We present below a summary of the items that cause recorded income taxes to differ from taxes computed using the statutory
federal income tax rate for the years ended December 31, 2019, 2018 and 2017:
On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (“the Act”), resulting in significant modifications to existing law. In December 2017, we recorded a provisional estimate of $3.3 million for the one-time deemed repatriation transition tax on unrepatriated foreign earnings. The provisional amount was based on information available at that time, including estimated tax earnings and profits from foreign investments. In the fourth quarter of 2018, we finalized our transition tax calculation and recorded additional tax expense of $0.3 million. In December 2017, we also recorded a provisional write-down to deferred tax assets of $0.7 million related to changes in Section 162(m), Internal Revenue Code of 1986, regarding deductions for excessive employee compensation. In 2018, we finalized our calculation under Section 162(m) and recorded a tax benefit of $0.5 million. We also recorded a one-time tax benefit in December 2017 of $1.2 million from the remeasurement of deferred tax assets and liabilities from 35% to 21%. As of December 31, 2018, we completed the accounting for all of the impacts of the Act. Act”), resulting in significant modifications to existing law. In December 2017, we recorded a provisional estimate of $3.3 million for the one-time deemed repatriation transition tax on unrepatriated foreign earnings. The provisional amount was based on information available at that time, including estimated tax earnings and profits from foreign investments. In the fourth quarter of 2018, we finalized our transition tax calculation and recorded additional tax expense of $0.3 million. In December 2017, we also recorded a provisional write-down to deferred tax assets of $0.7 million related to changes in Section 162(m), Internal Revenue Code of 1986, regarding deductions for excessive employee compensation. In 2018, we finalized our calculation under Section 162(m) and recorded a tax benefit of $0.5 million. We also recorded a one-time tax benefit in December 2017 of $1.2 million from the remeasurement of deferred tax assets and liabilities from 35% to 21%. As of December 31, 2018, we completed the accounting for all of the impacts of the Act.
Act”), resulting in significant modifications to existing law. In December 2017, we recorded a provisional estimate of $3.3 million for
the one-time deemed repatriation transition tax on unrepatriated foreign earnings. The provisional amount was based on information
available at that time, including estimated tax earnings and profits from foreign investments. In the fourth quarter of 2018, we
finalized our transition tax calculation and recorded additional tax expense of $0.3 million. In December 2017, we also recorded a
provisional write-down to deferred tax assets of $0.7 million related to changes in Section 162(m), Internal Revenue Code of 1986,
regarding deductions for excessive employee compensation. In 2018, we finalized our calculation under Section 162(m) and recorded
a tax benefit of $0.5 million. We also recorded a one-time tax benefit in December 2017 of $1.2 million from the remeasurement of
deferred tax assets and liabilities from 35% to 21%. As of December 31, 2018, we completed the accounting for all of the impacts of
the Act.
The Act provides for the global intangible low-taxed income (“GILTI”) provision which requires us in our U.S. income tax return, to include foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The FASB staff provided additional guidance to address the accounting for the effects of the provisions related to the taxation of GILTI, noting that companies should make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to include the tax expense in the year it is incurred. We have elected to include the tax expense in the year that we incur it.

                                              |             | Year Ended December 31, |
--------------------------------------------- | ----------- | ----------------------- | -------
                                              | 2019        | 2018                    | 2017
Statutory federal income tax rate             | 21.0 %      | 21.0 %                  | 35.0 %
Effect of:                                    |             |                         |
State income tax, net of federal benefit      | 3.5         | 3.4                     | 2.3
State credit carryforwards                    | 1.3         | 0.3                     | (0.1 )
U.S. federal R&D tax credit                   | (1.9 )      | (1.7 )                  | (0.8 )
Tax Reform                                    | -           | (0.1 )                  | 1.5
Excess benefit of equity compensation         | (0.1 )      | (0.6 )                  | (1.0 )
Foreign-derived intangible income (FDII)      |             |                         |
deduction                                     | (3.1 )      | (1.6 )                  | -
Foreign operations                            | 1.1         | 1.2                     | (0.1 )
Tax contingencies                             | 3.7         | 0.5                     | -
Other permanent differences                   | 1.5         | 1.0                     | 0.3
Change in valuation allowance                 | (0.9 )      | (0.2 )                  | (0.1 )
Income Tax                                    | 26.1%       | 23.2%                   | 37.0%


