Interest Expense and Interest Income and Other Expense, net
The table below sets forth the changes in interest expense and interest income and other expense, net, for the fiscal year ended December 29, 2019, as compared to fiscal year ended December 30, 2018 (in thousands, except percentage data):
The $242,000 increase in interest expense was attributable to higher line of credit balance in 2019 compared to 2018. The $112,000 increase in interest income and other expenses was attributable to increase in interest income from money market account with Heritage Bank.

                                       | Fiscal Years |        | Year-Over-Year Change |
-------------------------------------- | ------------ | ------ | --------------------- | ----------
                                       | 2019         | 2018   | Amount                | Percentage
Interest expense                       | $(350)       | $(108) | $(242)                | 224%
Interest income and other expense, net | 189          | 77     | 112                   | 145%
                                       | $(161)       | $(31)  | $(130)                | 419%


5.2 Key Management Personnel Compensation
Notes: (1) Comprise base salary, bonus, contributions to defined contribution plans and other benefits, but exclude performance share and share option expenses disclosed below.
(2) The Group Chief Executive Officer, an executive director of Singtel, was awarded up to 1,030,168 (2018: 1,712,538) ordinary shares of Singtel pursuant to Singtel performance share plans, subject to certain performance criteria including other terms and conditions being met. The performance share award in the previous financial year included a one-off Special Share Award (“SSA”). The performance share expense computed in accordance with SFRS(I) 2, Share-based Payment, was S$1.5 million (2018: S$3.3 million).
(3) The other key management personnel of the Group comprise the Chief Executive Officers of Consumer Singapore, Consumer Australia, Group Enterprise, Group Digital Life and International Group, as well as the Group Chief Corporate Officer, Group Chief Financial Officer, Group Chief Human Resources Officer, Group Chief Information Officer and Group Chief Technology Officer. The other key management personnel were awarded up to 3,537,119 (2018: 4,391,498) ordinary shares of Singtel pursuant to Singtel performance share plans, subject to certain performance criteria including other terms and conditions being met. The performance share award in the previous financial year included a one-off SSA. The performance share expense computed in accordance with SFRS(I) 2 was S$6.1 million (2018: S$8.5 million).
(4) Directors’ remuneration comprises the following: (i) Directors’ fees of S$2.7 million (2018: S$2.5 million), including fees paid to certain directors in their capacities as members of the Optus Advisory Committee and the Technology Advisory Panel, and as director of Singtel Innov8 Pte. Ltd. (ii) Car-related benefits of the Chairman of S$24,557 (2018: S$20,446). In addition to the Directors’ remuneration, Venkataraman Vishnampet Ganesan, a non-executive director of Singtel, was awarded 831,087 (2018: Nil) of share options pursuant to the Amobee Long-Term Incentive Plan during the financial year, subject to certain terms and conditions being met. The share option expense computed in accordance with SFRS(I) 2 was S$104,278 (2018: S$21,607).

                                          |        | Group
----------------------------------------- | ------ | ------
                                          | 2019   | 2018
                                          | S$ Mil | S$ Mil
Key management personnel compensation (1) |        |
Executive director (2)                    | 3.5    | 6.1
Other key management personnel (3)        | 15.9   | 22.4
                                          | 19.4   | 28.5
Directors' remuneration (4)               | 2.7    | 2.5
                                          | 22.1   | 31.0


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Disaggregated revenue
Revenue disaggregated by type of service was as follows for the periods presented:
(1) For the year ended December 31, 2019, includes a $30,459 change in fair value of our servicing asset primarily associated with increases to the contractually specified fixed servicing fees for certain Bank Partners. Refer to Note 3 for additional information.
(2) Other revenue includes miscellaneous revenue items that are individually immaterial. Other revenue is presented separately herein in order to clearly present merchant, interchange and servicing fees, which are more integral to our primary operations and better enable financial statement users to calculate metrics such as servicing and merchant fee yields.
No assets were recognized from the costs to obtain or fulfill a contract with a customer as of December 31,
2019 and 2018. We recognized bad debt expense arising from our contracts with customers of $950, $1,294 and
$817 during the years ended December 31, 2019, 2018 and 2017, respectively, which is recorded within general and
administrative expense in our Consolidated Statements of Operations.

                    |          | Year Ended December 31, |
------------------- | -------- | ----------------------- | --------
                    | 2019     | 2018                    | 2017
Merchant fees       | $361,755 | $297,776                | $234,548
Interchange fees    | 44,150   | 51,128                  | 44,410
Transaction fees    | 405,905  | 348,904                 | 278,958
Servicing fees(1)   | 123,697  | 65,597                  | 46,575
Other(2)            | 44       | 172                     | 354
Servicing and other | 123,741  | 65,769                  | 46,929
Total revenue       | $529,646 | $414,673                | $325,887


Restricted Stock Units
The Company intends to settle all vested restricted stock unit payments held by United States-based participants in shares of the Company’s common stock and classifies these awards as equity awards in its Consolidated Balance Sheets. Awards held by participants who are based outside of the United States will be settled in cash and are classified within accrued and other current liabilities on the Consolidated Balance Sheets as of December 31, 2019 and 2018
The following table summarizes the activity related to the unvested restricted stock units during the years ended December 31, 2019 and 2018:
Unrecognized compensation expense related to unvested restricted stock units was $731 at December 31, 2019, which is expected to be recognized as expense over the weighted-average period of 0.7 years.
During the years ended December 31, 2019 and 2018, the Company issued 642,520 and 782,364 shares, respectively, of common stock to participants of the 2016 Plan based in the United States, after withholding approximately 261,335 and 472,965 shares, respectively, to satisfy tax withholding obligations. The Company made a cash payment of $181 and $1,495 to cover employee withholding taxes upon the settlement of these vested restricted stock units during the years ended December 31, 2019 and 2018, respectively. During the years ended December 31, 2019 and 2018, the Company also paid $0 and $300 to cash-settle 16 and 100,025 vested restricted stock units by agreement with the Chief Operating Officer in relation to certain grants made to him and to pay cash in lieu of fractional shares for vested units held by participants based in the United States.

                                                                | Number of Units | Weighted-Average Grant-Date Fair Value
--------------------------------------------------------------- | --------------- | --------------------------------------
Unvested restricted stock units outstanding - December 31, 2017 | 3,106,024       | $3.43
Granted                                                         | 853,736         | 1.46
Vested                                                          | (1,583,399)     | 3.18
Forfeited                                                       | (563,400)       | 3.39
Unvested restricted stock units outstanding - December 31, 2018 | 1,812,961       | $2.74
Granted                                                         | 60,000          | $0.98
Vested                                                          | (904,096)       | $2.67
Forfeited                                                       | (263,450)       | $2.71
Unvested restricted stock units outstanding - December 31, 2019 | 705,415         | $2.68


Basic and Diluted Net Income Per Share
Basic net income per share is computed using net income divided by the weighted average number of shares of common stock
outstanding (“Weighted Shares”) for the period presented.
Diluted net income per share is computed using net income divided by Weighted Shares and the treasury stock method effect of common equivalent shares (“CESs”) outstanding for each period presented. In the following table, we present a reconciliation of earnings per share and the shares used in the computation of earnings per share for the years ended December 31, 2019, 2018 and 2017 (in thousands, except per share data):
common equivalent shares (“CESs”) outstanding for each period presented. In the following table, we present a reconciliation of
earnings per share and the shares used in the computation of earnings per share for the years ended December 31, 2019, 2018 and
2017 (in thousands, except per share data):
The number of anti-dilutive CESs in 2019, 2018 and 2017 was immaterial. See Note 2 for further information on those securities.

