Recently Adopted Accounting Guidance
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the capitalization of incremental costs to obtain a contract with a customer. The new revenue standard replaces most existing revenue recognition guidance in GAAP and permits the use of either the full retrospective or modified retrospective transition method.
On December 1, 2018, the beginning of our fiscal year 2019, we adopted the requirements of the new revenue standard utilizing the modified retrospective method of transition. Prior period information has not been restated and continues to be reported under the accounting standard in effect for those periods. We applied the new revenue standard to contracts that were not completed as of the adoption date, consistent with the transition guidance. Further, adoption of the new revenue standard resulted in changes to our accounting policies for revenue recognition and sales commissions as detailed below.
We recognized the following cumulative effects of initially applying the new revenue standard as of December 1, 2018
Below is a summary of the adoption impacts of the new revenue standard:
We capitalized $413.2 million of contract acquisition costs comprised of sales and partner commission costs at adoption date (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion), with a corresponding adjustment to retained earnings. We are amortizing these costs over their respective expected period of benefit.
Revenue for certain contracts that were previously deferred would have been recognized in periods prior to adoption under the new standard. Upon adoption, we recorded the following adjustments to our beginning balances to reflect the amount of revenue that will no longer be recognized in future periods for such contracts: an increase in unbilled receivables (included in trade receivables, net) of $24.8 million, an increase in contract assets (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion) of $46.4 million and a decrease in deferred revenue of $52.8 million, with corresponding adjustments to retained earnings.
We recorded an increase to our opening deferred income tax liability of $82.8 million, with a corresponding adjustment to retained earnings, to record the tax effect of the above adjustments.
Further, we had other impacts to various accounts which resulted to an immaterial net reduction to our retained earnings.

(in thousands)                                             | As of November 30, 2018 | Topic 606 Adoption Adjustments | As of December 1, 2018
---------------------------------------------------------- | ----------------------- | ------------------------------ | ----------------------
Assets                                                     |                         |                                |
Trade receivables, net of allowances for doubtful accounts | $1,315,578              | $43,028                        | $1,358,606
Prepaid expenses and other current assets                  | 312,499                 | 186,220                        | 498,719
Other assets                                               | 186,522                 | 273,421                        | 459,943
Liabilities and Stockholders’ Equity                       |                         |                                |
Accrued expenses                                           | 1,163,185               | 30,358                         | 1,193,543
Deferred revenue, current                                  | 2,915,974               | (52,842)                       | 2,863,132
Deferred income taxes                                      | 46,702                  | 82,834                         | 129,536
Retained earnings                                          | $11,815,597             | $442,319                       | $12,257,916


4. Profit before tax
The following items have been charged in arriving at profit before tax:

                                                                      |       | 2019      | 2018
--------------------------------------------------------------------- | ----- | --------- | ---------
                                                                      | Notes | $ million | $ million
Employee benefit costs                                                | 8     | 220.5     | 208.9
Costs of inventories recognised as an expense                         |       | 81.6      | 79.8
Write-down of inventories to net realisable value                     | 19    | 1.6       | 0.1
Amortisation of intangible assets                                     | 13    | 2.1       | 4.3
Depreciation of property, plant and equipment                         | 14    | 14.7      | 16.5
Depreciation of right-of-use assets                                   | 15    | 7.5       | –
Amortisation of assets recognised from costs to obtain a contract     | 21    | 0.5       | 0.6
Operating leases – minimum lease payments                             |       | –         | 8.5
Expenses relating to short-term leases and leases of low-value assets | 26    | 0.3       | –
Product development costs                                             |       | 96.5      | 96.9
Net foreign exchange loss                                             |       | 0.6       | 0.6


The pre-tax discount rate used within the recoverable amount calculations was 8.5% (2018: 8.0%) and is based upon the weighted average cost of capital reflecting specific principal risks and uncertainties. The discount rate takes into account the risk-free rate of return, the market risk premium and beta factor reflecting the average beta for the Group and comparator companies which are used in deriving the cost of equity.
The same discount rate has been applied to both CGUs as the principal risks and uncertainties associated with the Group, as highlighted on pages 30 to 33, would also impact each CGU in a similar manner. The Board acknowledges that there are additional factors that could impact the risk profile of each CGU, which have been considered by way of sensitivity analysis performed as part of the annual impairment tests.
Key drivers to future growth rates are dependent on the Group’s ability to maintain and grow income streams whilst effectively managing operating costs. The level of headroom may change if different growth rate assumptions or a different pre-tax discount rate were used in the cash flow projections. Where the value-in-use calculations suggest an impairment, the Board would consider alternative use values prior to realising any impairment, being the fair value less costs to dispose.
The key assumptions used for value-in-use calculations are as follows:
Having completed the 2019 impairment review, no impairment has been recognised in relation to the CGUs (2018: no impairment). Sensitivity
analysis has been performed in assessing the recoverable amounts of goodwill. There are no changes to the key assumptions of growth rate or
discount rate that are considered by the Directors to be reasonably possible, which give rise to an impairment of goodwill relating to the CGUs.

                                       | 2019 | 2018
-------------------------------------- | ---- | ----
Annual growth rate (after plan period) | 3.0% | 3.0%
Risk free rate of return               | 3.0% | 3.0%
Market risk premium                    | 5.0% | 4.9%
Beta factor                            | 0.83 | 0.79
Cost of debt                           | 3.3% | 3.3%


NOTE 5 – PROPERTY AND EQUIPMENT
The Company owned equipment recorded at cost, which consisted of the following as of December 31, 2019 and 2018:
Depreciation expense was $80,206 and $58,423 for the years ended December 31, 2019 and 2018, respectively

                              | 2019     | 2018
----------------------------- | -------- | --------
Computer equipment            | $137,763 | $94,384
Furniture and fixtures        | 187,167  | 159,648
Subtotal                      | 324,930  | 254,032
Less accumulated depreciation | 148,916  | 104,702
Property and equipment, net   | $176,014 | $149,330


Restricted Stock Units
The following table summarizes RSU activity in the fiscal years ended September 30, 2019, 2018, and 2017:
The cost of RSUs is determined using the fair value of the Company’s Common Stock on the award date, and the compensation expense is recognized ratably over the vesting period. The Company recognized $6.8 million, $5.9 million, and $4.0 million in stock-based compensation expense related to outstanding RSUs in the fiscal years ended September 30, 2019, 2018, and 2017, respectively. As of September 30, 2019, the Company had approximately $12.2 million of unrecognized compensation expense related to outstanding RSUs expected to be recognized over a weighted-average period of approximately 2.3 years.

                                  | Number of Shares | Fair Value Per Share
--------------------------------- | ---------------- | --------------------
Outstanding at September 30, 2016 | 2,046,169        | $4.90
Granted                           | 1,249,224        | $6.61
Settled                           | (707,174)        | $4.81
Canceled                          | (231,198)        | $4.93
Outstanding at September 30, 2017 | 2,357,021        | $5.65
Granted                           | 1,184,906        | $8.54
Settled                           | (745,197)        | $5.26
Canceled                          | (216,554)        | $7.39
Outstanding at September 30, 2018 | 2,580,176        | $6.92
Granted                           | 1,147,976        | $9.67
Settled                           | (881,420)        | $6.53
Canceled                          | (494,245)        | $7.70
Outstanding at September 30, 2019 | 2,352,487        | 8.26


2 Alternative performance measures continued
Cash generation
Cash generation is one of the Group’s key performance indicators used by the Board to monitor the performance of the Group and measure the successful implementation of our strategy. It is one of three financial measures on which Executive Directors’ variable remuneration is based.
Cash generation is adjusted operating profit after adding back depreciation and amortisation (excluding IFRS 16 depreciation), less cash payments to pension schemes in excess of the charge to operating profit, equity settled share plans and working capital changes.