16. SHARE-BASED PAYMENTS continued
c. Employee Share Option Plan
The Employee Share Option Plan (the Option Plan) was approved by shareholders at the Company’s AGM on 9 November 2001 and reaffirmed at the AGM on 24 November 2011.The Employee Share Option Plan (the Option Plan) was approved by shareholders at the Company’s AGM on 9 November 2001 and reaffirmed at the AGM on 24 November 2011. Under the Option Plan, awards are made to eligible executives and other management personnel who have an impact on the Group’s performance. Option Plan awards are delivered in the form of options over shares, which vest over a period of three years subject to meeting performance measures and continuous employment with the Company. Each option is to subscribe for one ordinary share when the option is exercised and, when issued, the shares will rank equally with other shares.
Unless the terms on which an option was offered specified otherwise, an option may be exercised at any time after the vesting date on satisfaction of the relevant performance criteria.
Options issued under the Employee Share Option Plan are valued on the same basis as those issued to KMP, which is described in Note 16(d).
There were no new options issued under the Option Plan during the 30 June 2019 and 30 June 2018 financial years, as the Option Plan was replaced with the Rights Plan as described in Note 16(b).
Movement of options during the year ended 30 June 2019:
1. The original expiry date for this tranche of options was 2 July 2018. However, due to extraordinary circumstances, the remaining 75,000 options could not be exercised during the prior financial year. Therefore, the Board had exercised its discretion during the year to extend the expiry date for the remaining options to 30 September 2018.
2. Options associated with an EPS hurdle are not expected to vest on 31 August 2019 as the minimum performance target will not be met. Options associated with a TSR hurdle will vest on 31 August 2019 in accordance with accounting standards. However, because the minimum target was not met, these options will be restricted and unexercisable. Refer to Section 3b) of the audited Remuneration Report for further details.

Grant Date                      | Vesting Date  | Expiry Date    | Exercise Price $ | No. of Options at Beg. of Year | Options Exercised or Lapsed | No. of Options at End of Year
------------------------------- | ------------- | -------------- | ---------------- | ------------------------------ | --------------------------- | -----------------------------
2 Jul 2013                      | 2 Jul 2016    | 30 Sept 2018 1 | 0.92             | 75,000                         | (75,000)                    | -
2 Jul 2014                      | 2 Jul 2017    | 2 Jul 2019     | 1.30             | 470,000                        | (205,000)                   | 265,000
2 Jul 2015                      | 2 Jul 2018    | 2 Jul 2020     | 2.67             | 1,000,000                      | (75,000)                    | 925,000
22 Dec 2016                     | 31 Aug 2019 2 | 22 Dec 2021    | 3.59             | 1,323,730                      | -                           | 1,323,730
Total                           |               |                |                  | 2,868,730                      | (355,000)                   | 2,513,730
Weighted average exercise price |               |                |                  |                                | $1.51                       | $3.01


(4) Goodwill, Customer Relationships and Other Intangible Assets
Goodwill, customer relationships and other intangible assets consisted of the following:
Our goodwill was derived from numerous acquisitions where the purchase price exceeded the fair value of the net assets acquired (including the acquisition described in Note 2—Acquisition of Level 3). As of December 31, 2019, the weighted average remaining useful lives of the intangible assets were approximately 8 years in total, approximately 9 years for customer relationships, 4 years for capitalized software and 3 years for trade names.
Total amortization expense for intangible assets for the years ended December 31, 2019, 2018 and 2017 was $1.7 billion, $1.8 billion and $1.2 billion, respectively. As of December 31, 2019, the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $44.0 billion.

                                                                           | As of December 31    |
-------------------------------------------------------------------------- | -------------------- | ------
                                                                           | 2019                 | 2018
                                                                           | (Dollars in million) |
Goodwill                                                                   | $21,534              | 28,031
Customer relationships, less accumulated amortization of $9,809 and $8,492 | $7,596               | 8,911
Indefinite-life intangible assets                                          | $269                 | 269
Other intangible assets subject to amortization:                           |                      |
Capitalized software, less accumulated amortization of $2,957 and $2,616   | $1,599               | 1,468
Trade names, less accumulated amortization of $91 and $61                  | 103                  | 131
Total other intangible assets, net                                         | $1,971               | 1,868


2019 financial year guidance
The adjusted EBITDA and free cash flow guidance measures for the year ended 31 March 2019 were forward-looking alternative performance measures based on the Group’s assessment of the global macroeconomic outlook and foreign exchange rates of €1:£0.87, €1:ZAR 15.1, €1:TRY 5.1 and €1:EGP 22.1. These guidance measures exclude the impact of licence and spectrum payments, material one-off tax-related payments, restructuring payments, changes in shareholder recharges from India and any fundamental structural change to the Eurozone. They also assume no material change to the current structure of the Group. We believe it is both useful and necessary to report these guidance measures to give investors an indication of the Group’s expected future performance, the Group’s sensitivity to foreign exchange movements and to report actual performance against these guidance measures.
Reconciliations of adjusted EBITDA and free cash flow to the 2019 financial year guidance basis is shown below.