                                   |            | Year Ended December 31,                  |
---------------------------------- | ---------- | ---------------------------------------- | ---------
                                   | 2019       | 2018                                     | 2017
                                   |            | (in thousands, except per share data)    |
Net income                         | $ 85,762   | $ 104,690                                | $ 116,481
Earnings per share：                |            |                                          |
Basic                              | $ 1.33     | $ 1.58                                   | $ 1.68
Effect of CESs                     | (0.01 )    | -                                        | -
Diluted                            | $ 1.32     | $ 1.58                                   | $ 1.68
Weighted average number of shares: |            |                                          |
Basic                              | 64,397     | 66,201                                   | 69,175
Effect of CESs                     | 706        | 233                                      | 249
Diluted                            | 65,103     | 66,434                                   | 69,424


Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality of and variability of our service revenue, operating results and cash flows. The following summary tables present a comparison of our results of operations with respect to certain key financial measures. The comparisons illustrated in the tables are discussed in greater detail below.
(1) Includes non-cash equity-based compensation expense of $895 and $604 for 2018 and 2017, respectively.
(2) Includes non-cash equity-based compensation expense of $16,813 and $12,686 for 2018 and 2017, respectively.
Service Revenue. Our service revenue increased 7.2% from 2017 to 2018. Exchange rates positively impacted our increase in service revenue by approximately $4.0 million. All foreign currency comparisons herein reflect results for 2018 translated at the average foreign currency exchange rates for 2017. We increased our total service revenue by increasing the number of sales representatives selling our services, by expanding our network, by adding additional buildings to our network, by increasing our penetration into the buildings connected to our network and by gaining market share by offering our services at lower prices than our competitors.
Revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, gross receipts taxes, Universal Service Fund fees and certain state regulatory fees. We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our consolidated statements of operations. The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues from 2017 to 2018 of approximately $1.6 million.
Our net-centric customers tend to purchase their service on a price per megabit basis. Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis. Revenues from our corporate and net-centric customers represented 64.9% and 35.1% of total service revenue, respectively, for 2018 and represented 62.3% and 37.7% of total service revenue, respectively, for 2017. Revenues from corporate customers increased 11.8% to $337.8 million for 2018 from $302.1 million for 2017 primarily due to an increase in our number of our corporate customers. Revenues from our net-centric customers decreased by 0.4% to $182.3 million for 2018 from $183.1 million for 2017 primarily due to an increase in our number of net-centric customers being offset by a decline in our average price per megabit. Our revenue from our net- centric customers has declined as a percentage of our total revenue and grew at a slower rate than our corporate customer revenue because net-centric customers purchase our services based upon a price per megabit basis and our average price per megabit declined by 25.9% from 2017 to 2018. Additionally, the net-centric market experiences a greater level of pricing pressure than the corporate market and net-centric customers who renew their service with us expect their renewed service to be at a lower price than their current price. We expect that our average price per megabit will continue to decline at similar rates which would result in our corporate revenues continuing to represent a greater portion of our total revenues and our net-centric revenues continuing to grow at a lower rate than our corporate revenues. Additionally, the impact of foreign exchange rates has a more significant impact on our net- centric revenues.
Our on-net revenues increased 8.1% from 2017 to 2018. We increased the number of our on-net customer connections by 12.1% at December 31, 2018 from December 31, 2017. On-net customer connections increased at a greater rate than on-net revenues primarily due to the 5.1% decline in our on-net ARPU, primarily from a decline in ARPU for our net-centric customers. ARPU is determined by dividing revenue for the period by the average customer connections for that period. Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers. The decline in on-net ARPU is partly attributed to volume and term based pricing discounts. Additionally, on-net customers who cancel their service from our installed base of customers, in general, have an ARPU that is greater than the ARPU for our new customers due to declining prices primarily for our on-net services sold to our net-centric customers. These trends resulted in the reduction to our on-net ARPU and a 25.9% decline in our average price per megabit for our installed base of customers.
Our off-net revenues increased 5.2% from 2017 to 2018. Our off-net revenues increased as we increased the number of our off-net customer connections by 10.3% at December 31, 2018 from December 31, 2017. Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 6.8% decrease in our off-net ARPU.
Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis. Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation. Our network operations expenses, including non-cash equity-based compensation expense, increased 4.9% from 2017 to 2018 as we were connected to 11.9% more customer connections and we were connected to 170 more on-net buildings as of December 31, 2018 compared to December 31, 2017. The increase in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities and the increase in our off- net revenues. When we provide off-net services we also assume the cost of the associated tail circuits.
Selling, General, and Administrative Expenses (“SG&A”). Our SG&A expenses, including non-cash equity- based compensation expense, increased 4.6% from 2017 to 2018. Non cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation and was $16.8 million for 2018 and $12.7 million for 2017. SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and increases in our sales efforts and an increase in our headcount partly offset by a $1.1 million decrease in our legal fees primarily associated with U.S. net neutrality and interconnection regulatory matters and by the $1.3 million reduction in commission expense from the impact of the new revenue accounting standard which requires us to capitalize certain commissions paid to our sales agents and sales employees. Our sales force headcount increased by 7.8% from 574 at December 31, 2017 to 619 at December 31, 2018 and our total headcount increased by 4.8% from 929 at December 31, 2017 to 974 at December 31, 2018.
Depreciation and Amortization Expenses. Our depreciation and amortization expenses increased 7.0% from 2017 to 2018. The increase is primarily due to the depreciation expense associated with the increase related to newly deployed fixed assets more than offsetting the decline in depreciation expense from fully depreciated fixed assets.
Gains on Equipment Transactions. We exchanged certain used network equipment and cash consideration for new network equipment resulting in gains of $1.0 million for 2018 and $3.9 million for 2017. The gains are based upon the excess of the estimated fair value of the new network equipment over the carrying amount of the returned used network equipment and the cash paid. The reduction in gains from 2017 to 2018 was due to purchasing more equipment under the exchange program in 2017 than we purchased in 2018.
Interest Expense. Interest expense results from interest incurred on our $445.0 million of senior secured notes, interest incurred on our $189.2 million of senior unsecured notes, interest on our installment payment agreement and interest on our finance lease obligations. Our interest expense increased by 5.3% for 2018 from 2017 primarily due to the issuance of $70.0 million of senior secured notes in August 2018 and an increase in our finance lease obligations.
Income Tax Expense. Our income tax expense was $12.7 million for 2018 and $25.2 million for 2017. The decrease in our income tax expense was primarily related to an increase in deferred income tax expense for 2017 primarily due to the impact of the Tax Cuts and Jobs Act (the "Act"). On December 22, 2017, the President of the United States signed into law the Act. The Act amended the Internal Revenue Code and reduced the corporate tax rate from a maximum rate of 35% to a flat 21% rate. The rate reduction was effective on January 1, 2018 and may reduce our future income taxes payable once we become a cash taxpayer in the United States. As a result of the reduction in the corporate income tax rate and other provisions under the Act, we were required to revalue our net deferred tax asset at December 31, 2017 resulting in a reduction in our net deferred tax asset of $9.0 million and we also recorded a transition tax of $2.3 million related to our foreign operations for a total income tax expense of approximately $11.3 million, which was recorded as additional noncash income tax expense in 2017.
Buildings On-net. As of December 31, 2018 and 2017 we had a total of 2,676 and 2,506 on-net buildings connected to our network, respectively.

                                                 | Year Ended December 31, |          | Change
------------------------------------------------ | ----------------------- | -------- | -------
                                                 | 2018                    | 2017     | Percent
                                                 | (in thousands)          |          |
Service revenue                                  | $520,193                | $485,175 | 7.2%
On-net revenues                                  | 374,555                 | 346,445  | 8.1%
Off-net revenues                                 | 145,004                 | 137,892  | 5.2%
Network operations expenses(1)                   | 219,526                 | 209,278  | 4.9%
Selling, general, and administrative expenses(2) | 133,858                 | 127,915  | 4.6%
Depreciation and amortization expenses           | 81,233                  | 75,926   | 7.0%
Gains on equipment transactions                  | 982                     | 3,862    | (74.6)%
Interest expense                                 | 51,056                  | 48,467   | 5.3%
Income tax expense                               | 12,715                  | 25,242   | (49.6)%


13. Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S. Law. As of December 31, 2018, the Company had completed its accounting for the tax effects related to the enactment of the Tax Act.
The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. During the year ended December 31, 2017, the Company remeasured certain deferred tax assets and liabilities and recorded a $15.0 million provisional tax charge. During the year ended December 31, 2018, the Company reduced the initial provisional tax charge by recording a $4.9 million benefit related to accelerated tax deductions claimed on the 2018 U.S. Federal Income Tax Return.
The Tax Act required U.S. companies to pay a one-time transition tax on certain unremitted foreign earnings. During the year ended December 31, 2017, the Company recorded a $20.9 million provisional tax charge based on post-1986 earnings and profits of foreign subsidiaries that were previously deferred from U.S. income taxes. Upon further analysis, the Company reduced the initial provisional tax charge by recording an $8.1 million benefit during the year ended December 31, 2018.
During the year ended December 31, 2018, the Company recorded a $15.5 million valuation allowance on its deferred tax asset related to U.S. foreign tax credits based upon business conditions and tax laws in effect at that time.
During the year ended December 31, 2019, following the acquisition of Speedpay, the Company determined it will more likely than not be able to utilize foreign tax credits in future years due to additional income generated by Speedpay; therefore, the Company released the $15.5 million valuation allowance that had been established on this deferred tax asset.
The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The Company has elected to account for GILTI in the year the tax is incurred.
Prior to 2018, the Company considered all earnings in foreign subsidiaries to be indefinitely reinvested, and accordingly, recorded no deferred income taxes related to unremitted earnings. As of December 31, 2019 and 2018, the Company considered only the earnings in its Indian subsidiaries to be indefinitely reinvested. The earnings of all other foreign subsidiaries are no longer considered indefinitely reinvested. The Company is also permanently reinvested for outside book/tax basis differences related to foreign subsidiaries.
For financial reporting purposes, income before income taxes includes the following components (in thousands):

              |         | Years Ended December 31, |
------------- | ------- | ------------------------ | -------
              | 2019    | 2018                     | 2017
United States | -16,317 | $16,312                  | -42,863
Foreign       | 88,527  | 75,487                   | 86,435
Total         | $72,210 | $91,799                  | $43,572