                                                              | 2019   | 2018
------------------------------------------------------------- | ------ | ------
                                                              | £m     | £m
Adjusted operating profit                                     | 282.7  | 264.9
Depreciation and amortisation (excluding IFRS16 depreciation) | 34.3   | 32.9
Cash payments to pension schemes in excess of charge to P&L   | (5.2)  | (4.6)
Equity settled share plans                                    | 6.2    | 5.7
Working capital changes                                       | (21.4) | (22.5)
Cash generation                                               | 296.6  | 276.4


The Company’s contractual obligations as of December 31, 2019, consist of our obligations as borrower under our 2019 Senior Secured Credit Facility, our obligations related to financing of our three 2018 Newbuildings.
The following table sets out financial, commercial and other obligations outstanding as of December 31, 2019.
Notes:
(1) Refers to obligation to repay indebtedness outstanding as of December 31, 2019.
(2) Refers to estimated interest payments over the term of the indebtedness outstanding as of December 31, 2019. Estimate based on applicable interest rate and drawn amount as of December 31, 2019.
(3) Refers to obligation to repay indebtedness outstanding as of December 31, 2019 for three 2018 Newbuildings.
(4) Refers to estimated interest payments over the term of the indebtedness outstanding as of December 31, 2019. Estimate based on applicable interest as of December 31, 2019 for the financing of the three 2018 Newbuildings.
(5) Refers to the future obligation as of December 31, 2019 to pay for operating lease liabilities at nominal values.
*The new five-year senior secured credit facility for $306.1 million is amortizing with a twenty-year maturity profile, carries a floating LIBOR interest rate plus a margin and matures in February 2024. Further, the agreement contains a discretionary excess cash amortization mechanism for the lender that equals 50% of the net earnings from the collateral vessels, less capex provision and fixed amortization.

Contractual Obligations in $’000s       | Total   | Less than 1 year   | 1-3 years   | 3-5 years   | More than 5 years
--------------------------------------- | ------- | ------------------ | ----------- | ----------- | -----------------
Senior Secured Credit Facility (1)*     | 291,798 | 18,749             | 30,610      | 242,439     | -
Interest Payments (2)                   | 82,255  | 21,690             | 39,624      | 20,941      | -
Financing of 2018 Newbuildings (3)      | 119,867 | 7,630              | 16,287      | 17,849      | 78,101
Interest Payments 2018 Newbuildings (4) | 47,517  | 7,674              | 13,739      | 11,526      | 14,578
Operating Lease Liabilities (5)         | 1,937   | 500                | 638         | 587         | 212
Total                                   | 543,374 | 56,243             | 100,898     | 293,342     | 92,891


3.3 Fair value estimation The table below analyses the Group’s financial instruments carried at fair value as at 31 December 2019 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The fair value of financial instruments traded in active markets is determined with reference to quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required for evaluating the fair value of a financial instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments mainly include: • Dealer quotes for similar instruments; • The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; and • Other techniques, such as discounted cash flow analysis, are used to determine fair value for financial instruments.

                            | Level 1     | Level 2     | Level 3     | Total
--------------------------- | ----------- | ----------- | ----------- | -----------
                            | RMB’Million | RMB’Million | RMB’Million | RMB’Million
As at 31 December 2019      |             |             |             |
FVPL                        | 14,766      | 5,091       | 116,079     | 135,936
FVOCI                       | 74,707      | –           | 7,014       | 81,721
OFA                         | –           | 375         | –           | 375
Other financial liabilities | –           | 523         | 1,873       | 2,396
As at 31 December 2018      |             |             |             |
FVPL                        | 10,875      | 5,009       | 81,993      | 97,877
FVOCI                       | 41,578      | –           | 1,941       | 43,519
OFA                         | –           | 2,032       | –           | 2,032
Other financial liabilities | –           | 40          | 4,466       | 4,506


Property and equipment consisted of the following:
Depreciation and amortization expense related to property and equipment was $86.5 million, $97.4 million and $88.8 million during 2019, 2018 and 2017, respectively.
Property and Equipment
Property and equipment is stated at cost. Depreciation is recorded over the shorter of the estimated useful life or the lease term of the applicable assets using the straight-line method beginning on the date an asset is placed in service. We regularly evaluate the estimated remaining useful lives of our property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

                                                | Estimated Useful Lives                        | December 31, |
----------------------------------------------- | --------------------------------------------- | ------------ | -------
                                                |                                               | 2019         | 2018
Computer equipment                              | 3 years                                       | $ 434.8      | $ 417.6
Software                                        | 3 years                                       | 55.9         | 40.5
Land                                            | Indefinite                                    | 9.0          | 9.0
Buildings, including improvements               | 5-40 years                                    | 145.5        | 175.0
Leasehold improvements                          | Lesser of useful life or remaining lease term | 99.4         | 70.8
Other                                           | 1-20 years                                    | 25.7         | 27.0
Total property and equipment                    |                                               | 770.3        | 739.9
Less: accumulated depreciation and amortization |                                               | (511.7)      | (440.9)
Property and equipment, net                     |                                               | $ 258.6      | $ 299.0


Film and Electrolytic
The table below sets forth net sales, operating income (loss) and operating income (loss) as a percentage of net sales for our Film and Electrolytic reportable segment for the fiscal years 2018 and 2017 (amounts in thousands, except percentages):
(1) Fiscal years ending March 31, 2018 and 2017 adjusted due to the adoption of ASC 606
Net Sales
Film and Electrolytic net sales of $202.0 million in fiscal year 2018 increased $19.7 million or 10.8% from $182.2 million in fiscal year 2017. The increase in net sales was primarily driven by an increase in net sales in the distributor channel across all the APAC and EMEA regions of $13.7 million, a $3.3 million increase in net sales in the OEM channel of the EMEA region and a $4.2 million increase in the EMS channel across the Americas, EMEA, and APAC regions. These increases were partially offset by a decrease in net sales of $1.2 million in the OEM channel across the Americas, APAC, and JPKO regions. In addition, there was a favorable impact of $7.6 million from foreign currency exchange primarily due to the change in the value of the Euro compared to the U.S. dollar.
Reportable Segment Operating Income (Loss)
Segment operating income of $3.6 million in fiscal year 2018 improved $12.7 million from $9.0 million of operating loss in fiscal year 2017. The improvement was primarily attributable to a $4.3 million increase in gross margin driven by higher net sales, as well as the benefit of completed restructuring activities. The increase was also attributed to an $11.7 million improvement in (gain) loss on the write down and disposal of long-lived assets. These improvements were partially offset by a $2.1 million increase in restructuring charges, a $0.7 million increase in SG&A expenses, and a $0.6 million increase in R&D expenses.

                                    | For the Fiscal Years Ended |                |                |
----------------------------------- | -------------------------- | -------------- | -------------- | --------------
                                    | March 31, 2018             |                | March 31, 2017 |
                                    | Amount                     | % to Net Sales | Amount         | % to Net Sales
Net sales (1)                       | $201,977                   |                | $182,228       |
Segment operating income (loss) (1) | 3,622                      | 1.8%           | (9,028)        | (5.0)%


Financials
1. EBITDA is a non-IFRS term, defined as earnings before interest, tax, depreciation and amortisation, and excluding net foreign exchange gains (losses).
2. NPATA is a non-IFRS term, defined as net profit after tax, excluding tax-effected amortisation of acquired intangibles. This is used to determine EPSa as disclosed here and in the audited Remuneration Report.
3. Underlying EBITDA, underlying NPAT and underlying NPATA exclude separately disclosed items, which represent the transaction and other restructuring costs associated with the Sigma acquisition (2018: Enoro acquisition) and the exiting of a premises lease in the Americas. Further details of the separately disclosed items are outlined in Note 4 to the Financial Report.
Operating revenue for FY19 was $231.3 million, $0.5 million up on FY18. With Sigma contributing $5.0 million of revenue in June (the first month since acquisition), revenues for the remainder of Hansen excluding Sigma were $4.5 million lower. This decline was a result of lower non-recurring revenues, due primarily to both lower one-off licence fees and reduced project work following the large body of work completed in the first half of FY18 associated with implementing Power of Choice in Australia. Conversely, recurring revenues grew to represent 63% of total operating revenue.
Underlying EBITDA for the year was $55.8 million, 7.0% down on the $60.0 million in FY18. This resulted in an underlying EBITDA margin decline to 24.1% from 26.0% in FY18. Sigma only contributed a modest $0.1 million of EBITDA in June, which we do not see as representative of the business going forward. Excluding Sigma, the underlying EBITDA margin was 24.6%. This reduced margin was the direct result of the lower non-recurring revenue, as we were able to maintain operating expenses at the same level as FY18, even after the investment in the Vietnam Development Centre.