                                  |         | Adjusted EBITDA |        | Free cash flow (pre-spectrum)
--------------------------------- | ------- | --------------- | ------ | -----------------------------
                                  | 2019 €m | 2018 €m         | Growth | 2019 €m
Reported (IAS 18 basis)           | 14,139  | 14,737          | (4.1)% | 5,443
Other activity (including M&A)    | (95)    | (341)           |        | –
Foreign exchange                  | –       | (288)           |        | –
Handset financing and settlements | (198)   | (674)           |        | –
Guidance basis                    | 13,846  | 13,434          | 3.1%   | 5,443


Backlog
At December 31, 2019 and 2018, our backlog of unfilled orders in our four reportable segments was as follows:
Customers may delay delivery of products or cancel orders suddenly and without advanced notice, subject to possible cancellation penalties. Due to possible customer changes in delivery schedules and cancellation of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition or results of operations.

                      | 2019          | 2018
--------------------- | ------------- | ------
                      | (in millions) |
Semiconductor Test    | $543.2        | $367.5
System Test           | 206.0         | 149.5
Wireless Test         | 42.9          | 32.0
Industrial Automation | 17.9          | 19.7
                      | $810.0        | $568.7


North America
North America net revenues increased $710,000 in 2019 compared to 2018 (see “Revenues” above). North America expenses decreased $2.2 million from 2018 to 2019 primarily due to a $1.7 million decrease in salary and employee related expenses, $742,000 decrease in professional service expenses, a $584,000 decrease in customer service costs and a $498,000 decrease in trade and brand marketing expenses, offset partially by a $1.2 million increase in member acquisition costs.

                                          | Year Ended December 31, |
----------------------------------------- | ----------------------- | -------
                                          | 2019                    | 2018
(In thousands)                            |                         |
Revenues                                  | $68,024                 | $67,314
Income from operations                    | $12,491                 | $9,587
Income from operations as a % of revenues | 18%                     | 14%


4. Discontinued Operations
In fiscal 2019, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $297 million and incurred a pre-tax loss on sale of $86 million, related primarily to the recognition of cumulative translation adjustment losses of $67 million and the guarantee liabilities discussed below. The definitive agreement provided that, if the purchaser sells the business within two years of the closing date, we will be entitled to 20% of the net proceeds of that future sale, as defined in the agreement, in excess of $325 million. The sale of the SubCom business, which was previously included in our Communications Solutions segment, represents our exit from the telecommunications market and was significant to our sales and profitability, both to the Communications Solutions segment and to the consolidated company. We concluded that the divestiture was a strategic shift that had a major effect on our operations and financial results. As a result, the SubCom business met the held for sale and discontinued operations criteria and has been reported as such in all periods presented on our Consolidated Financial Statements.
Upon entering into the definitive agreement, which we consider a level 2 observable input in the fair value hierarchy, we assessed the carrying value of the SubCom business and determined that it was in excess of its fair value. In fiscal 2018, we recorded a pre-tax impairment charge of $19 million, which was included in income (loss) from discontinued operations on the Consolidated Statement of Operations, to write the carrying value of the business down to its estimated fair value less costs to sell.
In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These guarantees had a combined value of approximately $1.55 billion as of fiscal year end 2019 and are expected to expire at various dates through fiscal 2025; however, the majority are expected to expire by fiscal year end 2020. At the time of sale, we determined that the fair value of these guarantees was $12 million, which we recognized by a charge to pre-tax loss on sale. Also, under the terms of the definitive agreement, we are required to issue up to $300 million of new performance guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of up to three years. At fiscal year end 2019, there were no such new performance guarantees outstanding. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.
The following table presents the summarized components of income (loss) from discontinued operations, net of income taxes, for the SubCom business and prior divestitures:
(1) Included a $19 million impairment charge recorded in connection with the sale of our SubCom business.
(2) Included a $19 million credit related to the SubCom business’ curtailment of a postretirement benefit plan.

                                                                |          | Fiscal        |
--------------------------------------------------------------- | -------- | ------------- | ------
                                                                | 2019     | 2018          | 2017
                                                                |          | (in millions) |
Net sales                                                       | $  41    | $  702        | $  928
Cost of sales                                                   | 50       | 602           | 653
Gross margin                                                    | (9)      | 100           | 275
Selling, general, and administrative expenses                   | 11       | 48            | 50
Research, development, and engineering expenses                 | 3        | 39            | 40
Restructuring and other charges (credits), net                  | 3        | 30 (1)        | (3)
Operating income (loss)                                         | (26)     | (17)          | 188
Non-operating income, net                                       | —        | —             | 22 (2)
Pre-tax income (loss) from discontinued operations              | (26)     | (17)          | 210
Pre-tax gain (loss) on sale of discontinued operations          | (86)     | (2)           | 3
Income tax (expense) benefit                                    | 10       | —             | (70)
Income (loss) from discontinued operations, net of income taxes | $  (102) | $  (19)       | $  143