Consolidated Comparison of Fiscal Year 2019 to Fiscal Year 2018
Net Sales
Net sales of $1.4 billion in fiscal year 2019 increased 15.2% from $1.2 billion in fiscal year 2018 primarily due to an increased in Solid Capacitor net sales $164.6 million. In addition, Film and Electrolytic net sales increased by $4.3 million, and MSA net sales increased by $13.8 million.
The increase in Solid Capacitors net sales was primarily driven by a $111.8 million increase in distributor sales across the Americas, APAC, and EMEA regions. The $111.8 million increase consisted of a $72.8 million increase in Ceramic product line sales and a $39.0 million increase in Tantalum product line sales. Also contributing to the increase in net sales was a $30.6 million increase in OEM sales across the APAC, EMEA, and JPKO regions, and a $28.0 million increase in EMS sales across all regions. These increases in net sales were partially offset by a $3.2 million decrease in distributor sales in the JPKO region and a $2.7 million decrease in OEM sales in the Americas region. In addition, Solid Capacitors net sales was unfavorably impacted by $0.5 million from foreign currency exchange due to the change in the value of the Euro compared to the U.S. dollar.
The increase in Film and Electrolytic net sales was primarily driven by a $10.5 million increase in distributor sales across the Americas and EMEA regions. Also contributing to the increase in net sales was $1.7 million increase in EMS sales in the Americas region and a $0.8 million increase in OEM sales in the JPKO region. These increases in net sales were partially offset by a $5.6 million decrease in OEM sales across the APAC and EMEA regions and a $3.1 million decrease in distributor sales across the APAC and JPKO regions. In addition, there was an unfavorable impact of $0.1 million from foreign currency exchange primarily due to the change in the value of the Euro compared to the U.S. dollar.
The increase in MSA net sales was primarily driven by a $15.0 million increase in OEM sales in the JPKO region. Also contributing to the increase in net sales was a $4.3 million increase in EMS sales across all regions and a $3.7 million increase in distributor sales across the Americas and EMEA regions. These increase in net sales were partially offset by a $5.5 million decrease in distributor sales across the APAC and JPKO regions and a $3.8 million decrease in OEM sales across the Americas, APAC, and JPKO regions.
In fiscal years 2019 and 2018, net sales by channel and the percentages of net sales by region to total net sales were as follows (dollars in thousands):

         | Fiscal Year 2019 |            | Fiscal Year 2018 |
-------- | ---------------- | ---------- | ---------------- | ----------
         | Net Sales        | % of Total | Net Sales        | % of Total
APAC     | $533,340         | 38.6%      | $479,987         | 40.0%
EMEA     | 315,535          | 22.8%      | 277,898          | 23.1%
Americas | 337,842          | 24.4%      | 259,105          | 21.6%
JPKO     | 196,101          | 14.2%      | 183,191          | 15.3%
Total    | $1,382,818       |            | $1,200,181       |


BIG W’s Store‐controllable VOC and VOC NPS improved on the prior year with higher customer scores translating into sales, with an increase in F19 of 4.2% on a normalised basis to $3.8 billion. Comparable sales increased by 5.3% in F19 and 7.2% in Q4 (Easter‐adjusted) with growth in all customer universes.
BIG W’s growth continues to be driven by an increase in customer transactions (F19: 4.0%) and customers increasingly putting more items in their baskets with comparable items per basket growth of 4.4%. Together this drove comparable item growth of 8.6%. Excluding reusable bags, comparable items increased by 5.2%.
With BIG W’s turnaround gaining momentum, and to build a sustainable network for the future, a store and DC network review was announced in April. BIG W intends to close approximately 30 stores over the next three years and two distribution centres at the end of their leases. The review of the store network is ongoing, with three stores recently announced to be closed in F20.
BIG W has remained price competitive, improved ranges and built a convenient online and in‐store experience in F19.
Normalised Online sales increased by 128% in F19 with Pick up consistently delivering strong sales growth. Apparel, which has been more challenging, improved steadily through H2 due to a focus on range, stock flow and in‐store execution.
Normalised gross profit declined 49 bps for F19 reflecting continued challenges in stockloss as well as slow sell‐through of seasonal apparel in H1. Category mix improved in H2 with improved apparel sell‐through.
Normalised CODB declined 132 bps resulting from store efficiencies and sales growth fractionalising fixed costs.
The LBIT of $85 million before significant items excludes a $371 million charge identified as part of the network review.
Funds employed declined primarily due to significant items provisions. Inventory quality has improved as a result of solid sales and improved apparel sell‐through in H2.
In F20, BIG W will focus on creating a sustainable business that is simpler to operate, and continue providing customers with low prices and more convenient, connected solutions in‐store and online.

                              | F19      | F18      |           | CHANGE
----------------------------- | -------- | -------- | --------- | ----------
$ MILLION                     | 53 WEEKS | 52 WEEKS | CHANGE    | NORMALISED
Sales                         | 3,797    | 3,566    | 6.5%      | 4.2%
LBITDA before                 |          |          |           |
significant items             | (5)      | (30)     | (82.2)%   | (88.7)%
Depreciation and amortisation | (80)     | (80)     | 0.7%      | 0.7%
LBIT before significant items | (85)     | (110)    | (22.2)%   | (24.0)%
Significant items             | (371)    | –        | n.m.      | n.m.
LBIT after significant items  | (456)    | (110)    | 315.5%    | 313.7%
Gross margin (%)              | 31.1     | 31.7     | (59) bps  | (49) bps
Cost of doing business (%)    | 33.4     | 34.8     | (142) bps | (132) bps
LBIT 2 to sales (%)           | (2.3)    | (3.1)    | 83 bps    | 84 bps
Sales per square metre ($)$)  | 3,629    | 3,369    | 7.7%      | 5.4%
Funds employed                | 204      | 502      | (59.4)%   |
ROFE (%)                      | (23.0)   | (23.3)   | 24 bps    | 77 bps


Summary Disclosures about Contractual Obligations and Commercial Commitments
Our material capital commitments consist of obligations under facilities and operating leases. Some of these leases have free or escalating rent payment provisions. We recognize rent expense under leases on a straight-line basis. We anticipate that we will experience an increase in our capital expenditures and lease commitments as a result of our anticipated growth in operations, infrastructure, personnel and resources devoted to building our brand name.
The following table summarizes our obligations as of March 31, 2019 (dollars in thousands):
We generally do not enter into binding purchase obligations. The purchase obligations above relate primarily to marketing and IT services. The contractual obligations table above excludes unrecognized tax benefits, plus related interest and penalties totaling $1.1 million because we cannot reasonably estimate in which future periods these amounts will ultimately be settled.
We have certain software royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a fixed cost per unit shipped or a fixed fee for unlimited units shipped over a designated period. Royalty expense, included in cost of software and products revenues was $12.3 million in fiscal 2019 and $4.5 million million in fiscal 2018.
We offer a 90-day limited product warranty for our software. To date, costs relating to this product warranty have not been material.

                            |         |                  | Payments Due by Period |           |
--------------------------- | ------- | ---------------- | ---------------------- | --------- | -----------------
                            | Total   | Less Than 1 Year | 2-3 Years              | 4-5 Years | More Than 5 Years
Operating lease obligations | $23,673 | $9,008           | $10,907                | $2,827    | $931
Purchase obligations        | 20,520  | 16,748           | 3,669                  | 103       | —
Total                       | $44,193 | $25,756          | $14,576                | $2,930    | $931


NAVIOS MARITIME HOLDINGS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in thousands of U.S. dollars — except share data)
NOTE 5: ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:

                                         | December 31, 2019 | December 31,2018
---------------------------------------- | ----------------- | ----------------
Accounts receivable                      | $68,309           | $76,376
Less: provision for doubtful receivables | (16,377)          | (16,086)
Accounts receivable, net                 | $51,932           | $60,290


Acquisition Related and Other Expenses: Acquisition related and other expenses consist of personnel related costs and stock-based compensation for transitional and certain other employees, integration related professional services, and certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net. Stock-based compensation expenses included in acquisition related and other expenses resulted from unvested restricted stock-based awards and stock options assumed from acquisitions whereby vesting was accelerated generally upon termination of the employees pursuant to the original terms of those restricted stock-based awards and stock options.
* Not meaningful
On a constant currency basis, acquisition related and other expenses decreased in fiscal 2019 compared to fiscal 2018 primarily due to certain favorable business combination related adjustments that were recorded in fiscal 201 9 .

