39)
Impact of tax credits and irrecoverable taxes                                                | 79      | 93      | 98
Deferred tax on overseas earnings3                                                           | (39)    | 24      | 26
Effect of current year changes in statutory tax rates on deferred tax balances               | (2)     | (44)    | 2,755
Financing costs not deductible for tax purposes                                              | 67      | 23      | 25
Expenses not deductible (income not taxable) for tax purposes                                | 97      | 61      | 72
Income tax expense/(credit)                                                                  | 1,496   | (879)   | 4,764


31. Financial instruments
Financial assets

                          |      | 2019 | 2018
------------------------- | ---- | ---- | ----
                          | Note | £m   | £m
Net trade receivables     | 18   | 24.9 | 25.4
Accrued income            | 18   | 28.0 | 26.7
Other receivables         | 18   | 0.3  | 0.1
Cash and cash equivalents | 19   | 5.9  | 4.3
Total                     |      | 59.1 | 56.5


4.4 Financial instruments and risk management (continued)
Exposure to credit risk
The carrying amount of financial assets subject to credit risk at reporting date are as follows:
Managing our liquidity risks
Liquidity risk is the risk that we will be unable to meet our financial obligations.
The Group aims to maintain the level of its cash and cash equivalents at an amount to meet its financial obligations. The Group also monitors the level of expected cash inflows on trade receivables and contract assets together with expected cash outflows on trade and other payables through rolling forecasts. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.
In order to avoid excessive concentrations of risk, the Group’s internal policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.
The Group’s non-derivative financial liabilities consist of trade payables expected to be settled within three months. At 30 June 2019, the carrying amount and contractual cash flows is $25,153,000 (2018: $33,978,000).

                                      | CONSOLIDATED |
------------------------------------- | ------------ | ----------
                                      | 2019 $’000   | 2018 $’000
Cash and cash equivalents             | 21,956       | 33,045
Trade receivables and contract assets | 22,989       | 28,710
Trail commission asset                | 114,078      | 102,920


11 Intangible assets (continued)
(a) Intangible assets
RIGHTS AND LICENCES
Certain licences that NEXTDC possesses have an indefinite useful life and are carried at cost less impairment losses and are subject to impairment review at least annually and whenever there is an indication that it may be impaired.
Other licences that NEXTDC acquires are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful life. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period.
INTERNALLY GENERATED SOFTWARE
Internally developed software is capitalised at cost less accumulated amortisation. Amortisation is calculated using the straight-line basis over the asset’s useful economic life which is generally two to three years. Their useful lives and potential impairment are reviewed at the end of each financial year.
SOFTWARE UNDER DEVELOPMENT
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and services and employee costs.
Assets in the course of construction include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset.

                                       | Rights and licenses | Internally generated software | Software under development | Total
-------------------------------------- | ------------------- | ----------------------------- | -------------------------- | -------
Movements                              | $'000               | $'000                         | $'000                      | $'000
At 30 June 2019                        |                     |                               |                            |
Cost                                   | 13                  | 12,961                        | 16,284                     | 29,259
Accumulated amortisation               | -                   | (5,580)                       | -                          | (5,580)
Netbook amount                         | 13                  | 7,381                         | 16,284                     | 23,678
30 June 2018                           |                     |                               |                            |
Opening net book amount at 1 July 2017 | 43                  | 442                           | 8,053                      | 8,538
Additions – externally acquired        | 13                  | -                             | 5,253                      | 5,266
Additions – internally developed       | -                   | -                             | 1,256                      | 1,256
Amortisation                           | (43)                | (1,746)                       | -                          | (1,789)
Transfers                              | -                   | 7,563                         | (7,563)                    | -
Transfer between classes               | -                   | 744                           | -                          | 744
Disposals                              | -                   | (618)                         | (490)                      | (1,108)
Closing net book amount                | 13                  | 6,385                         | 6,509                      | 12,907
At 30 June 2018                        |                     |                               |                            |
Cost                                   | 104                 | 9,555                         | 6,509                      | 16,168
Accumulated amortisation               | (91)                | (3,170)                       | -                          | (3,261)
Net book amount                        | 13                  | 6,385                         | 6,509                      | 12,907


16. Earnings Per Share
The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:

                                                         |      | Fiscal        |
-------------------------------------------------------- | ---- | ------------- | ----
                                                         | 2019 | 2018          | 2017
                                                         |      | (in millions) |
Basic                                                    | 338  | 350           | 355
Dilutive impact of share-based compensation arrangements | 2    | 3             | 3
Diluted                                                  | 340  | 353           | 358


Deferred Compensation Plan
We have a non-qualified deferred compensation plan that allows a group of employees within the U.S. to contribute base salary and commissions or incentive compensation on a tax deferred basis in excess of the IRS limits imposed on 401(k) plans. The marketable securities related to these investments are held in a Rabbi Trust. The related deferred compensation plan assets and liabilities under the non-qualified deferred compensation plan were as follows (in millions):

                                               | April 26, 2019 | April 27, 2018
---------------------------------------------- | -------------- | --------------
Deferred compensation plan assets              | $ 35           | $ 31
Deferred compensation liabilities reported as: |                |
Accrued expenses                               | $ 6            | $ 6
Other long-term liabilities                    | $ 29           | $ 25


17 Inventories
The write-down of inventories recognised as an expense during the year in respect of continuing operations was £0.7m (2018: £3.5m). This comprises a cost of £5.1m (2018: £4.8m) to write-down inventory to net realisable value reduced by £4.4m (2018: £1.3m) for reversal of previous write-down reassessed as a result of customer demand.
The value of inventories expected to be recovered after more than 12 months is £13.4m (2018: £11.2m).
There is no material difference between the Statement of Financial Position value of inventories and their replacement cost. None of the inventory has been pledged as security.

                                          | 2019  | 2018
----------------------------------------- | ----- | -----
                                          | £m    | £m
Raw materials, consumables and components | 72.2  | 53.0
Work in progress                          | 25.5  | 25.7
Finished goods and goods for resale       | 88.2  | 81.9
Total inventories                         | 185.9 | 160.6