7 OTHER GAINS, NET
Note: (a) The disposal and deemed disposal gains of approximately RMB8,492 million recognised during the year ended 31 December 2019 mainly comprised the following:
– net gains of approximately RMB4,859 million (2018: RMB1,661 million) on dilution of the Group’s equity interests in certain associates due to new equity interests being issued by these associates (Note 21). These investee companies are principally engaged in Internet-related business; and
– aggregate net gains of approximately RMB3,633 million (2018: RMB1,271 million) on disposals, partial disposals or deemed disposals of various investments of the Group.
(b) Net fair value gains on FVPL of approximately RMB9,511 million (Note 24) recognised during the year ended 31 December 2019 mainly comprised the following:
– aggregate gains of approximately RMB1,886 million (2018: RMB22,215 million) arising from reclassification of several investments principally engaged in Internet-related business from FVPL to investments in associates due to the conversion of the Group’s redeemable instruments or preferred shares of these investee companies into their ordinary shares and the Group has board representation upon their respective initial public offerings (“IPO”); and
– net gains of approximately RMB7,625 million (2018: RMB6,523 million) from fair value changes of FVPL.

                                                                                | 2019        | 2018
----------------------------------------------------------------------------------------------------------------- | ----------- | -----------
                                                                                | RMB’Million | RMB’Million
Net gains on disposals and deemed disposals of investee companies (Note (a))                                      | 8,492       | 2,932
Net fair value gains on FVPL (Note (b))                                                                           | 9,511       | 28,738
Subsidies and tax rebates                                                                                | 4,263       | 3,456
Impairment provision/(reversal) for investee companies and intangible assets arising from acquisitions (Note (c)) | (4,006)     | (17,577)
Net fair value gains on other financial instruments (Note 27 and Note 38)                                         | 1,647       | 1,019
Dividend income                                                                                | 1,014       | 686
Donations to Tencent Charity Funds                                                                                | (850)       | (730)
Others                                                                                | (382)       | (1,810)
                                                                                | 19,689      | 16,714


Contractual Obligations
Our principal commitments consist of obligations for outstanding debt, leases for our office space, contractual commitments for professional service projects, and third-party consulting firms. The following table summarizes our contractual obligations at December 31, 2019 (in thousands):

                                                        |          |                  | Payment Due by period |           |
------------------------------------------------------- | -------- | ---------------- | --------------------- | --------- | -----------------
                                                        | Total    | Less than 1 Year | 1-3 Years             | 3-5 Years | More than 5 Years
Long-term debt obligations including interest           | $334,500 | $17,250          | $317,250              | $—        | $—
Operating lease obligations                             | 82,895   | 9,434            | 47,410                | 15,226    | 10,825
Software subscription and other contractual obligations | 18,726   | 12,371           | 6,355                 | —         | —
                                                        | $436,121 | $39,055          | $371,015              | $15,226   | $10,825


Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
ADTRAN’s common stock is traded on the NASDAQ Global Select Market under the symbol ADTN. As of February 19, 2020, ADTRAN had 163 stockholders of record and approximately 6,972 beneficial owners of shares held in street name. The following table shows the high and low closing prices per share for our common stock as reported by NASDAQ for the periods indicated.

COMMON STOCK PRICES |               |                |               |
------------------- | ------------- | -------------- | ------------- | --------------
2019                | First Quarter | Second Quarter | Third Quarter | Fourth Quarter
High                | $15.40        | $17.81         | $16.40        | $11.59
Low                 | $10.49        | $13.76         | $ 9.92        | $ 8.09


Intellectual Property and Custom Development Income
Licensing of intellectual property including royalty-based fees decreased 49.2 percent in 2019 compared to 2018. This was primarily due to a decline in new partnership agreements compared to the prior year. The timing and amount of licensing, sales or other transfers of IP may vary significantly from period to period depending upon the timing of licensing agreements, economic conditions, industry consolidation and the timing of new patents and know-how development.

($ in millions)                                                 |      |        | Percent
--------------------------------------------------------------- | ---- | ------ | -------------------------
For the year ended December 31:                                 | 2019 | 2018   | Yr.-to-Yr. Percent Change
Licensing of intellectual property including royalty-based fees | $367 | $723   | (43.2)%
Custom development income                                       | 246  | 275    | (10.5)
Sales/other transfers of intellectual property                  | 34   | 28     | 22.6
Total                                                           | $648 | $1,026 | (36.9)%


2017 Restructuring Plan
On September 15, 2016, the Company’s Board of Directors formally approved a restructuring plan to better align the Company’s global capacity and administrative support infrastructure to further optimize organizational effectiveness. This action includes headcount reductions across the Company’s selling, general and administrative cost base and capacity realignment in higher cost locations (the “2017 Restructuring Plan”).
The 2017 Restructuring Plan, totaling $195.0 million in restructuring and other related costs, is complete as of August 31, 2019.
The tables below summarize the Company’s liability activity, primarily associated with the 2017 Restructuring Plan (in thousands):