                                              |      |        | Year Ended May 31, |
--------------------------------------------- | ---- | ------ | ------------------ | ----
                                              |      |        | Percent Change     |
(Dollars in millions)                         | 2019 | Actual | Constant           | 2018
Transitional and other employee related costs | $49  | 3%     | 4%                 | $48
Stock-based compensation                      | —    | -100%  | -100%              | 1
Professional fees and other, net              | 16   | 373%   | 426%               | 3
Business combination adjustments, net         | (21) | *      | *                  | —
Total acquisition related and other expenses  | $44  | -15%   | -13%               | $52


In accordance with the requirements of ASC 606, the disclosure of the impact of adoption on our consolidated
balance sheet as of the fiscal year ended February 28, 2019 is as follows:
(1) Deferred product costs included in Prepaid expenses and other current assets and Other assets amounted
to $6.2 million and $8.8 million, respectively, as of February 28, 2019.
(2) The balances as of February 28, 2019 also included deferred revenue of TRACKER, which was acquired
on February 25, 2019 (see Note 2).
The impact of adopting ASC 606 on our consolidated statements of comprehensive income (loss) for the fiscal year ended February 28, 2019 was immaterial.

                                              |                                      | As of February 28, 2019 |
--------------------------------------------- | ------------------------------------ | ----------------------- | ---------------
                                              |                                      | ASC 606                 | Without ASC 606
                                              | As reported                          | Adjustments             | Adoption
Assets                                        |                                      |                         |
Prepaid expenses and other current assets (1) | $19,373                              | (1,473)                 | $17,900
Deferred income tax assets                    | 22,626                               | (532)                   | 22,094
Other assets (1)                              | 22,510                               | (3,319)                 | 19,191
                                              | Liabilities and Stockholders' Equity |                         |
Deferred revenue (2)                          | $24,264                              | (1,945)                 | 22,319
Other non-current liabilities (2)             | 38,476                               | (5,353)                 | 33,123
Stockholders' equity:                         |                                      |                         |
Accumulated deficit                           | $(2,227)                             | 1,689                   | (538)


23. Associates (Cont'd)
The summarised financial information of the Group’s significant associate namely Intouch Holdings Public Company Limited (“Intouch”), based on its financial statements and a reconciliation with the carrying amount of the investment in the consolidated financial statements was as follows –
Note: (1) Others include adjustments to align the respective local accounting standards to SFRS(I).

                                                  | 2019    | 2018    | 2017
------------------------------------------------- | ------- | ------- | -------
                                                  | S$ Mil  | S$ Mil  | S$ Mil
Statement of comprehensive income                 |         |         |
Revenue                                           | 250.1   | 353.9   | 144.1
Profit after tax                                  | 451.7   | 488.2   | 166.1
Other comprehensive (loss)/ income                | (0.9)   | 10.9    | (1.6)
Total comprehensive income                        | 450.8   | 499.1   | 164.5
Statement of financial position                   |         |         |
Current assets                                    | 743.1   | 720.0   | 701.9
Non-current assets                                | 1,532.5 | 1,554.3 | 1,629.3
Current liabilities                               | (305.1) | (444.4) | (483.6)
Non-current liabilities                           | (205.5) | (313.4) | (395.3)
Net assets                                        | 1,765.0 | 1,516.5 | 1,452.3
Less: Non-controlling interests                   | (304.6) | (342.2) | (411.6)
Net assets attributable to equity holders         | 1,460.4 | 1,174.3 | 1,040.7
Proportion of the Group’s ownership               | 21.0%   | 21.0%   | 21.0%
Group’s share of net assets                       | 306.7   | 246.6   | 218.5
Goodwill and other identifiable intangible assets | 1,441.7 | 1,417.6 | 1,371.7
Others (1)                                        | (46.8)  | (23.0)  | (8.4)
Carrying amount of the investment                 | 1,701.6 | 1,641.2 | 1,581.8
Other items                                       |         |         |
Group’s share of market value                     | 1,653.2 | 1,639.6 | 1,525.0
Dividends received during the year                | 78.5    | 77.8    | -


Accumulated Other Comprehensive Loss-Recognition and Deferrals
The following table presents cumulative items not recognized as a component of net periodic benefits expense as of December 31, 2018, items recognized as a component of net periodic benefits expense in 2019, additional items deferred during 2019 and cumulative items not recognized as a component of net periodic benefits expense as of December 31, 2019. The items not recognized as a component of net periodic benefits expense have been recorded on our consolidated balance sheets in accumulated other comprehensive loss:

                                           |          |                                              | As of and for the Years Ended December 31, |                    |
------------------------------------------ | -------- | -------------------------------------------- | ------------------------------------------ | ------------------ | -------
                                           | 2018     | Recognition of Net Periodic Benefits Expense | Deferrals                                  | Net Change in AOCL | 2019
                                           |          |                                              | (Dollars in millions)                      |                    |
Accumulated other comprehensive loss:      |          |                                              |                                            |                    |
Pension plans:                             |          |                                              |                                            |                    |
Net actuarial (loss) gain                  | $(2,973) | 224                                          | (297)                                      | (73)               | (3,046)
Prior service benefit (cost)               | 46       | (8)                                          | 9                                          | 1                  | 47
Deferred income tax benefit (expense)      | 754      | (53)                                         | 69                                         | 16                 | 770
Total pension plans                        | (2,173)  | 163                                          | (219)                                      | (56)               | (2,229)
Post-retirement benefit plans:             |          |                                              |                                            |                    |
Net actuarial (loss) gain                  | 7        | —                                            | (182)                                      | (182)              | (175)
Prior service (cost) benefit               | (87)     | 16                                           | —                                          | 16                 | (71)
Deferred income tax benefit (expense)      | 22       | (4)                                          | 44                                         | 40                 | 62
Total post-retirement benefit plans        | (58)     | 12                                           | (138)                                      | (126)              | (184)
Total accumulated other comprehensive loss | $(2,231) | 175                                          | (357)                                      | (182)              | (2,413)


Dividends are distributions of the Group’s profit after tax before significant items to its shareholders and represent one of the ways the Group distributes returns to its shareholders.
All dividends are fully franked at a 30% tax rate.
On 29 August 2019, the Board of Directors declared a final dividend in respect of the 2019 period of 57 cents per share, fully franked at a 30% tax rate. The amount will be paid on or around 30 September 2019 and is expected to be $717 million. As the dividend was declared subsequent to 30 June 2019, no provision had been made as at 30 June 2019.
The DRP remains active. Eligible shareholders may participate in the DRP in respect of all or part of their shareholding. There is currently no DRP discount applied and no limit on the number of shares that can participate in the DRP.
Shares will be allocated to shareholders under the DRP for the 2019 final dividend at an amount equal to the average of the daily volume weighted average market price of ordinary shares of the Company traded on the ASX over the period of 10 trading days commencing on 6 September 2019. The last date for receipt of election notices for the DRP is 5 September 2019. The Company may acquire shares on-market during this period to satisfy its obligations under the DRP.
During the period, 13.4% (2018: 39.9%) of the dividends paid were reinvested in shares of the Company. The change in the reinvestment participation rate reflects the removal of the discount with effect from the 2018 final dividend paid on 12 October 2018. The DRP in respect of the 2019 interim dividend was satisfied in full through the on-market purchase and transfer of $73 million of shares to participating shareholders.

                                          | 2019      |        |                 |           | 2018   |
----------------------------------------- | --------- | ------ | --------------- | --------- | ------ | --------------
                                          | CENTS PER | TOTAL  | DATE OF         | CENTS PER | TOTAL  | DATE OF
                                          | SHARE     | AMOUNT | PAYMENT         | SHARE     | AMOUNT | PAYMENT
                                          |           | $M     |                 |           | $M     |
Current year interim                      | 45        | 593    | 5 April 2019    | 43        | 561    | 6 April 2018
Prior year final                          | 50        | 657    | 12 October 2018 | 50        | 647    | 6 October 2017
Prior year special                        | 10        | 131    | 12 October 2018 | -         | –      |
Dividends paid during the period          | 105       | 1,381  |                 | 93        | 1,208  |
Issues of shares to satisfy the dividend  |           |        |                 |           |        |
reinvestment plan                         |           | (114)  |                 |           | (482)  |
Dividends received - shares held in trust |           | -      |                 |           | (2)    |
Dividends paid in cash                    |           | 1,267  |                 |           | 724    |


Contractual Obligations
Following is a summary of our contractual cash obligations as of February 28, 2019 (in thousands):
Purchase obligations consist primarily of inventory purchase commitments.