A$ Million                                    | FY19  | FY18  | Variance %
--------------------------------------------- | ----- | ----- | ----------
Operating revenue                             | 231.3 | 230.8 | 0.2%
Underlying EBITDA 1, 3                        | 55.8  | 60.0  | (7.0%)
Underlying NPAT 3                             | 24.0  | 29.5  | (18.7%)
Underlying NPATA 2, 3                         | 33.7  | 38.7  | (12.9%)
Basic EPS based on underlying NPATA (cents) 2 | 17.1  | 19.8  | (13.6%)


Proofpoint, Inc. Notes to Consolidated Financial Statements (Continued) (dollars and share amounts in thousands, except per share amounts)
of the transaction price to each performance obligation based on a relative standalone selling price, or SSP, basis.
• Recognition of revenue when, or as, the Company satisfies a performance obligation - The Company recognizes revenue when control of the services or products are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company records its revenue net of any value added or sales tax.
The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted

The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all revenue recognition criteria are met. Channel partners generally receive an order from an end-customer prior to placing an order with the Company, and these partners do not carry any inventory of the Company’s products or solutions. Payment from channel partners is not contingent on the partner’s success in sales to end-customers. In the event that the Company offers rebates, joint marketing funds, or other incentive programs to a partner, recorded revenues are reduced by these amounts accordingly.
Payment terms on invoiced amounts are typically 30 to 45 days.
Disaggregation of Revenue Disaggregation of Revenue
The Company derives its revenue primarily from: (1) subscription service revenue; (2) subscription software revenue, and (3) hardware and services, which include professional service and training revenue provided to customers related to their use of the platform.
The following table presents the Company’s revenue disaggregation:
Subscription service revenue
Subscription service revenue is derived from a subscription-based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (1) subscription fees from the licensing of the Company’s security-as-a-service platform and it’s various components, (2) subscription fees for software with support and related future updates where the software updates are critical to the customers’ ability to derive benefit from the software due to the fast changing nature of the technology. These function together as one performance obligation, and (3) subscription fees for the right to access the Company’s customer support services for software with significant standalone functionality and support services for hardware. The hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support revenue is derived from ongoing security updates, upgrades, bug fixes, and maintenance. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to subscription service revenue is generally recognized on a straight-line basis over the contract term beginning on the date access is provided, as long as other revenue recognition criteria have been met. Most of the Company’s contracts are non-inate their contract for cause if the

Subscription service revenue is derived from a subscription-based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (1) subscription fees from the licensing of the Company’s security-as-a-service platform and it’s various components, (2) subscription fees for software with support and related future updates where the software updates are critical to the customers’ ability to derive benefit from the software due to the fast changing nature of the technology. These function together as one performance obligation, and (3) subscription fees for the right to access the Company’s customer support services for software with significant standalone functionality and support services for hardware. The hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support revenue is derived from ongoing security updates, upgrades, bug fixes, and maintenance. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to subscription service revenue is generally recognized on a straight-line basis over the contract term beginning on the date access is provided, as long as other revenue recognition criteria have been met. Most of the Company’s contracts are non-cancelable over the contract term. Customers typically have the right to terminate their contract for cause if the Company fails to perform in accordance with the contractual terms. Some of the Company’s customers have the option to purchase additional subscription services at a stated price. These options are evaluated on a case-by-case basis but generally do not provide a material right as they are priced at or above the Company’s SSP and, as such, would not result in a separate performance obligation.

                              | Year Ended December 31, |          |
----------------------------- | ----------------------- | -------- | --------
                              | 2019                    | 2018     | 2017
Subscription service revenue  | $849,267                | $681,138 | $489,274
Subscription software revenue | 25,739                  | 23,262   | 17,081
Hardware and services         | 13,184                  | 12,594   | 13,326
Total revenue                 | $888,190                | $716,994 | $519,681


Stock Options with Market-based Vesting Criteria
We grant NQs that are subject to vesting only upon the market price of our underlying public stock closing above a certain price target withins even years of the date of grant. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately three years.
If the required service period is not met for these options, then the share-based compensation expense would be reversed. In the event that our common stock achieves the target price per share based on a 30-day trailing average prior to the end of the estimated service period, any remaining unamortized compensation cost will be recognized.
Stock options with market-based vesting criteria granted for fiscal years 2019, 2018 and 2017 were 585,000, 325,000 and 320,000, respectively, at weighted average grant date fair values of $7.47, $15.52 and $13.18 per share, or total grant date fair value $2.4 million, $5.0 million and $4.3 million, respectively.
These NQs with market-based vesting criteria were valued using a Monte Carlo simulation model. The weighted average Monte Carlo input assumptions used for calculating the fair value of these market-based stock options are as follows:
During our fiscal first quarter of 2019, we canceled 1,122,500 performance-based stock options with a concurrent grant of 748,328 PRSUs for 13 employees, which was accounted for as a modification. The incremental compensation cost resulting from the modification was $8.2 million, and was being recognized as share-based compensation expense over the requisite service period of three years for the new PRSU awards.
As a result of subsequent actions that resulted in forfeitures, the remaining compensation expense associated with this modification as of September 27, 2019 is $2.8 million.

                        |        | Fiscal Years |
----------------------- | ------ | ------------ | ------
                        | 2019   | 2018         | 2017
Risk-free interest rate | 2.8%   | 2.3%         | 1.9%
Expected term (years)   | 3.9    | 3.4          | 7.0
Expected volatility     | 51.9%  | 45.8%        | 32.3%
Target price            | $53.87 | $98.99       | $67.39


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Financial Statements
Reference is made to Item 8 for a list of all financial statements and schedules filed as a part of this Report.
2. Financial Statement Schedules
QuickLogic Corporation
Valuation and Qualifying Accounts
(in thousands)
All other schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes hereto.

                                   | Balance at Beginning of Period | Charged to Costs and Expenses | Write-offs | Balance at End of Period
---------------------------------- | ------------------------------ | ----------------------------- | ---------- | ------------------------
Allowance for Doubtful Accounts:   |                                |                               |            |
Fiscal Year 2019                   | $—                             | $—                            | $5         | $—
Fiscal Year 2018                   | $—                             | $—                            | $—         | $—
Fiscal Year 2017                   | $—                             | $—                            | $—         | $—
Allowance for Deferred Tax Assets: |                                |                               |            |
Fiscal Year 2019                   | $54,913                        | $3,227                        | $—         | $58,140
Fiscal Year 2018                   | $55,931                        | $—                            | $(1,018)   | $54,913
Fiscal Year 2017                   | $79,150                        | $—                            | $(23,219)  | $55,931


M. Property and Equipment, Net
Property and equipment, net, as of the periods presented consisted of the following (table in millions):
As of January 31, 2020, construction in progress primarily represented various buildings and site improvements that had not yet been placed into service.
Depreciation expense was $234 million, $211 million and $206 million during the years ended January 31, 2020, February 1, 2019 and February 2, 2018, respectively.

                                  | January 31, 2020 | February 1, 2019
--------------------------------- | ---------------- | ----------------
Equipment and software            | $1,404           | $1,448
Buildings and improvements        | 1,088            | 991
Furniture and fixtures            | 120              | 116
Construction in progress          | 106              | 56
Total property and equipment      | 2,718            | 2,611
Accumulated depreciation          | (1,438)          | (1,449)
Total property and equipment, net | $1,280           | $1,162


Income Taxes
nm - not meaningful
For fiscal 2018, the effective tax rate was different than the statutory rate due primarily to the impact of the Tax Act reform. The Company recorded a benefit of approximately $3.3 million resulting from the effect of a reduction in the deferred rate and the ability to offset indefinite lived deferred tax liabilities with certain deferred tax assets, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects including a benefit of $0.4 million related to a settlement with the California Franchise Tax Board and other U.S. permanent book to tax differences. At March 31, 2018, we had $198.7 million of a federal net operating loss carryforward that expires, if unused, in fiscal years 2031 to 2038.
For fiscal 2017, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences.
Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction in unrecognized tax benefits may occur in the range of zero to $0.1 million of tax and zero to $0.2 million of interest based on the outcome of tax examinations and as a result of the expiration of various statutes of limitations. We are routinely audited; due to the ongoing nature of current examinations in multiple jurisdictions, other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.
Because of our losses in prior periods, we have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets generated prior to Tax Act reform depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Because of our losses in prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

                             | Year ended March 31, |        | (Unfavorable) favorable |
---------------------------- | -------------------- | ------ | ----------------------- | --
(Dollars in thousands)       | 2018                 | 2017   | $                       | %
Income tax (benefit) expense | $ (3,251)            | $ 236  | $ 3,487                 | nm
Effective tax rate           | (28.0)%              | (2.1)% |                         |


7 Revenue
Revenue recognised in the Consolidated Statement of Profit or Loss is analysed as follows:

                    | Year-ended 31 March 2019 | Year-ended 31 March 2018 Restated See note 2
------------------- | ------------------------ | --------------------------------------------
Revenue by Product: | $M                       | $M
Network             | 328.5                    | 316.5
Enduser             | 348.4                    | 291.8
Other               | 33.7                     | 30.7
Total               | 710.6                    | 639.0


COHERENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
(1) Reclassification adjustments were not significant during fiscal 2019, 2018 and 2017.
(2) Tax benefits of $(5,161), $0 and $(326) were provided on translation adjustments during fiscal 2019, 2018 and 2017, respectively.
(3) Tax benefits of $0, $(2) and $(1,876) were provided on changes in unrealized losses on available-for-sale securities during fiscal 2019, 2018 and 2017, respectively.
(4) Tax expenses (benefits) of $(2,371), $202 and $1,747 were provided on changes in defined benefit pension plans during fiscal 2019, 2018 and 2017, respectively.