                                                   | Employee Severance and Benefit Costs | Lease Costs | Asset Write-off Costs | Other Related Costs | Total
-------------------------------------------------- | ------------------------------------ | ----------- | --------------------- | ------------------- | --------
Balance as of August 31, 2017                      | $ 33,580                             | $1,665      | $ —                   | $ 3,143             | $38,388
Restructuring related charges                      | 16,269                               | 1,596       | 16,264                | 2,773               | 36,902
Asset write-off charge and other non-cash activity | (127)                                | 525         | (16,264)              | 25                  | (15,841)
Cash payments                                      | (31,591)                             | (1,102)     | —                     | (5,419)             | (38,112)
Balance as of August 31, 2018                      | 18,131                               | 2,684       | —                     | 522                 | 21,337
Restructuring related charges                      | 16,029                               | (41)        | (3,566)               | 2,071               | 14,493
Asset write-off charge and other non-cash activity | (494)                                | —           | 3,566                 | (18)                | 3,054
Cash payments                                      | (30,504)                             | (663)       | —                     | (1,786)             | (32,953)
Balance as of August 31, 2019                      | $3,162                               | $1,980      | $—                    | $789                | $5,931


12. Government grants
The following government grants are included within creditors:
A government grant has been received to accelerate and support research and development in the vulnerability of global navigation satellite systems.

            | 2019      | 2018
----------- | --------- | ---------
            | £ million | £ million
Current     | 0.7       | 0.3
Non-current | 0.1       | 0.8
            | 0.8       | 1.1


30. RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES (Cont’d)
Note: (1) The cash flows comprise the net amount of proceeds from borrowings and repayments of borrowings, net interest paid on borrowings, and settlement of swaps for bonds repaid in the statement of cash flows.

                              | Bonds   | Bank loans | Finance lease liabilities | Interest payable | Derivative financial instruments
----------------------------- | ------- | ---------- | ------------------------- | ---------------- | --------------------------------
Group - 2018                  | S$ Mil  | S$ Mil     | S$ Mil                    | S$ Mil           | S$ Mil
As at 1 April 2017            | 8,726.6 | 2,306.3    | 198.2                     | 142.7            | (245.3)
Financing cash flows (1)      | (506.2) | 222.6      | (28.3)                    | (379.9)          | 61.4
Non-cash changes:             |         |            |                           |                  |
Fair value adjustments        | (65.4)  | -          | -                         | -                | 107.8
Amortisation of bond discount | 3.2     | -          | -                         | -                | -
Foreign exchange movements    | (273.3) | (58.5)     | (0.5)                     | (8.5)            | 11.5
Acquisition of subsidiary     | -       | 31.3       | 8.7                       | -                |
Additions of finance lease    | -       | -          | 4.8                       | -                | -
Interest expense              | -       | -          | -                         | 383.6            | -
Adjustment                    | -       | -          | (78.3)                    | -                | -
                              | (335.5) | (27.2)     | (65.3)                    | 375.1            | 119.3
As at 31 March 2018           | 7,884.9 | 2,501.7    | 104.6                     | 137.9            | (64.6)


Revenue
Recurring revenue consists of subscription-based software sales, support and maintenance revenue, recurring transactions revenue and recurring revenue from managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management. Non-recurring revenue consists of perpetual software licenses sales, hardware resale and non-recurring transactions revenue, and project-based client services revenue.
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Recurring revenue decreased during the year ended December 31, 2019 compared to prior year due to known attrition within the EIS and other businesses partially offset with growth in subscription revenue. The sale of the OneContent business on April 2, 2018 also contributed to the decline in recurring revenue. The OneContent business was acquired as part of the EIS Business acquisition on October 2, 2017, and it contributed $13 million of recurring revenue during the first quarter of 2018, including $1 million of amortization of acquisition-related deferred revenue adjustments. Non-recurring revenue increased due to higher sales of perpetual software licenses for our acute solutions and hardware in 2019 compared to 2018, partially offset by lower client services revenue related to the timing of software activations.
The percentage of recurring and non-recurring revenue of our total revenue was 79% and 21%, respectively, during the year ended December 31, 2019 and 81% and 19%, respectively, during the year ended December 31, 2018.
Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017
The increase in revenue for the year ended December 31, 2018 compared with the year ended December 31, 2017 was primarily driven by incremental revenue from the acquisitions of the EIS Business in the fourth quarter of 2017 and Practice Fusion in the first quarter of 2018. Total revenue includes the amortization of acquisition-related deferred revenue adjustments, which totaled $24 million and $29 million during the years ended December 31, 2018 and 2017, respectively. The growth in both recurring and non-recurring revenue for the year ended December 31, 2018 compared with the prior year was also largely driven by incremental revenue from the previously mentioned acquisitions.
The increase in revenue for the year ended December 31, 2018 compared with the year ended December 31, 2017 was primarily driven by incremental revenue from the acquisitions of the EIS Business in the fourth quarter of 2017 and Practice Fusion in the first quarter of 2018. Total revenue includes the amortization of acquisition-related deferred revenue adjustments, which totaled $24 million and $29 million during the years ended December 31, 2018 and 2017, respectively. The growth in both recurring and non-recurring revenue for the year ended December 31, 2018 compared with the prior year was also largely driven by incremental revenue from the previously mentioned acquisitions.