                                         |           |          | Future Estimated Cash Payments Due by Period |           |
---------------------------------------- | --------- | -------- | -------------------------------------------- | --------- | --------
                                         | Less than | 1 - 3    | 3 - 5                                        |           |
Contractual Obligations                  | 1 year    | years    | years                                        | > 5 years | Total
Convertible senior notes principal       | $-        | $122,527 | $-                                           | $230,000  | $352,527
Convertible senior notes stated interest | 6,591     | 10,196   | 9,200                                        | 6,900     | 32,887
Operating leases                         | 7,565     | 12,628   | 12,325                                       | 7,659     | 40,177
Purchase obligations                     | 39,390    | -        | -                                            | -         | 39,390
Total contractual obligations            | $53,546   | $145,351 | $21,525                                      | $244,559  | $464,981


10. Other financial result
The other financial income and expenses from financial instruments are assigned to measurement categories according to IFRS 9 on the basis of the underlying transactions. Besides income and expenses from the measurement of financial instruments (except derivatives in hedging relationships in accordance with IAS 39), this also includes the measurement of foreign currency positions according to IAS 21.
The total comprehensive income from currency effects and measurement results from hedging transactions and hedging relationships totalled €17 million (2017/18: €−14 million). In addition, the other financial result reflects €−5 million (2017/18: €4 million) in currency effects resulting from the translation of the financial statements of foreign subsidiaries that are recognised through profit or loss in the year the subsidiary is deconsolidated or in the year business activities are discontinued. In addition, impairment losses on financial assets amounting to €2 million (2017/18: €0 million) were recognised in the reporting period.

€ million                                                                                | 2017/2018 | 2018/2019
------------------------------------------------------------------------------------------------------------ | --------- | ---------
Other financial income                                                                                | 182       | 159
thereof currency effects                                                                                | (126)     | (112)
thereof hedging transactions                                                                                | (16)      | (39)
Other financial expenses                                                                                | −184      | −158
thereof currency effects                                                                                | (−152)    | (−116)
thereof hedging transactions                                                                                | (−3)      | (−18)
Other financial result                                                                                | −2        | 1
thereof from financial instruments of the measurement categories according to IFRS 9 (previous year: IAS39): | (−16)     | (17)
thereof cash flow hedges:                                                                                |           |
ineffectiveness                                                                                | (7)       | (−1)


Unaudited Pro Forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of operations for Oracle, Aconex and certain other companies that we acquired since the beginning of fiscal 2018 that were considered relevant for the purposes of unaudited pro forma financial information disclosure as if the companies were combined as of the beginning of fiscal 2018. The unaudited pro forma financial information for all periods presented included the business combination accounting effects resulting from these acquisitions, including amortization charges from acquired intangible assets (certain of which are preliminary), stock-based compensation charges for unvested restricted stock-based awards and stock options assumed, if any, and the related tax effects as though the aforementioned companies were combined as of the beginning of fiscal 2018. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2018 or 2019.
The unaudited pro forma financial information for fiscal 2019 presented the historical results of Oracle for fiscal 2019 and certain other companies that we acquired since the beginning of fiscal 2019 based upon their respective previous reporting periods and the dates these companies were acquired by us, and the effects of the pro forma adjustments listed above.
The unaudited pro forma financial information for fiscal 2018 combined the historical results of Oracle for fiscal 201 8 and the historical results of Aconex for the twelve month period ended December 31, 2017 (adjusted due to differences in reporting periods and considering the date we acquired Aconex) and certain other companies that we acquired since the beginning of fiscal 201 8 based upon their respective previous reporting periods and the dates these companies were acquired by us, and the effects of the pro forma adjustments listed above. The unaudited pro forma financial information was as follows:

                                     | Year Ended May 31, |
------------------------------------ | ------------------ | -------
(in millions, except per share data) | 2019               | 2018
Total revenues                       | $39,512            | $39,546
Net income                           | $11,076            | $3,500
Basic earnings per share             | $3.05              | $0.85
Diluted earnings per share           | $2.97              | $0.83


Concentrations
The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable and short term investments. The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit.
The following table sets forth major customers accounting for 10% or more of the Company’s net revenue:

                      | Year Ended    |               |
--------------------- | ------------- | ------------- | -------------
                      | June 30,
2019 | June 30,
2018 | June 30, 2017
Tech Data Corporation | 18%           | 14%           | 16%
Jenne Corporation     | 17%           | 13%           | 15%
Westcon Group Inc.    | 12%           | 13%           | 12%


9. DEBT AND OTHER FINANCING ARRANGEMENTS
2021 Senior Convertible Notes
In 2017, the Company issued $300.0 million principal amount of 5.75% senior convertible notes (the “2021 Notes”) for a purchase price equal to 98% of the principal amount. The Company received net proceeds of $284.9 million, net of a discount of $6.0 million and issuance costs of $9.1 million. The debt discount is being accreted to interest expense over the term of the 2021 Notes using the interest method. The issuance costs were deferred and are being amortized to interest expense over the same term.
The 2021 Notes are governed by an Indenture, dated December 8, 2017 between the Company and US Bank National Association, as trustee (the “2017 Indenture”). The 2021 Notes mature on July 1, 2021, unless earlier repurchased or converted. Interest is payable semi-annually in arrears on January 1 and July 1, commencing January 1, 2018.
The 2021 Notes are convertible at an initial conversion rate of 23.8095 shares of the Company’s common stock per $1,000 principal amount of the 2021 Notes, which represents an initial conversion price of $42.00 per share, subject to adjustment for anti-dilutive issuances, voluntary increases in the conversion rate, and make-whole adjustments upon a fundamental change. A fundamental change includes a change in control, delisting of the Company’s common stock, and a liquidation of the Company. Upon conversion, the Company will deliver the applicable number of the Company’s common stock and cash in lieu of any fractional shares. Holders of the 2021 Notes may convert their 2021 Notes at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date.
The holders of the 2021 Notes may require the Company to repurchase all or a portion of their 2021 Notes at a cash repurchase price equal to 100% of the principal amount of the 2021 Notes being repurchased, plus the remaining scheduled interest through and including the maturity date, upon a fundamental change and events of default, including non-payment of interest or principal and other obligations under the 2017 Indenture.
The net carrying amounts of the liability components of the 2021 Notes consist of the following (in thousands):
The effective interest rate of the liability component is 6.4% for the 2021 Notes.

                                                           | December 31, 2019 | December 31, 2018
---------------------------------------------------------- | ----------------- | -----------------
Principal amount                                           | $300,000          | $300,000
Unamortized debt discount                                  | (2,691)           | (4,348)
Net carrying amount before unamortized debt issuance costs | 297,309           | 295,652
Unamortized debt issuance costs                            | (4,135)           | (6,685)
Net carrying value                                         | $293,174          | $288,967


11. Reportable Segments, Geographic Information and Major Customers
Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in assessing performance and allocating resources. The Company uses an internal management reporting system, which provides important financial data to evaluate performance and allocate the Company’s resources on a regional basis. Net sales for the segments are attributed to the region in which the product is manufactured or the service is performed. The services provided, manufacturing processes used, class of customers serviced and order fulfillment processes used are similar and generally interchangeable across the segments. A segment’s performance is evaluated based upon its operating income (loss). A segment’s operating income (loss) includes its net sales less cost of sales and selling and administrative expenses, but excludes corporate and other expenses. Corporate and other expenses  fiscal 2019 and the $13.5 million one-time employee bonus paid to full-time, non-executive employees during fiscal 2018 due to the Company's ability to access overseas cash as a result of Tax Reform (the "one-time employee bonus"). These costs are not allocated to the segments, as management excludes such costs when assessing the performance of the segments. Inter-segment transactions are generally recorded at amounts that approximate arm’s length transactions. The accounting policies for the segments are the same as for the Company taken as a whole.
Information about the Company’s three reportable segments for fiscal 2019, 2018 and 2017 is as follows (in thousands):

                      | 2019    | 2018    | 2017
--------------------- | ------- | ------- | -------
Depreciation:         |         |         |
AMER                  | $22,531 | $21,224 | $19,694
APAC                  | 16,905  | 15,954  | 15,588
EMEA                  | 6,105   | 6,054   | 5,467
Corporate             | 5,344   | 4,863   | 4,581
                      | 50,885  | 48,095  | 45,330
Capital expenditures: |         |         |
AMER                  | $42,459 | $17,690 | $18,111
APAC                  | 33,454  | 33,018  | 13,816
EMEA                  | 5,186   | 7,923   | 5,748
Corporate             | 9,501   | 4,149   | 863
                      | $90,600 | $62,780 | $38,538


2. Earnings Per Share:
Basic earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding for the period. Diluted
earnings per share are computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and
(b) the dilutive effect of potential common stock equivalents during the period. Stock options and unvested service-based RSU awards make up the common stock
equivalents and are computed using the treasury stock method.
The table below represents the basic and diluted earnings per share, calculated using the weighted average number of shares of common stock and potential
common stock equivalents outstanding for the years ended March 31, 2017, 2018, and 2019:
(1) Common stock equivalents not included in the computation of diluted earnings per share because the impact would have been anti-dilutive were 1,381 shares, 1,733
shares, and 4,375 shares for the fiscal years ended March 31, 2017, 2018, and 2019, respectively.