                                                                               |                   | Year Ended        |
------------------------------------------------------------------------------ | ----------------- | ----------------- | -----------------
                                                                               | September 28,2019 | September 29,2018 | September 30,2017
Net income                                                                     | $53,825           | $247,358          | $207,122
Other comprehensive income (loss):(1)                                          |                   |                   |
Translation adjustment, net of taxes(2)                                        | (32,609)          | (18,065)          | 24,923
Changes in unrealized losses on available-for-sale securities, net of taxes(3) | —                 | (4)               | (3,330)
Defined benefit pension plans, net of taxes(4)                                 | (6,560)           | 996               | 3,613
Other comprehensive income (loss), net of tax                                  | (39,169)          | (17,073)          | 25,206
Comprehensive income                                                           | $14,656           | $230,285          | $232,328


The following table sets forth information known to us with respect to the beneficial ownership of our common shares as of (i) April 12, 2020, our most recent record date, and (ii) as of certain record dates in each of the preceding three years, for (1) the stockholders known by us to beneficially own more than 2% of our common shares and (2) all directors and executive officers as a group. Beneficial ownership is determined in accordance with SEC rules.
(1) 36.49% owned by United Microelectronics Corporation as of March 31, 2020.
None of our major stockholders have different voting rights from those of our other stockholders. To the best of our knowledge, we are not directly or indirectly controlled by another corporation, by any foreign government or by any other natural or legal person severally or jointly.
For information regarding our common shares held or beneficially owned by persons in the United States, see “Item 9. The Offer and Listing—A. Offer and Listing Details—Market Price Information for Our American Depositary Shares” in this annual report.

                                            | As of April 14, 2018                       | As of April 14, 2019                       | As of April 12, 2020                       | As of April 12, 2020
------------------------------------------- | ------------------------------------------ | ------------------------------------------ | ------------------------------------------ | ------------------------------------------
                                            | Number of common shares beneficially owned | Number of common shares beneficially owned | Number of common shares beneficially owned | Number of common shares beneficially owned
Name of Beneficial Owner                    |                                            |                                            |                                            |
Hsun Chieh Investment Co., Ltd. (1)         | 3.50%                                      | 3.64%                                      | 441,371,000                                | 3.75%
Silicon Integrated Systems Corp.            | 2.50%                                      | 2.35%                                      | 285,380,424                                | 2.42%
Directors and executive officers as a group | 6.32%                                      | 6.67%                                      | 832,664,416                                | 7.07%


28. Contingent liabilities and legal proceedings
Contingent liabilities are potential future cash outflows, where the likelihood of payment is considered more than remote, but is not considered probable or cannot be measured reliably.
Notes: 1 Performance bonds require the Group to make payments to third parties in the event that the Group does not perform what is expected of it under the terms of any related contracts or commercial arrangements
2 Other guarantees principally comprise Vodafone Group Plc’s guarantee of the Group’s 50% share of an AUD1.7 billion loan facility and a US$3.5 billion loan facility of its joint venture, Vodafone Hutchison Australia Pty Limited. The Group’s share of these loan balances is included in the net investment in joint venture (see note 12 “Investments in associates and joint arrangements”).

                                             | 2019  | 2018
-------------------------------------------- | ----- | -----
                                             | €m    | €m
Performance bonds1                           | 337   | 993
Other guarantees and contingent liabilities2 | 2,943 | 4,036


In the Communications Solutions segment, operating income decreased $79 million in fiscal 2019 as compared to fiscal 2018. The Communications Solutions segment’s operating income included the following:
Excluding these items, operating income decreased in fiscal 2019 due primarily to lower volume.

                                     |       | Fiscal
------------------------------------ | ----- | -------------
                                     | 2019  | 2018
                                     |       | (in millions)
Restructuring and other charges, net | $  48 | $  13
Other items                          | 1     | —
Total                                | $  49 | $  13


Pro Forma Results
The following table summarizes, on a pro forma basis, the combined results of operations of the Company and TOKIN as though the acquisition and the Sale of EMD had occurred as of April 1, 2016. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of April 1, 2016, or of future consolidated operating results (amounts in thousands, except per share data):
(1) The net income for the fiscal year ended March 31, 2018 excludes the following: 34% of the gain on sale of the EMD business of $75.2 million, the gain related to the fair value of KEMET’s previous 34% interest in TOKIN of $68.7 million, and the bargain gain on the acquisition of TOKIN of $62.2 million.
(2) The net income for the fiscal year ended March 31, 2017 includes the following: 34% of the gain on sale of the EMD business of $123.4 million (which includes the release of a valuation allowance that was recorded in the fourth quarter of fiscal year 2017 and the use of the deferred tax asset which was recorded in the first quarter of fiscal year 2018), the gain related to the fair value of KEMET’s previous 34% interest in TOKIN of $66.7 million, and the bargain gain on the acquisition of TOKIN of $60.3 million.
(3) Fiscal years ended March 31, 2018 and 2017 adjusted due to the adoption of ASC 606.

                                                                                | Fiscal Years Ended March 31, |
------------------------------------------------------------------------------------ | ---------------------------- | ----------
                                                                                | 2018 (1)                     | 2017 (2)
Pro forma revenues (3)                                                               | $1,217,655                   | $1,060,777
Pro forma net income from continuing operations available to common stockholders (3) | 51,975                       | 226,086
Pro forma earnings per common share - basic (3)                                      | 0.98                         | 4.86
Pro forma earnings per common share - diluted (3)                                    | 0.89                         | 4.08
Pro forma common shares - basic                                                      | 52,798                       | 46,552
Pro forma common shares - diluted                                                    | 58,640                       | 55,389


3. Inventories
Inventories consist of the following (in thousands):

                                          | August 31,2019 | August 31,2018
----------------------------------------- | -------------- | --------------
Raw materials                             | $2,310,081     | $2,070,569
Work in process                           | 468,217        | 788,742
Finished goods                            | 314,258        | 659,335
Reserve for excess and obsolete inventory | (69,553)       | (60,940)
Inventories, net                          | $3,023,003     | $3,457,706


Supplementary Financial Data (Unaudited)
(in millions, except per-share amounts)
(1) In the fourth quarter of fiscal 2019, we recorded an $872 million charge which was the reversal of the previously recorded benefit associated with the U.S. taxation of deemed foreign dividends recorded in fiscal 2018 as a result of a retroactive final U.S. Treasury regulation issued during the quarter.

Quarters Ended                              | July 27, 2019 (1) | April 27, 2019 | January 26, 2019 | October 27, 2018
------------------------------------------- | ----------------- | -------------- | ---------------- | ----------------
Revenue .                                   | $13,428           | $12,958        | $12,446          | $13,072
Gross margin                                | $8,574            | $8,173         | $7,773           | $8,146
Operating income                            | $3,690            | $3,513         | $3,211           | $3,805
Net income                                  | $2,206            | $3,044         | $2,822           | $3,549
Net income per share - basic                | $0.52             | $0.70          | $0.63            | $0.78
Net income per share - diluted              | $0.51             | $0.69          | $0.63            | $0.77
Cash dividends declared per common share .  | $0.35             | $0.35          | $0.33            | $0.33
Cash and cash equivalents and investments . | $33,413           | $34,643        | $40,383          | $42,593


29. Contract balances
The following table provides information about receivables and contract liabilities from contracts with customers. The Group does not have any contract assets.
There was no revenue recognised in 2019, 2018 or 2017 from performance obligations satisfied in previous periods.
The timing of revenue recognition, invoicing and cash collections results in trade receivables, deferred income and advance customer payments received on account on the balance sheet.
The Group receives payments from customers based on a billing schedule, as established in the contract. Trade receivables are recognised when the right to consideration becomes unconditional. Contract liabilities are recognised as revenue as (or when) the Group performs under the contract.
The Group also recognises incremental costs incurred to obtain a contract as an asset if it expects to recover those costs. Such costs are presented in the balance sheet as assets recognised from costs to obtain a contract and disclosed in note 21.