                      |            |            | Year Ended December 31, |                         |
--------------------- | ---------- | ---------- | ----------------------- | ----------------------- | -----------------------
(In thousands)        | 2019       | 2018       | 2017                    | 2019 % Change from 2018 | 2018 % Change from 2017
Revenue:              |            |            |                         |                         |
Recurring revenue     | $1,395,869 | $1,411,742 | $1,176,720              | (1.1%)                  | 20.0%
Non-recurring revenue | 375,808    | 338,220    | 320,988                 | 11.1%                   | 5.4%
Total revenue         | $1,771,677 | $1,749,962 | $1,497,708              | 1.2%                    | 16.8%


Free Cash Flow
We monitor our free cash flow, as a key measure of our overall business performance, which enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payment for products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers.
Our net cash provided by (used in) operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable, the timing and amount of annual bonus payments, as well as payroll and tax payments. Our capital expenditures consisted of purchases of property and equipment, most of which were computer hardware, software, capitalized software development costs, and leasehold improvements.
In fiscal year 2019, free cash flow was impacted by $23.6 million related to the build out and furnishing of our new corporate headquarters in San Mateo, California. For a further discussion of our operating cash flows, see “Liquidity and Capital Resources - Cash Flows.”(in thousands)

                                          | Fiscal years ended July 31, |
----------------------------------------- | --------------------------- | --------
                                          | 2019                        | 2018
Net cash provided by operating activities | $116,126                    | $140,459
Net cash used for capital expenditures    | (48,857)                    | (12,011)
Free cash flow                            | $67,269                     | $128,448


Plans with projected benefit obligations in excess of plan assets are attributable to unfunded domestic supplemental retirement plans, and our U.K. retirement plan.
Accrued benefit liability reported as:
As of September 30, 2019 and 2018, the amounts included in accumulated other comprehensive income, consisted of
deferred net losses totaling approximately $6.3 million and $5.3 million, respectively.
The amount of net deferred loss expected to be recognized as a component of net periodic benefit cost for the year ending September 30, 2019, is approximately $229 thousand.

                                      | September 30,          |
------------------------------------- | ---------------------- | ------
                                      | 2019                   | 2018
                                      | (Amounts in thousands) |
Current accrued benefit liability     | $335                   | $340
Non-current accrued benefit liability | 6,904                  | 6,168
Total accrued benefit liability       | $7,239                 | $6,508


Other Subsidiary Debt— The Company’s other subsidiary debt includes (i) a credit facility entered into by one of the Company’s South African subsidiaries in December 2015, as amended (the “South African Credit Facility”), (ii) a long-term credit facility entered into by one of the Company’s Colombian subsidiaries in October 2014 (the “Colombian Credit Facility”), (iii) a credit facility entered into by one of the Company’s Brazilian subsidiaries in December 2014 (the “Brazil Credit Facility”) with Banco Nacional de Desenvolvimento Econômico e Social, (iv) a note entered into by one of the Company’s subsidiaries in October 2018 in connection with the acquisition of sites in Kenya (the “Kenya Debt”), (v) U.S. subsidiary debt related to a seller-financed acquisition (the “U.S. Subsidiary Debt”) and (vi) debt entered into by certain Eaton Towers subsidiaries acquired in connection with the Eaton Towers Acquisition (the “Eaton Towers Debt”).
Amounts outstanding and key terms of other subsidiary debt consisted of the following as of December 31, (in millions, except percentages):
(1) Includes applicable deferred financing costs.
(2) Denominated in ZAR, with an original principal amount of 830.0 million ZAR. On December 23, 2016, the borrower borrowed an additional 500.0 million ZAR. Debt accrues interest at a variable rate. The borrower no longer maintains the ability to draw on the South African Credit Facility.
(3) Denominated in COP, with an original principal amount of 200.0 billion COP. Debt accrues interest at a variable rate. The loan agreement for the Colombian Credit Facility requires that the borrower manage exposure to variability in interest rates on certain of the amounts outstanding under the Colombian Credit Facility. The borrower no longer maintains the ability to draw on the Colombian Credit Facility.
(4) Denominated in BRL, with an original principal amount of 271.0 million BRL. Debt accrues interest at a variable rate. The borrower no longer maintains the ability to draw on the Brazil Credit Facility.
(5) Denominated in USD, with an original principal amount of $51.8 million. The loan agreement for the Kenya Debt requires that the debt be paid either (i) in future installments subject to the satisfaction of specified conditions or (ii) three years from the note origination date.
(6) Related to a seller-financed acquisition. Denominated in USD with an original principal amount of $2.5 million.
(7) Related to the Eaton Towers Acquisition. Denominated in multiple currencies, including USD, EUR, KES and XOF. Amounts shown represent principal outstanding as of December 31, 2019.
(8) Subsequent to December 31, 2019, the Company repaid all of the outstanding USD denominated and KES denominated debt.
Pursuant to the agreements governing the South African Credit Facility and the Colombian Credit Facility, payments of principal and interest are generally payable quarterly in arrears. Outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The South African Credit Facility may be prepaid in whole or in part without prepayment consideration. The Colombian Credit Facility may be prepaid in whole or in part at any time, subject to certain limitations and prepayment consideration.
The South African Credit Facility, the Colombian Credit Facility and the Brazil Credit Facility are secured by, among other things, liens on towers owned by the applicable borrower.
Each of the agreements governing the other subsidiary debt contains contractual covenants and other restrictions. Failure to comply with certain of the financial and operating covenants could constitute a default under the applicable debt agreement, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.