                                                                      |          | Fiscal Year Ended March 31, |
--------------------------------------------------------------------- | -------- | --------------------------- | --------
                                                                      | 2017     | 2018                        | 2019
Net income                                                            | $125,785 | $4,910                      | $271,813
Computation of Basic EPS:                                             |          |                             |
Weighted Average Shares Outstanding used in Computing Basic EPS       | 167,506  | 168,262                     | 168,713
Basic earnings per share                                              | $0.75    | $0.03                       | $1.61
Computation of Diluted EPS:                                           |          |                             |
Weighted Average Shares Outstanding used in Computing Basic EPS       | 167,506  | 168,262                     | 168,713
Effect of stock options                                               | 311      | 663                         | 609
Weighted Average Shares Outstanding used in Computing Diluted EPS (1) | 167,837  | 168,925                     | 169,322
Diluted earnings per share                                            | $0.75    | $0.03                       | $1.61


Indefinite-lived Intangible Assets
The carrying amount of indefinite-lived intangible assets were as follows (in millions):
The Broadcasting segment strategically acquires assets across the United States, which results in the recording of FCC licenses. Providing the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal costs. Accordingly, we have concluded that the acquired FCC licenses are indefinite-lived intangible assets.
In 2019, FCC licenses increased $15.6 million, $18.2 million of which was through acquisitions, offset by $2.3 million of impairments and $0.3 million loss on the sale of licenses. Our Broadcasting segment recorded the impairment as a result of its decision to forfeit FCC licenses in certain lower-ranked markets, and does not expect any significant changes to future cash flows as a result of these forfeitures. The Company reports intangible impairment charges within the Asset impairment expense line of our Consolidated Statements of Operations.

               | December 31, |
-------------- | ------------ | -------
               | 2019         | 2018
FCC licenses   | $ 136.2      | $ 120.6
State licenses | 2.5          | 2.5
Total          | $ 138.7      | $ 123.1


Contract Balances
A contract asset will be recorded if we have recognized revenue but do not have an unconditional right to the related consideration from the customer. For example, this will be the case if implementation services offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are reclassified to accounts receivable when the rights become unconditional.
The balance for our contract assets and contract liabilities (i.e. deferred revenues) for the periods indicated below were as follows:
The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance and the customer’s payments. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. During the year ended June 30, 2019, we reclassified $19.2 million of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional. During the year ended June 30, 2019, there was no significant impairment loss recognized related to contract assets.
We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services. Our deferred revenues primarily relate to customer support agreements which have been paid for by customers prior to the performance of those services. The amount of revenue that was recognized during the year ended June 30, 2019 that was included in the deferred revenue balances at July 1, 2018 was approximately $617 million.

                            | As of June 30, 2019 | As of July 1, 2018
--------------------------- | ------------------- | ------------------
Short-term contract assets  | $20,956             | $5,474
Long-term contract assets   | $15,386             | $12,382
Short-term deferred revenue | $641,656            | $618,197
Long-term deferred revenue  | $46,974             | $64,743


Overview of the Markets We Serve
The U.S. mortgage loan servicing market is comprised of first and second lien mortgage loans. Even through housing downturns, the mortgage loan servicing market generally remains stable, as the total number of first lien mortgage loans outstanding tends to stay relatively constant. The number of second lien mortgage loans outstanding can vary based on a number of factors including loan-to-value ratios, interest rates and lenders' desire to own such loans.
While delinquent mortgage loans typically represent a small portion of the overall mortgage loan servicing market, the mortgage loan default process is long and complex and involves multiple parties, a significant exchange of data and documentation and extensive regulatory requirements. Providers in the default process must be able to meet strict regulatory guidelines, which we believe are best met through the use of proven technology.
The U.S. mortgage loan origination market consists of both purchase and refinance mortgage loan originations. The mortgage loan origination process is complex and involves multiple parties, significant data exchange and significant regulatory oversight, which requires a comprehensive, scalable solution developed by a company with substantial industry experience. According to the Mortgage Bankers Association ("MBA"), the U.S. mortgage loan origination market for purchase and refinance mortgage loan originations is estimated as follows (in billions):
Note: Amounts may not recalculate due to rounding.
(1) The 2019, 2018 and 2017 U.S. mortgage loan origination market for purchase and refinance originations is estimated by the MBA Mortgage Finance Forecast as of February 18, 2020, February 11, 2019 and October 16, 2018, respectively.

                               | 2019     | 2018     | 2017
------------------------------ | -------- | -------- | --------
Mortgage loan originations(1): |          |          |
Purchase                       | $1,272.0 | $1,185.0 | $1,143.0
Refinance                      | 796.0    | 458.0    | 616.0
Total                          | $2,068.0 | $1,643.0 | $1,760.0


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 18 — Income Taxes
Significant components of our deferred tax assets and liabilities are as follows:

                                       | As of December 31, |
-------------------------------------- | ------------------ | -------
                                       | 2019               | 2018
Post-retirement benefits               | $1,100             | $1,061
Inventory reserves                     | 708                | 1,236
Loss carry-forwards                    | 4,724              | 4,647
Credit carry-forwards                  | 15,964             | 16,909
Accrued expenses                       | 4,932              | 5,685
Research expenditures                  | 17,953             | 16,847
Operating lease liabilities            | 6,211              | —
Stock compensation                     | 2,232              | 2,142
Foreign exchange loss                  | 1,986              | 2,245
Other                                  | 230                | 207
Gross deferred tax assets              | 56,040             | 50,979
Depreciation and amortization          | 12,453             | 11,500
Pensions                               | 13,552             | 11,736
Operating lease assets                 | 5,963              | —
Subsidiaries' unremitted earnings      | 1,903              | 1,258
Gross deferred tax liabilities         | 33,871             | 24,494
Net deferred tax assets                | 22,169             | 26,485
Deferred tax asset valuation allowance | (8,011)            | (8,274)
Total net deferred tax assets          | $14,158            | $18,211


Deferred tax (liabilities) assets are comprised of the following at:
The Company has Federal tax credit carryforwards of $5.4 million that expire in various tax years from 2028 to 2038. The Company has a Federal operating loss carryforward of $24.5 million expiring from 2029 through 2037 and a Federal operating loss carryforward of $17.9 million with an unlimited carryforward period. The Company also has state tax credit carryforwards of $0.3 million and state operating loss carryforwards of $43.3 million, which vary by jurisdiction and expire in various tax years through 2039.
In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.
As a result of this analysis and based on the current year’s taxable income, and utilization of certain carryforwards management determined an increase in the valuation allowance in the current year to be appropriate.
In calculating the valuation allowance, the Company was not permitted to use its existing deferred tax liabilities related to its indefinite-lived intangible assets (i.e. “naked credit deferred tax liabilities”) as a source of taxable income to support the realization of its existing finite-lived deferred tax assets.
Due to the Tax Act, U.S. net operating losses ("NOLs") arising in tax years ending after December 31, 2017 will no longer be subject to the limited 20-year carryforward period. Under the new law, these NOLs carry forward indefinitely, resulting in the creation of indefinite-lived deferred tax assets. Consequently, as the Company schedules its deferred taxes and considers the ability to realize its deferred tax assets in future periods, it needs to consider how existing deferred tax assets, other than historical NOLs, will reverse.
If the reversal is expected to generate an indefinite carryforward NOL under the new law, this may impact the valuation allowance assessment. The indefinite carryforward period for NOLs also means that its deferred tax liabilities related to indefinite-lived intangibles, commonly referred to as “naked credits,” can be considered as support for realization. The adjustment for the 2019 “naked credit” resulted in a $0.01 million deferred tax liability.
In 2019, it was determined that the foreign tax credit carryforward of the Company would not be realizable. The reduction of the foreign tax credit carryforward resulted in a decrease in the valuation allowance for those credits. Therefore, there is no net income tax provision in 2019 related to the reduction in the foreign tax credit carryforward. A valuation allowance is required to the extent it is more likely than not that the future benefit associated with certain Federal and state tax loss carryforwards will not be realized.
The current year income tax provision includes a reduction of the Company’s valuation allowance due to the establishment of a deferred tax liability in connection with the issuance of convertible debt. The establishment of that deferred tax liability created “future taxable income” for the utilization of existing deferred tax assets of the Company, resulting in the $4 million reduction of the Company’s valuation allowance.
The Company records the benefits relating to uncertain tax positions only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.
At December 31, 2019, the Company’s reserve for uncertain tax positions is not material and we believe we have adequately provided for its tax-related liabilities. The Company is no longer subject to United States federal income tax examinations for years before 2014.