                                                                                |       | 2019      | 2018      | 2017
------------------------------------------------------------------------------------------------------------- | ----- | --------- | --------- | ---------
                                                                                | Notes | $ million | $ million | $ million
Trade receivables                                                                                | 20    | 128.7     | 123.4     | 113.8
Contract liabilities                                                                                |       |           |           |
Payments received on account                                                                                | 23    | 2.3       | 1.0       | 3.8
Deferred income                                                                                | 25    | 66.8      | 69.6      | 72.7
                                                                                |       | 69.1      | 70.6      | 76.5
Revenue recognised in the period from amounts included in contract liabilities at the beginning of the period |       | 56.2      | 65.5      | 62.1


NOTE 2 — EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.
The components of basic and diluted EPS were as follows:
Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

(In millions, except earnings per share)                |           |           |
------------------------------------------------------- | --------- | --------- | ---------
Year Ended June 30,                                     | 2019      | 2018      | 2017
Net income available for common shareholders (A)        | $  39,240 | $  16,571 | $  25,489
Weighted average outstanding shares of common stock (B) | 7,673     | 7,700     | 7,746
Dilutive effect of stock-based awards                   | 80        | 94        | 86
Common stock and common stock equivalents (C)           | 7,753     | 7,794     | 7,832
Earnings Per Share                                      |           |           |
Basic (A/B)                                             | $ 5.11    | $ 2.15    | $ 3.29
Diluted (A/C)                                           | $ 5.06    | $ 2.13    | $ 3.25


(5) GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying value of goodwill by segment was as follows:
Reclassifications and other during the year ended December 31, 2019 were due primarily to tax adjustments for acquisitions in 2019 and 2018. See Note 2 for information regarding acquisitions.

                                         | Application Software | Network Software & Systems | Measurement & Analytical Solutions | Process Technologies | Total
---------------------------------------- | -------------------- | -------------------------- | ---------------------------------- | -------------------- | ------------
Balances at December 31, 2017            | $ 4,565.4            | $ 2,591.3                  | $ 1,345.4                          | $ 318.2              | $    8,820.3
Goodwill acquired                        | 684.4                | 33.1                       | —                                  | —                    | 717.5
Goodwill related to assets held for sale | —                    | —                          | (156.2)                            | —                    | (156.2)
Currency translation adjustments         | (17.0)               | (2.3)                      | (14.5)                             | (5.9)                | (39.7)
Reclassifications and other              | 3.3                  | 1.6                        | —                                  | —                    | 4.9
Balances at December 31, 2018            | $ 5,236.1            | $ 2,623.7                  | $ 1,174.7                          | $312.3               | $  9,346.8
Goodwill acquired                        | 143.4                | 1,303.6                    | —                                  | —                    | 1,447.0
Currency translation adjustments         | 8.3                  | 8.8                        | 3.3                                | 2.2                  | 22.6
Reclassifications and other              | 1.6                  | (2.6)                      | —                                  | —                    | (1.0)
Balances at December 31, 2019            | $ 5,389.4            | $ 3,933.5                  | $ 1,178.0                          | $ 314.5              | $ 10,815.4


Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings or it becomes probable the forecasted transactions will not occur. The following is a summary of the gains (losses) related to cash flow hedges recognized during the years ended June 30, 2019, 2018 and 2017:

                                               |       | Amount of Gain (Loss) Recognized in AOCI on Derivatives |
---------------------------------------------- | ----- | ------------------------------------------------------- | -----
                                               |       | Years Ended June 30,                                    |
($ in millions)                                | 2019  | 2018                                                    | 2017
Derivatives in Cash Flow Hedging Relationship: |       |                                                         |
Commodity contracts                            | $45.4 | $41.4                                                   | $9.4
Foreign exchange contracts                     | (0.9) | (0.4)                                                   | (0.1)
Total                                          | $44.5 | $41.0                                                   | $9.3


Adjusted EBITDA is defined as Earnings before Interest Expense, Taxes, Depreciation and Amortization, adjusted to exclude the impact of Special Items. Management uses Adjusted EBITDA as one of many measures to assess the performance of the business. Additionally, Adjusted EBITDA is the performance metric used by the Company's chief operating decision maker to evaluate performance of our reportable segments. Adjusted EBITDA is also a metric used to determine performance in the Company's Annual Incentive Plan. We do not believe there are estimates underlying the calculation of Adjusted EBITDA, other than those inherent in our U.S. GAAP results of operations, which would render the use and presentation of Adjusted EBITDA misleading. While the nature and amount of individual Special Items vary from period to period, we believe our calculation of Adjusted EBITDA is applied consistently to all periods and, in conjunction with other U.S. GAAP and non- U.S. GAAP measures, provides a useful and consistent comparison of our Company's performance to other periods. In our evaluation of Adjusted EBITDA, management assumes that gain/losses related to Special Items may not be reflective of our core operating results.
(1) Includes depreciation and amortization adjustments of $(0.8) million and $(2.4) million for the years ended December 31, 2019 and 2018, respectively.
(2) Other Special Items for the years ended December 31, 2019 and 2018, primarily included fees related to professional services, mainly legal fees, directly associated with Special Items or events that are considered one-time or infrequent in nature.
The Company may also assess performance using Adjusted EBITDA Margin. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by net trade sales. We believe that Adjusted EBITDA Margin is one useful measure to assess the profitability of sales made to third parties and the efficiency of our core operations.
The following table shows a reconciliation of U.S. GAAP Net Earnings from continuing operations to non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations:

                                                                       |         | Year Ended December 31, |
---------------------------------------------------------------------- | ------- | ----------------------- | -------
(In millions)                                                          | 2019    | 2018                    | 2017
Net earnings from continuing operations                                | $ 293.7 | $ 150.3                 | $ 62.8
Interest expense, net                                                  | 184.1   | 177.9                   | 184.2
Income tax provision                                                   | 76.6    | 307.5                   | 330.5
Depreciation and amortization, net of adjustments(1)                   | 184.5   | 159.0                   | 158.3
Special Items:                                                         |         |                         |
Restructuring charges                                                  | 41.9    | 47.8                    | 12.1
Other restructuring associated costs                                   | 60.3    | 15.8                    | 14.3
Foreign currency exchange loss due to highly inflationary economies    | 4.6     | 2.5                     | —
Loss on debt redemption and refinancing activities                     | 16.1    | 1.9                     | —
Charges related to acquisition and divestiture activity                | 14.9    | 34.2                    | 84.1
Charges related to the Novipax settlement agreement                    | 59.0    | —                       | —
Gain from class-action litigation settlement                           | —       | (14.9)                  | —
Curtailment related to retained Diversey retirement plans              | —       | —                       | (13.5)
Other Special Items(2)                                                 | 29.1    | 7.5                     | 0.5
Pre-tax impact of Special Items                                        | 225.9   | 94.8                    | 97.5
Non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations | $ 964.8 | $ 889.5                 | $ 833.3


Management makes allowance for expected credit loss based on the simplified approach to provide for expected credit losses, which permits the use of the lifetime expected loss provision for all trade receivables. Expected credit loss for receivables overdue more than 180 days is 25%-100%, depending on category. Expected credit loss for receivables overdue more than one year is 100%.
Movements in provisions for impairment of freight receivables during the year are as follows:
Allowance for expected credit loss of freight receivables have been recognized in the income statement under "Port expenses, bunkers and commissions".
Allowance for expected credit loss of freight receivables is calculated using an ageing factor as well as a specific customer knowledge and is based on a provision matrix on days past due.