                                  | Carrying Value (Denominated Currency) (1) |           | Carrying Value (USD) (1) |       | Interest Rate | Maturity Date
--------------------------------- | ----------------------------------------- | --------- | ------------------------ | ----- | ------------- | -----------------
                                  | 2019                                      | 2018      | 2019                     | 2018  |               |
South African Credit Facility (2) | 288.7                                     | 577.4     | $20.6                    | $40.2 | 8.75%         | December 17, 2020
Colombian Credit Facility (3)     | 79,647.3                                  | 109,193.8 | $24.3                    | $33.6 | 8.13%         | April 24, 2021
Brazil Credit Facility (4)        | 65.4                                      | 94.7      | $16.2                    | $24.4 | Various       | January 15, 2022
Kenya Debt (5)                    | 29.6                                      | 51.8      | $29.6                    | $51.8 | 8.00%         | October 1, 2021
U.S. Subsidiary Debt (6)          | 1.9                                       | 2.5       | $1.9                     | $2.5  | —%            | January 1, 2022
Eaton Towers Debt (7):            |                                           |           |                          |       |               |
USD Denominated (8)               | 238.8                                     | —         | $238.8                   | $—    | Various       | Various
EUR Denominated                   | 26.2                                      | —         | $29.5                    | $—    | Various       | Various
XOF Denominated                   | 16,836.8                                  | —         | $28.8                    | $—    | Various       | Various
KES Denominated (8)               | 3,319.2                                   | —         | $ 32.7                   | $—    | Various       | Various


25. Loans and other borrowings continued
Loans and other borrowings are analysed as follows:
a Includes collateral received on swaps of £638m (2017/18: £525m, 2016/17: £702m).
The carrying values disclosed in the above table reflect balances at amortised cost adjusted for accrued interest and fair value adjustments to the relevant loans or borrowings. These do not reflect the final principal repayments that will arise after taking account of the relevant derivatives in hedging relationships which are reflected in the table below. Apart from finance leases, all borrowings as at 31 March 2019, 2018 and 2017 were unsecured.

                                  | 2019   | 2018   | 2017
--------------------------------- | ------ | ------ | ------
At 31 March                       | £m     | £m     | £m
Current liabilities               |        |        |
Listed bonds                      | 1,367  | 1,702  | 1,539
Finance leases                    | 16     | 18     | 15
Bank loans                        | –      | –      | 352
Other loans and bank overdrafts a | 717    | 561    | 726
Total current liabilities         | 2,100  | 2,281  | 2,632
Non-current liabilities           |        |        |
Listed bonds                      | 14,586 | 11,789 | 9,866
Finance leases                    | 190    | 205    | 214
Other loans                       | –      | –      | 1
Total non-current liabilities     | 14,776 | 11,994 | 10,081
Total                             | 16,876 | 14,275 | 12,713


DERIVATIVE LIABILITIES
In connection with the issuance of Series A-1 Preferred Stock in June 2017, the Company issued a warrant with variable consideration through September 2018. The Company determined that this instrument is an embedded derivative pursuant to ASC 815, “Derivatives and Hedging.” The accounting treatment of derivative financial instruments requires that the Company record the warrant, at its fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date through the expiration of the variable consideration. Any change in fair value is recorded as a change in the fair value of derivative liabilities for each reporting period at each balance sheet date. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. On September 19, 2018, upon expiration of the variable consideration, the warrant liability of $4.5 million was reclassified to equity.
The Monte Carlo Valuation model is used to estimate the fair value of the warrant. The model was developed for use in estimating the fair value of traded options or warrants. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the instrument granted.
The risk-free interest rate used is the United States Treasury rate for the day of the grant having a term equal to the life of the equity instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate. The dividend yield is zero as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future. The Company determines the expected term of its warrant awards by using the contractual term.
The principal assumptions used in applying the model were as follows:

                        | Upon 2018 Expiration | December 31, 2017
----------------------- | -------------------- | -----------------
Assumptions:            |                      |
Risk-free interest rate | 2.3% - 2.5%          | 1.5% - 2.0%
Expected life           | 1.8 - 2.2 Years      | 2.5 - 3 Years
Expected volatility     | 65% - 70%            | 50% - 60%
Dividends               | 0%                   | 0%