                                              | December 31,   |
--------------------------------------------- | -------------- | --------
                                              | (in thousands) |
                                              | 2019           | 2018
Deferred tax (liabilities) assets:            |                |
Subordinated debt                             | $(3,659)       | $—
Indefinite lived intangibles                  | (64)           | —
Right of use assets                           | (756)          | —
Software development costs                    | (1,219)        | (1,954)
Acquired intangible assets                    | (446)          | (676)
Depreciation on property, plant and equipment | (352)          | —
Gross deferred tax liabilities                | (6,496)        | (2,630)
Allowances for bad debts and inventory        | 3,013          | 2,785
Capitalized inventory costs                   | 141            | 116
Intangible assets                             | 117            | 420
Employee benefit accruals                     | 2,427          | 1,742
Interest Limitation                           | 1,248          | —
Lease liabilities                             | 772            | —
Federal net operating loss carryforward       | 8,563          | 6,512
State net operating loss carryforward         | 2,317          | 2,112
Tax credit carryforwards                      | 5,777          | 6,176
Depreciation on property, plant and equipment | —              | 373
Other                                         | 912            | 722
Gross deferred tax assets                     | 25,287         | 20,958
Less valuation allowance                      | (18,855)       | (18,328)
Net deferred tax liabilities                  | $(64)          | $—


Sales and Marketing
Sales and marketing expenses increased $3.1 million, or 1%, in 2019 as compared to 2018. As a percentage of revenue, sales and marketing expense decreased by approximately two percentage points, resulting from the 2018 Reallocation, increased cost efficiency, and leverage realized from changes to our sales commission plans as we continued our efforts to strategically scale our sales teams and improve their productivity.
Sales and marketing expenses decreased $15.6 million, or 7%, in 2018 as compared to 2017. As a percentage of revenue, sales and marketing expense decreased by approximately eight percentage points, primarily resulting from a combination of increased cost efficiency, reduction in headcount as part of our restructuring activities, and leverage realized from changes to our sales commission plans as we continued our efforts to strategically scale our sales teams and improve their productivity.

                    |          | Year Ended December 31, |
------------------- | -------- | ----------------------- | --------
                    | 2019     | 2018                    | 2017
                    |          | (dollars in thousands)  |
Sales and marketing | $227,733 | $224,635                | $240,271
Percent of revenue  | 39.5%    | 41.8%                   | 49.9%


1 Interest on borrowings includes interest on short-term borrowings and on long-term debt.
FOREIGN EXCHANGE AND CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS We recognized $79 million in net foreign exchange gains in 2019 (2018 – $136 million in net losses). These gains and losses were primarily attributed to our US dollar-denominated commercial paper (US CP) program borrowings (see note 17).
These foreign exchange gains (2018 – losses) were partially offset by the $80 million loss related to the change in fair value of derivatives (2018 – $95 million gain) that was primarily attributed to the debt derivatives, which were not designated as hedges for accounting purposes, we used to substantially offset the foreign exchange risk related to these US dollar-denominated borrowings.
During the year ended December 31, 2018, after determining we would not be able to exercise our outstanding bond forward derivatives (bond forwards) within the designated time frame, we discontinued hedge accounting and reclassified a $21 million loss from the hedging reserve within shareholders’ equity to “change in fair value of derivative instruments” within finance costs.
We subsequently extended the bond forwards and redesignated them as effective hedges. During the year ended December 31, 2019, we exercised these bond forwards. See note 17 for more information on our bond forwards.
NOTE 11: FINANCE COSTS

                                                   | Years ended December 31 | Years ended December 31 | Years ended December 31
-------------------------------------------------- | ----------------------- | ----------------------- | -----------------------
(In millions of dollars)                           | Note                    | 2019                    | 2018
Interest on borrowings 1                           |                         | 746                     | 709
Interest on post-employment benefits liability     | 23                      | 11                      | 14
Loss on repayment of long-term debt                | 21                      | 19                      | 28
(Gain) loss on foreign exchange                    |                         | (79)                    | 136
Change in fair value of derivative instruments     |                         | 80                      | (95)
Capitalized interest                               |                         | (19)                    | (20)
Other                                              |                         | 21                      | 21
Finance costs before interest on lease liabilities |                         | 779                     | 793
Interest expense on lease liabilities              | 8                       | 61                      | -
Total finance costs                                |                         | 840                     | 793


Note: 1 Primarily comprises foreign exchange differences reflected in the income statement in relation to sterling and US dollar balances.
Net financing costs increased by €1.3 billion, primarily driven by mark-to-market losses (including hedges of the mandatory convertible bond) and adverse foreign exchange rate movements. Net financing costs before interest on settlement of tax issues includes increased interest costs as part of the financing for the Liberty Global transaction as well as adverse interest rate movements on borrowings in foreign operations. Excluding these, underlying financing costs remained stable, reflecting consistent average net debt balances and weighted average borrowing costs for both periods.

Net financing costs                                             |         |
--------------------------------------------------------------- | ------- | -------
                                                                | 2019    | 2018
                                                                | €m      | €m
Investment income                                               | 433     | 685
Financing costs                                                 | (2,088) | (1,074)
Net financing costs                                             | (1,655) | (389)
Analysed as:                                                    |         |
Net financing costs before interest on settlement of tax issues | (1,043) | (749)
Interest income arising on settlement of outstanding tax issues | 1       | 11
                                                                | (1,042) | (738)
Mark to market (losses)/gains                                   | (423)   | 27
Foreign exchange (losses)/gains1                                | (190)   | 322
Net financing costs                                             | (1,655) | (389)


Fourth quarter gross profit was $1,081 million and gross margin was 39.3%. On a sequential basis, gross margin increased 140 basis points, mainly driven by improved product mix and better manufacturing efficiencies.
Gross margin decreased 70 basis points year-over-year, mainly impacted by price pressure and unsaturation charges, partially offset by improved manufacturing efficiencies, better product mix and favorable currency effects, net of hedging.

                                             |                   | Three Months Ended       |                   | Variation  |
-------------------------------------------- | ----------------- | ------------------------ | ----------------- | ---------- | --------------
                                             | December 31, 2019 | September 29, 2018       | December 31, 2018 | Sequential | Year-Over-Year
                                             |                   | (Unaudited, in millions) |                   |            |
Gross profit                                 | $ 1,081           | $ 967                    | $ 1,059           | 11.8%      | 2.0%
Gross margin (as percentage of net revenues) | 39.3%             | 37.9%                    | 40.0%             | +140 bps   | -70 bps


* As adjusted to reflect the impact of the full retrospective adoption of IFRS 15. See Note 2 for further details.
The U.S. Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 introduces a number of changes to U.S. income tax law. Among other changes, the Tax Act (i) reduces the U.S. federal corporate tax rate from 35% to 21%, (ii) enacts limitations regarding the deductibility of interest expense, (iii) modifies the provisions relating to the limitations on deductions for executive compensation of publicly traded corporations, (iv) imposes new limitations on the utilization of net operating loss arising in taxable years beginning after December 31, 2017, (v) repeals the corporate alternative minimum tax and provides for a refund of existing alternative minimum tax credits, and (vi) creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively.
As a result of the new U.S. federal statutory corporate tax rate of 21% contained within the Tax Act, the Group recorded non-cash charges of $16.9 million to tax expense and $16.9 million to equity to revalue the Group’s U.S. net deferred tax assets during fiscal year 2018.
In June 2019 and December 2017, as a result of the Group’s assessment of the realizability of its Australian and U.S. deferred tax assets, the Group recorded non-cash charges to tax expense of $54.7 million and $30.4 million, respectively, and $25.8 million to equity in December 2017 to reduce the carrying value of these assets. The assessment of the realizability of the Australian and U.S. deferred tax assets is based on all available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets. The Group will continue to assess and record any necessary changes to align its deferred tax assets to their realizable value.
In December 2017, the Group made changes to its corporate structure to include certain foreign subsidiaries in its U.S. consolidated tax group that resulted in the creation of certain deferred tax assets and liabilities, including a non-recognized deferred tax asset of $2.1 billion related to the fair market value of its intellectual property. The assets are included in the Group’s quarterly assessment and are only recognized to the extent they are determined to be realizable.
The impact on the net deferred tax asset from business combinations of $19.1 million in fiscal year 2019 represents the net deferred tax assets and liabilities recognized as a result of the acquisition of OpsGenie. The Group acquired net operating loss carryforward deferred tax assets of approximately $1.8 million from OpsGenie. The Group also recognized deferred tax liabilities of approximately $19.6 million primarily related to acquired intangibles from OpsGenie, the amortization of which will not be deductible from future taxable profits.