USDm                                | 2019 | 2018 | 2017
----------------------------------- | ---- | ---- | ----
Allowance for expected credit loss  |      |      |
Balance as of 1 January             | 1.7  | 1.3  | 2.6
Adjustment to prior years           | 1.5  | -    | -
Provisions for the year             | 2.4  | 1.7  | 0.6
Provisions reversed during the year | -1.9 | -1.0 | -1.9
Provisions utilized during the year | -    | -0.3 | -
Balance as of 31 December           | 3.7  | 1.7  | 1.3


Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
At December 31, 2019, the Company had net operating loss carry-forwards of approximately $21.6 million that may be offset against future taxable income indefinitely. No tax benefit has been reported in the 2019 financial statements, since the potential tax benefit is offset by a valuation allowance of the same amount.
Net deferred tax assets consist of the following components as of December 31, 2019 and 2018:
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

                                   | 2019    | 2018
---------------------------------- | ------- | -------
Deferred tax assets (liabilities): |         |
NOL carryover                      | $5,910  | $3,370
R&D carryover                      | 173     | 173
Other                              | 236     | 239
Depreciation                       | 42      | 61
                                   | 6,361   | 3,843
Less valuation allowance           | (6,361) | (3,843)
Net deferred tax asset             | $-      | $-


Other Current Assets
The following table presents details of other current assets in our consolidated balance sheets:

                                  | As of December 31,    |
--------------------------------- | --------------------- | ----
                                  | 2019                  | 2018
                                  | (Dollars in millions) |
Prepaid expenses                  | $274                  | 307
Income tax receivable             | 35                    | 82
Materials, supplies and inventory | 105                   | 120
Contract assets                   | 42                    | 52
Contract acquisition costs        | 178                   | 167
Contract fulfillment costs        | 115                   | 82
Other                             | 59                    | 108
Total other current assets        | $808                  | 918


13. CONTRIBUTED EQUITY
Capital raise On 4 September 2018, the Group undertook a fully underwritten $175.4m equity raising. This resulted in the issue of 105,677,937 new stapled securities (2018: $59.5m equity raising resulting in the issue of 39,712,882 stapled securities).
On 25 June 2019, the Group announced a fully underwritten $170m equity raising. On 28 June 2019, the Group received proceeds for this raising. This has been recognised as a contract for future issue of equity under AASB 132 and has been recognised as contributed equity within the statement of financial position. This resulted in the issue of 99,415,205 new stapled securities on 1 July 2019. These securities are not reflected in the securities on issue above as they were issued subsequent to the year end.
On 25 June 2019, the Group also announced a non-underwritten security purchase plan. This completed on 30 July 2019, raising $13.5m and resulted in the issue of 7,917,735 new stapled securities.
Distribution reinvestment plan During the year, 9,143,772 (2018: 6,480,246) stapled securities were issued to securityholders participating in the Group’s Distribution Reinvestment Plan for consideration of $16.2m (2018: $9.6m). The stapled securities were issued at the volume weighted average market price of the Group's stapled securities over a period of ten trading days, less a 2% discount.

                                      | 2019        | 2018
------------------------------------- | ----------- | -----------
                                      | $'000       | $'000
Issued and paid up capital            | 83,692      | 66,128
Contract for future issue of equity   | 16,451      | -
Total contributed equity              | 100,143     | 66,128
Number of stapled securities on Issue | 2019        | 2018
Opening balance at 1 July             | 559,107,042 | 512,913,914
Institutional and retail placement    | 105,677,937 | 39,712,882
Distribution reinvestment plan        | 9,143,772   | 6,480,246
Closing balance at 30 June            | 673,928,751 | 559,107,042


ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT
The acquisitions of property, plant and equipment as well as the capital intensity per operating segment are as follows:
(1) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy. For further details, please consult the "Accounting policies" section. (2) Fiscal 2019 actuals are translated at the average foreign exchange rate of the comparable period of fiscal 2018 which was 1.3100 USD/CDN.
Fiscal 2019 fourth-quarter acquisitions of property, plant and equipment decreased by 10.6% (11.2% in constant currency) mainly due to lower capital expenditures in the Canadian and American broadband services segments. Fiscal 2019 fourth-quarter capital intensity reached 24.9% compared to 28.7% for the same period of the prior year mainly as a result of lower capital capital expenditures combined with higher revenue.

Three months ended August 31,                 | 2019    | 2018    | Change | Change in constant currency(2)
--------------------------------------------- | ------- | ------- | ------ | ------------------------------
(in thousands of dollars, except percentages) | $       | $       | %      | %
Canadian broadband services                   | 79,132  | 89,405  | (11.5) | (11.7)
Capital intensity                             | 24.7%   | 28.0%   |        |
American broadband services                   | 65,967  | 72,914  | (9.5)  | (10.5)
Capital intensity                             | 25.0%   | 29.6%   |        |
Consolidated                                  | 145,099 | 162,319 | (10.6) | (11.2)
Capital intensity                             | 24.9%   | 28.7%   |        |


The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition.
The amount recorded for developed technology represents the estimated fair value of Trello’s project management and organization technology. The amount recorded for customer relationships represents the fair values of the underlying relationship with Trello customers.

                                                | Fair Value            | Useful Life
----------------------------------------------- | --------------------- | -----------
                                                | (U.S. $ in thousands) | (years)
Developed technology                            | $50,600               | 3
Customer relationships                          | 56,900                | 2
Trade names                                     | 19,900                | 3
Total intangible assets subject to amortization | $127,400              |


During the three months ended June 30, 2018, the Company adopted ASU 2016-18-Statement of Cash Flows: Restricted Cash. This standard requires that the statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard has been applied using a retrospective transition method to each period presented. The adoption of this standard did not have a material impact on the Company's financial statements.
The following table summarizes the opening balance sheet adjustments related to the adoption of the New Revenue Standard, ASU 2016-01-Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, and ASU 2016-16-Intra-Entity Transfers of Assets Other Than Inventory (in millions):

                                             | Balance as of  |          | Adjustments from |             | Balance as of
-------------------------------------------- | -------------- | -------- | ---------------- | ----------- | -------------
                                             | March 31, 2018 | ASC 606  | ASU 2016-01      | ASU 2016-16 | April 1, 2018
ASSETS                                       |                |          |                  |             |
Accounts receivable, net                     | $563.7         | $340.1   | $—               | $—          | $903.8
Inventories                                  | $476.2         | $(5.1)   | $—               | $—          | $471.1
Other current assets                         | $119.8         | $17.2    | $—               | $—          | $137.0
Long-term deferred tax assets                | $100.2         | $(23.1)  | $—               | $1,579.4    | $1,656.5
Other assets                                 | $71.8          | $—       | $—               | $(24.1)     | $47.7
LIABILITIES                                  |                |          |                  |             |
Accrued liabilities                          | $229.6         | $404.2   | $—               | $—          | $633.8
Deferred income on shipments to distributors | $333.8         | $(333.8) | $—               | $—          | $—
Long-term deferred tax liability             | $205.8         | $16.8    | $—               | $(1.1)      | $221.5
Other long-term liabilities                  | $240.9         | $—       | $—               | $(1.7)      | $239.2
STOCKHOLDERS' EQUITY                         |                |          |                  |             |
Accumulated other comprehensive loss         | $(17.6)        | $—       | $(1.7)           | $—          | $(19.3)
Retained earnings                            | $1,397.3       | $241.9   | $1.7             | $1,558.1    | $3,199.0


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
The following table presents activities associated with our loan receivable sales and servicing activities during the periods indicated.

                                                   |         | Year Ended December 31, |
-------------------------------------------------- | ------- | ----------------------- | -------
                                                   | 2019    | 2018                    | 2017
Gain (loss) on sold loan receivables held for sale | $—      | $—                      | $(500)
Cash Flows                                         |         |                         |
Sales of loans                                     | $91,946 | $139,026                | $72,071
Servicing fees                                     | 3,901   | 2,321                   | 2,821


Cash flow measures and capital additions
In presenting and discussing our reported results, free cash flow (pre-spectrum), free cash flow, capital additions and operating free cash flow are calculated and presented even though these measures are not recognised within IFRS. We believe that it is both useful and necessary to communicate free cash flow to investors and other interested parties, for the following reasons:
Free cash flow (pre-spectrum) and free cash flow allows us and external parties to evaluate our liquidity and the cash generated by our operations. Free cash flow (pre-spectrum) and capital additions do not include payments for licences and spectrum included within intangible assets, items determined independently of the ongoing business, such as the level of dividends, and items which are deemed discretionary, such as cash flows relating to acquisitions and disposals or financing activities. In addition, it does not necessarily reflect the amounts which we have an obligation to incur. However, it does reflect the cash available for such discretionary activities, to strengthen the consolidated statement of financial position or to provide returns to shareholders in the form of dividends or share purchases;
– Free cash flow facilitates comparability of results with other companies, although our measure of free cash flow may not be directly comparable to similarly titled measures used by other companies;
– These measures are used by management for planning, reporting and incentive purposes; and
These measures are useful in connection with discussion with the investment analyst community and debt rating agencies.
A reconciliation of cash generated by operations, the closest equivalent GAAP measure, to operating free cash flow and free cash flow, is provided below.