                                            | 2019                  | 2018
------------------------------------------- | --------------------- | ------------
                                            | (U.S. $ in thousands) |
                                            |                       | *As Adjusted
Reconciliation of deferred tax assets, net  |                       |
Balance at the beginning of                 | $47,060               | $140,532
Deferred tax expense for the year           | (15,916)              | (53,297)
Debited to equity                           | (8,884)               | (40,092)
Adjustment in respect of income tax payable | —                     | (83)
Impact from business combinations           | (19,092)              | —
Currency revaluation impact                 | 44                    | —
Balance at the ending of                    | $3,212                | $47,060


Foreign Currency Analysis
We generate a significant amount of our revenue in the United States, Germany, Japan, the United Kingdom and Canada
The following table shows the impact of foreign exchange rate changes on our net revenue and total spend:
(1) Please refer to the Glossary of Terms for the definitions of our constant currency growth rates.
Changes in the value of the U.S. dollar may have a significant effect on net revenue, total spend, and income (loss) from operations in future periods. We use foreign currency contracts to reduce the exchange rate effect on a portion of the net revenue of certain anticipated transactions but do not attempt to completely mitigate the impact of fluctuations of such foreign currency against the U.S. dollar.

            | Fiscal Year Ended January 31, 2019                         |                                                                    |
----------- | ---------------------------------------------------------- | ------------------------------------------------------------------ | -------------------------------------------------------------------
            | Percent change compared to prior fiscal year (as reported) | Constant currency percent change compared to prior fiscal year (1) | Positive/negative/neutral impact from foreign exchange rate changes
Revenue     | 25%                                                        | 24%                                                                | Positive
Total spend | 1%                                                         | 1%                                                                 | Neutral


Contractual Obligations
The following table presents the payments due by fiscal year for our outstanding contractual obligations as of December 31, 2019 (in thousands):
(1) Includes estimated cash interest to be paid over the remaining terms of the underlying debt. Interest payments are based on fixed and floating rates as of December 31, 2019.
(2) Purchase obligations represent agreements to purchase goods or services, including open purchase orders and contracts with fixed volume commitments, that are noncancelable or cancelable with a significant penalty. Purchase obligations for our long-term supply agreements for the purchase of substrate glass and cover glass represent specified termination penalties, which are up to $430 million in the aggregate under the agreements. Our actual purchases under these supply agreements are expected to be approximately $2.4 billion of substrate glass and $500 million of cover glass.
(3) In connection with business or project acquisitions, we may agree to pay additional amounts to the selling parties upon achievement of certain milestones. See Note 14. “Commitments and Contingencies” to our consolidated financial statements for further information.
(4) Transition tax obligations represent estimated payments for U.S. federal taxes associated with accumulated earnings and profits of our foreign corporate subsidiaries. See Note 18. “Income Taxes” to our consolidated financial statements for further information.
(5) Includes expected letter of credit fees and unused revolver fees.
We have excluded $72.2 million of unrecognized tax benefits from the amounts presented above as the timing of such obligations is uncertain.

                                 |            |           | Payments Due by Year |          |
-------------------------------- | ---------- | --------- | -------------------- | -------- | ---------
                                 |            | Less Than | 1 - 3                | 3 - 5    | More Than
                                 | Total      | 1 Year    | Years                | Years    | 5 Years
Long-term debt obligations       | $482,892   | $17,684   | $98,571              | $37,496  | $329,141
Interest payments (1) .          | 168,040    | 17,276    | 29,533               | 27,409   | 93,822
Operating lease obligations      | 162,913    | 15,153    | 28,771               | 26,708   | 92,281
Purchase obligations (2) .       | 1,424,267  | 900,200   | 221,888              | 187,277  | 114,902
Recycling obligations .          | 137,761    | —         | —                    | —        | 137,761
Contingent consideration (3) .   | 6,895      | 2,395     | 4,500                | —        | —
Transition tax obligations (4) . | 76,667     | 6,620     | 14,747               | 32,259   | 23,041
Other obligations (5) .          | 10,527     | 2,933     | 5,164                | 2,430    | —
Total .                          | $2,469,962 | $962,261  | $403,174             | $313,579 | $790,948


Additional Information
The following table presents sales information by geographic area for the years ended December 31, 2019, 2018 and 2017:
Customers comprising more than 10% of revenue can change from year to year. Single customers comprising more than 10% of our revenue in 2019 included three customers at 19%, 17% and 13%. Single customers comprising more than 10% of our revenue in 2018 included two customers at 27% and 17%. Single customers comprising more than 10% of our revenue in 2017 included two customers at 40% and 16%. Other than those with more than 10% of revenues disclosed above, and excluding distributors, our next five largest customers can change, and has historically changed, from year-to-year. These combined customers represented 15%, 18% and 15% of total revenue in 2019, 2018 and 2017, respectively.
As of December 31, 2019, property, plant and equipment, net totaled $73.7 million, which included $69.9 million held in the U.S. and $3.9 million held outside the U.S. As of December 31, 2018, property, plant and equipment, net totaled $80.6 million, which included $77.3 million held in the U.S. and $3.3 million held outside the U.S. Property, plant and equipment, net is reported on a company-wide, functional basis only.

(In thousands)      | 2019     | 2018     | 2017
------------------- | -------- | -------- | --------
United States       | $300,853 | $288,843 | $508,178
Mexico              | 90,795   | 12,186   | 2,246
Germany             | 78,062   | 167,251  | 119,502
Other international | 60,351   | 60,997   | 36,974
Total               | $530,061 | $529,277 | $666,900


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT(Tabular amounts in millions, unless otherwise disclosed)
11. ASSET RETIREMENT OBLIGATIONS
The changes in the carrying amount of the Company’s asset retirement obligations were as follows:
(1) Revisions in estimates include decreases to the liability of $6.7 million and $49.4 million related to foreign currency translation for the years ended December 31, 2019 and 2018, respectively.
As of December 31, 2019, the estimated undiscounted future cash outlay for asset retirement obligations was $3.2 billion.

                                   | 2019     | 2018
---------------------------------- | -------- | --------
Beginning balance as of January 1, | $1,210.0 | $1,175.3
Additions                          | 61.8     | 39.6
Accretion expense                  | 81.6     | 83.6
Revisions in estimates (1)         | 56.8     | (81.5)
Settlements                        | (26.1)   | (7.0)
Balance as of December 31,         | $1,384.1 | $1,210.0


Free Cash Flow (non-U.S. GAAP measure). We also present Free Cash Flow, which is a non-U.S. GAAP measure, defined as (i) net cash from operating activities plus (ii) net cash used in investing activities, excluding payment for purchases (and proceeds from the sale) of marketable securities, and net cash variation for joint ventures deconsolidation, which are considered as temporary financial investments. The result of this definition is ultimately net cash from operating activities plus payment for purchase and proceeds from sale of tangible, intangible and financial assets, proceeds received in the sale of businesses and cash paid for business acquisitions.
We believe Free Cash Flow, a non-U.S. GAAP measure, provides useful information for investors and management because it measures our capacity to generate cash from our operating and investing activities to sustain our operations. Free Cash Flow is not a U.S. GAAP measure and does not represent total cash flow since it does not include the cash flows generated by or used in financing activities.
Free Cash Flow reconciles with the total cash flow and the net cash increase (decrease) by including the payment for purchases (and proceeds from the sale) of marketable securities and net cash variation from joint ventures deconsolidation, the net cash from (used in) financing activities and the effect of changes in exchange rates. In addition, our definition of Free Cash Flow may differ from definitions used by other companies. Free Cash Flow is determined from our Consolidated Statements of Cash Flows as follows:
(1) Reflects the total of the following line items reconciled with our Consolidated Statements of Cash Flows relating to the investing activities: Payment for purchase of tangible assets, Proceeds from sale of tangible assets, Payment for purchase of intangible assets, Payment for purchase of financial assets, Proceeds from sale of financial assets, Payment for disposal of equity investment, Proceeds received in sale of businesses, Payment for business acquisitions, net of cash and cash equivalents acquired.
Free Cash Flow was positive $497 million in 2019, compared to positive $533 million and positive $308 million in 2018 and 2017, respectively.

                                                                                |         | Year Ended December 31, |
------------------------------------------------------------------------------------------------------------------------------- | ------- | ----------------------- | -------
                                                                                | 2019    | 2018                    | 2017
                                                                                |         | (In millions)           |
Net cash from operating activities                                                                                | $1,869  | $1,845                  | $1,677
Net cash used in investing activities                                                                                | (1,172) | (1,212)                 | (1,468)
Excluding:                                                                                |         |                         |
Payment for purchase and proceeds from sale of marketable securities, and net cash variation for joint ventures deconsolidation | (200)   | (100)                   | 99
Payment for purchase and proceeds from sale of tangible and intangible assets, payment for business acquisitions(1)             | (1,372) | (1,312)                 | (1,369)
Free Cash Flow (non-U.S. GAAP measure)                                                                                | $497    | $533                    | $308