                                                               | 2019    | 2018    | 2017
-------------------------------------------------------------- | ------- | ------- | -------
                                                               | €m      | €m      | €m
Cash generated by operations (refer to note 18)                | 14,182  | 13,860  | 13,781
Capital additions                                              | (7,227) | (7,321) | (7,675)
Working capital movement in respect of capital additions       | (89)    | 171     | (822)
Disposal of property, plant and equipment                      | 45      | 41      | 43
Restructuring payments                                         | 195     | 250     | 266
Other                                                          | (35)    | –       | 34
Operating free cash flow                                       | 7,071   | 7,001   | 5,627
Taxation                                                       | (1,040) | (1,010) | (761)
Dividends received from associates and investments             | 498     | 489     | 433
Dividends paid to non-controlling shareholders in subsidiaries | (584)   | (310)   | (413)
Interest received and paid                                     | (502)   | (753)   | (830)
Free cash flow (pre-spectrum)                                  | 5,443   | 5,417   | 4,056
Licence and spectrum payments                                  | (837)   | (1,123) | (474)
Restructuring payments                                         | (195)   | (250)   | (266)
Free cash flow                                                 | 4,411   | 4,044   | 3,316


Net finance cost was £47.2m for the year; a decrease of £1.2m on 2017/18. Net regular interest in the year was £40.5m, a decrease of £3.9m compared to the prior year. Consistent with recent years, the largest component of finance costs in the year was interest due to holders of the Group’s senior secured notes, which was £31.7m.
The interest on the senior secured notes was £0.5m lower compared to the prior year following the re-financing of the June 2021 £325m fixed rate notes at a coupon of 6.5% to the October 2023 £300m fixed rate notes to the slightly lower coupon of 6.25%. Bank debt interest of £5.1m was £2.1m lower in the year due to lower levels of average debt and a lower margin on the revolving credit facility following the refinancing completed in May 2018. Amortisation of debt issuance costs was £3.7m, £1.3m lower than the prior year due to lower transaction costs associated with the issue of the £300m 6.25% Fixed rate notes compared with the retired £325m 6.5% Fixed rate notes.
Write-off of financing costs and early redemption fees of £11.3m include a £5.7m fee related to the write-off of transaction costs associated with the senior secured fixed rate notes due March 2021, which were repaid during the year, and a £5.6m redemption fee associated with the early call of the March 2021 bond.
In the prior year, a £0.4m discount unwind credit relating to long-term property provisions held by the Group due to an increase in gilt yields was reflected in reported Net finance cost. In 2018/19, a discount unwind charge of £3.0m was included in the Net finance cost of £47.2m. Other interest income of £7.6m in the year relates to monies received from the Group’s associate Hovis Holdings Limited ('Hovis') and reflects the reversal of a previous impairment.

£m                                                          | 2018/19 | 2017/18 | Change
----------------------------------------------------------- | ------- | ------- | ------
Senior secured notes interest                               | 31.7    | 32.2    | 0.5
Bank debt interest                                          | 5.1     | 7.2     | 2.1
                                                            | 36.8    | 39.4    | 2.6
Amortisation of debt issuance costs                         | 3.7     | 5.0     | 1.3
Net regular interest5                                       | 40.5    | 44.4    | 3.9
Fair value movements on interest rate financial instruments | –       | (0.4)   | (0.4)
Write-off of financing costs and early redemption fees      | 11.3    | 4.0     | (7.3)
Discount unwind                                             | 3.0     | (0.4)   | (3.4)
Other finance income                                        | (7.6)   | –       | 7.6
Other interest cost                                         | –       | 0.8     | 0.8
Net finance cost                                            | 47.2    | 48.4    | 1.2


10. Debt
A summary of debt is shown below:
Revolving Credit Facility/Term Loan
On September 12, 2018, the Company entered into five-year Amended and Restated Credit Agreement (“Credit Agreement”) with Bank of America, N.A., as Administrative Agent, and Wells Fargo Bank, N.A. The Credit Agreement amends and restates the credit agreement, dated November 18, 2016, among the Company, Bank of America, N.A. and Wells Fargo Bank, N.A. The Credit Agreement consists of a senior unsecured revolving credit facility (“Revolving Credit Facility”) of $200.0 million and a senior unsecured term loan (“Term Loan”) of $250.0 million. In addition, the Company has an option to increase the size of the Revolving Credit Facility and Term Loan by up to an additional $200.0 million. The Credit Agreement is guaranteed by the Company’s wholly-owned U.S. subsidiaries. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original Term Loan ($3.1 million) through maturity, with the remaining balance due on September 12, 2023.
Outstanding borrowings under the Credit Agreement bear interest at variable rates based on the type of borrowing and the Company’s debt to EBITDA financial ratio, as defined. The interest rate on outstanding borrowings under the Credit Agreement was 3.98% at April 27, 2019. The Credit Agreement contains customary representations and warranties, financial covenants, restrictive covenants and events of default. As of April 27, 2019, the Company was in compliance with all the covenants in the Credit Agreement. The fair value of borrowings under the Credit Agreement approximates book value because the interest rate is variable.
Subsidiary Credit Facility
The Company’s subsidiary, Pacific Insight, is a party to a credit agreement with the Bank of Montreal which provides a credit facility in the maximum principal amount of C$10.0 million, with an option to increase the principal amount by up to an additional C$5.0 million. Availability under the facility is based on a percentage of eligible accounts receivable and finished goods inventory balances. Interest is calculated at a base rate plus margin, as defined. In addition, Pacific Insight was a party to a credit agreement with Roynat which was terminated during the second quarter of fiscal 2019. Total repayments under the credit agreement with Roynat were $3.8 million in fiscal 2019, including a prepayment fee of $0.1 million.
Other Debt
The Company’s subsidiary, Procoplast, has debt that consists of eighteen notes with maturities ranging from 2019 to 2031. The weighted-average interest rate was approximately 1.5% at April 27, 2019 and $3.2 million of the debt was classified as short-term. The fair value of other debt was $16.3 million at April 27, 2019 and was based on Level 2 inputs on a nonrecurring basis.
Unamortized Debt Issuance Costs
The Company paid debt issuance costs of $3.1 million on September 12, 2018 in connection with the Credit Agreement. The debt issuance costs are being amortized over the five-year term of the Credit Agreement.

(Dollars in Millions)           | April 27, 2019 | April 28, 2018
------------------------------- | -------------- | --------------
Revolving Credit Facility       | $35.0          | $30.0
Term Loan                       | 243.7          | —
Subsidiary Credit Facility      | —              | 3.6
Other Debt                      | 16.8           | 24.2
Unamortized Debt Issuance Costs | (2.9)          | —
Total Debt                      | 292.6          | 57.8
Less: Current Maturities        | (15.7)         | (4.4)
Total Long-term Debt            | $276.9         | $53.4


During the fourth and third quarters of 2019 and the fourth quarter of 2018, we recorded an income tax expense of $62 million, $28 million and $28 million, respectively, reflecting (i) in the third quarter of 2019 the estimated annual effective tax rate in each of our jurisdictions, applied to the consolidated results before taxes in the third quarter of 2019 and (ii) in both fourth quarters the actual tax charges and benefits in each jurisdiction as well as the true-up of tax provisions based upon the most updated visibility on open tax matters in several jurisdictions. and (ii) in both fourth quarters the actual tax charges and benefits in each jurisdiction as well as the true-up of tax provisions based upon the most updated visibility on open tax matters in several jurisdictions. and (ii) in both fourth quarters the actual tax charges and benefits in each jurisdiction as well as the true-up of tax provisions based upon the most updated visibility on open tax matters in several jurisdictions.
Income tax expense

                   |                   | Three Months Ended       |
------------------ | ----------------- | ------------------------ | -----------------
                   | December 31, 2019 | September 29, 2019       | December 31, 2018
                   |                   | (Unaudited, in millions) |
Income tax expense | $(62)             | $(28)                    | $(28)


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in millions, unless otherwise disclosed)
The Company expects the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe, or if the applicable statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to $53.0 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:
During the years ended December 31, 2019, 2018 and 2017, the statute of limitations on certain unrecognized tax benefits lapsed and certain positions were effectively settled, which resulted in a decrease of $2.5 million, $9.3 million and $0.4 million, respectively, in the liability for uncertain tax benefits.
The Company recorded penalties and tax-related interest expense to the tax provision of $10.3 million, $8.0 million and $5.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, due to the expiration of the statute of limitations in certain jurisdictions and certain positions that were effectively settled, the Company reduced its liability for penalties and income tax-related interest expense related to uncertain tax positions during the years ended December 31, 2019, 2018 and 2017 by $2.7 million, $16.2 million and $0.6 million, respectively.
As of December 31, 2019 and 2018, the total amount of accrued income tax-related interest and penalties included in the consolidated balance sheets were $26.6 million and $19.1 million, respectively.
The Company has filed for prior taxable years, and for its taxable year ended December 31, 2019 will file, numerous consolidated and separate income tax returns, including U.S. federal and state tax returns and foreign tax returns. The Company is subject to examination in the U.S. and various state and foreign jurisdictions for certain tax years. As a result of the Company’s ability to carryforward federal, state and foreign NOLs, the applicable tax years generally remain open to examination several years after the applicable loss carryforwards have been used or have expired. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. The Company believes that adequate provisions have been made for income taxes for all periods through December 31, 2019.

                                                             |        | Year Ended December 31, |
------------------------------------------------------------ | ------ | ----------------------- | ------
                                                             | 2019   | 2018                    | 2017
Balance at January 1                                         | $107.7 | $116.7                  | $107.6
Additions based on tax positions related to the current year | 33.3   | 8.1                     | 7.6
Additions and reductions for tax positions of prior years    | 37.5   | 0.3                     | —
Foreign currency                                             | (1.6)  | (8.1)                   | 1.9
Reduction as a result of the lapse of statute of limitations | (1.3)  | (2.6)                   | (0.4)
Reduction as a result of effective settlements               | —      | (6.7)                   | —
Balance at December 31                                       | $175.6 | $107.7                  | $116.7


NOTE 14. PROVISION FOR WARRANTY
The changes in the amount of provision for warranty are as follows:
Costs of warranty include the cost of labor and materials to repair a product during the warranty period. The main term of the warranty period is one year. The Company accrues for the estimated cost of the warranty on its products shipped in the provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated periodically. Actual warranty costs are charged against the provision for warranty.

                                    | December 31, |
----------------------------------- | ------------ | --------
                                    | 2018         | 2019
Balance January 1                   | 6,562        | 7,955
Charged to cost of sales            | 18,408       | 26,301
Deductions                          | (8,985)      | (12,232)
Releases of expired warranty        | (8,214)      | (5,684)
Foreign currency translation effect | 184          | 84
Balance December 31                 | 7,955        | 16,424


5. CASH FLOW ANALYSIS
(1) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy as well as to reclassify results from Cogeco Peer 1 as discontinued operations. For further details, please consult the "Accounting policies" and "Discontinued operations" sections.
(2) For further details on the Corporation's cash flow attributable to discontinued operations, please consult the "Discontinued operations" section.
Fiscal 2019 cash flow from operating activities increased by 39.9% compared to the prior year mainly from: • higher adjusted EBITDA; • the decreases in income taxes paid and in financial expense paid; and • the decrease in integration, restructuring and acquisitions costs.
Fiscal 2019 investing activities decreased by 78.5% compared to the prior year mainly due to the MetroCast acquisition of $1.76 billion in the second quarter of fiscal 2018.

Years ended August 31,                                                                         | 2019      | 2018 (1)    | Change
---------------------------------------------------------------------------------------------- | --------- | ----------- | ------
(in thousands of dollars, except percentages)                                                  | $         | $           | %
Cash flow from operating activities                                                            | 868,711   | 620,748     | 39.9
Cash flow from investing activities                                                            | (471,078) | (2,191,666) | (78.5)
Cash flow from financing activities                                                            | (659,222) | 1,426,136   | —
Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency | (439)     | 1,989       | —
Net change in cash and cash equivalents from continuing operations                             | (262,028) | (142,793)   | 83.5
Net change in cash and cash equivalent from discontinued operations(2)                         | 733,807   | 16,333      | —
Cash and cash equivalents, beginning of the year                                               | 84,725    | 211,185     | (59.9)
Cash and cash equivalents, end of the year                                                     | 556,504   | 84,725      | —


Net revenue: Net revenue from our Energy segment for the year ended December 31, 2019 increased $18.3 million to $39.0 million from $20.7 million for the year ended December 31, 2018. The increase was primarily driven by the AFTC related to the 2018 and 2019 CNG sales that was recognized in the fourth quarter of 2019, inclusive of prior period AFTC at the acquired ampCNG stations which was also recognized in 2019. The increase was also driven by higher volume-related revenues from the recent acquisition of the ampCNG stations and growth in CNG sales volumes.
Cost of revenue: Cost of revenue from our Energy segment for the year ended December 31, 2019 increased $5.9 million to $17.1 million from $11.2 million for the year ended December 31, 2018. The increase was due to overall growth in volumes of gasoline gallons delivered and higher commodity and utility costs driven by the acquisition of ampCNG stations.
Selling, general and administrative: Selling, general and administrative expenses from our Energy segment for the year ended December 31, 2019 increased $0.9 million to $4.9 million from $4.0 million for the year ended December 31, 2018. The increase was driven by an increase in salaries and benefits largely due to the of the acquisition of ampCNG stations, which were acquired late in the second quarter of 2019, partially offset by a one-time expense in the prior year related to the abandonment of a station development project.
Depreciation and amortization from our Energy segment for the year ended December 31, 2019 increased $1.4 million to $6.9 million from $5.5 million for the year ended December 31, 2018. The increase was due to additional depreciation and amortization from the recent acquisition of ampCNG stations.
Other operating expense from our Energy segment was a loss of $0.5 million for the year ended December 31, 2018, driven by impairment of certain stations during the fourth quarter of 2018.

                                    |       | Years Ended December 31, |
----------------------------------- | ----- | ------------------------ | ---------------------
                                    | 2019  | 2018                     | Increase / (Decrease)
Net revenue                         | $39.0 | $20.7                    | $18.3
Cost of revenue                     | 17.1  | 11.2                     | 5.9
Selling, general and administrative | 4.9   | 4.0                      | 0.9
Depreciation and amortization       | 6.9   | 5.5                      | 1.4
Other operating expense             | —     | 0.5                      | (0.5)
Income (loss) from operations       | 10.1  | $(0.5)                   | $10.6


The Company’s estimated future benefit payments as of December 31, 2019 are as follows:
The Company has certain defined contribution plans, which accrue benefits for employees on a pro-rata basis during their employment period based on their individual salaries. The Company’s accrued benefits related to defined contribution pension plans of $20 million as of December 31, 2019 and $18 million as of December 31, 2018. The annual cost of these plans amounted to approximately $86 million in 2019, $84 million in 2018 and $77 million in 2017.

Years             | Pension Benefits | Other Long Term Benefits
----------------- | ---------------- | ------------------------
2020              | 32               | 7
2021              | 29               | 7
2022              | 32               | 5
2023              | 41               | 6
2024              | 51               | 9
From 2025 to 2029 | 272              | 35


Interest and Other Income (Expense)
Interest and other income (expense), net changed by $3.3 million from a net expense of $13.8 million in the year ended December 31, 2018 to a net expense of $10.4 million for the year ended December 31, 2019. The change in interest and other income (expense), net was primarily due to a decrease in interest expense pertaining to a lower average balance of debt outstanding under our term loan facility during the year.

                                         | Year Ended December 31, |                        | % Change
---------------------------------------- | ----------------------- | ---------------------- | --------
                                         | 2019                    | 2018                   | 2019
                                         |                         | (dollars in thousands) |
Interest and other income (expense), net | $(10,427)               | $(13,755)              | (24)%
% of net revenue                         | (3)%                    | (4)%                   |


Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.36 per share divided by Teradyne’s stock price on the grant date of $37.95 for the 2019 grants, $47.70 for the 2018 grants and $28.56 for the 2017 grants.
Stock compensation plan activity for the years 2019, 2018, and 2017, is as follows:

                                           | 2019    | 2018           | 2017
------------------------------------------ | ------- | -------------- | -------
                                           |         | (in thousands) |
Restricted Stock Units:                    |         |                |
Non-vested at January 1                    | 2,454   | 3,174          | 3,778
Awarded                                    | 1,139   | 790            | 939
Vested                                     | (1,237) | (1,382)        | (1,434)
Forfeited                                  | (87)    | (128)          | (109)
Non-vested at December31                   | 2,269   | 2,454          | 3,174
Stock Options:                             |         |                |
Outstanding at January 1                   | 506     | 531            | 926
Granted                                    | 102     | 69             | 111
Exercised                                  | (280)   | (94)           | (501)
Forfeited                                  | (7)     | —              | —
Expired                                    | (2)     | —              | (5)
Outstanding at December 31                 | 319     | 506            | 531
Vested and expected to vest at December 31 | 319     | 506            | 531
Exercisable at December 31                 | 85      | 256            | 233