15. ASSET UNDER DEVELOPMENT
In May 2018, upon the completion of the Hilli FLNG conversion and commissioning, we reclassified $1,296 million to "Vessels and equipment, net" in our consolidated balance sheet as of December 31, 2018.
In December 2018, we entered into agreements with Keppel for the conversion of the Gimi to a FLNG and consequently reclassified the carrying value of the Gimi of $20.0 million from "Vessels and equipment, net" to "Asset under development".
In February 2019, Golar entered into an agreement with BP for the employment of a FLNG unit, Gimi, to service the Greater Tortue Ahmeyim project for a 20-year period expected to commence in 2022.
In April 2019, we issued the shipyard with a Final Notice to Proceed with conversion works that had been initiated under the Limited Notice to Proceed. We also completed the sale of 30% of the total issued ordinary share capital of Gimi MS Corp to First FLNG Holdings (see note 5). The estimated conversion cost of the Gimi is approximately $1.3 billion.

(in thousands of $)                                | 2019    | 2018
-------------------------------------------------- | ------- | -----------
As of January 1                                    | 20,000  | 1,177,489
Additions                                          | 372,849 | 118,942
Transfer to vessels and equipment, net (note 16)   | —       | (1,296,431)
Transfer from vessels and equipment, net (note 16) | —       | 20,000
Transfer from other non-current assets (note 17)   | 31,048  | —
Interest costs capitalized                         | 10,351  | —
As of December 31                                  | 434,248 | 20,000


Year ended December 31, 2017 compared to the year ended December 31, 2018
The following table summarizes our net cash flows from operating, investing and financing activities for the years indicated:
Net Cash Provided By Operating Activities
Net cash provided by operating activities increased by $60.1 million, from $223.6 million during the year ended December 31, 2017 to $283.7 million during the year ended December 31, 2018. The increase was attributable to an increase in total revenues (revenues and net pool allocation) of $103.7 million, partially offset by a decrease of $23.5 million caused by movements in working capital accounts, an increase of $15.3 million in cash paid for interest including the interest paid for finance leases and a net decrease of $4.8 million from the remaining movements.
Net Cash Used In Investing Activities
Net cash used in investing activities increased by $618.4 million, from $74.6 million during the year ended December 31, 2017 to $693.0 million during the year ended December 31, 2018. The increase is mainly attributable to an increase of $591.5 million in payments for the construction costs of newbuildings and other fixed assets and a net decrease in cash from short-term investments of $43.0 million in 2018 compared to 2017. The above movements were partially offset by $14.0 million in payments made for the investment in Gastrade made in 2017 and an increase of $2.1 million in cash from interest income.
Net Cash Provided By Financing Activities
Net cash provided by financing activities increased by $360.8 million, from $7.3 million during the year ended December 31, 2017 to $368.1 million during the year ended December 31, 2018. The increase is mainly attributable to an increase of $244.2 million in proceeds from our borrowings, a decrease in bank loan and bond repayments of $165.3 million, an increase of $69.2 million in proceeds from the issuance of the Partnership’s Series B and Series C Preference Units in 2018 as compared to the issuance of 5,750,000 of its 8.625% Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the ‘‘Partnership’s Series A Preference Units’’) in 2017 and an increase of
$20.6 million from payments during 2017 for CCS termination. The above movements were partially offset by a decrease of $81.1 million in proceeds from GasLog Partners’ common unit offerings and an increase of $57.0 million in dividend payments.

                                          |          | Year ended December 31, |
----------------------------------------- | -------- | ----------------------- | ---------
                                          | 2017     | 2018                    | Change
Amounts in thousands of U.S. dollars      |          |                         |
Net cash provided by operating activities | $223,630 | $283,710                | $60,080
Net cash used in investing activities     | (74,599) | (692,999)               | (618,400)
Net cash provided by financing activities | 7,265    | 368,120                 | 360,855


As of June 30, 2018, the Group’s investments consisted of the following:
As of June 30, 2018, the Group had $323.1 million of investments which were classified as short-term investments on the Group’s consolidated statements of financial position. Additionally, the Group had certificates of deposit and time deposits totaling $3.6 million which were classified as long-term and were included in other non- current assets on the Group’s consolidated statements of financial position.

                                          | Amortized Cost | Unrealized Gains      | Unrealized Losses | Fair Value
----------------------------------------- | -------------- | --------------------- | ----------------- | ----------
                                          |                | (U.S. $ in thousands) |                   |
Debt Investments                          |                |                       |                   |
U.S. treasury securities                  | $52,809        | $—                    | $(109)            | $52,700
Agency securities                         | 22,097         | —                     | (82)              | 22,015
Certificates of deposit and time deposits | 58,824         | —                     | —                 | 58,824
Commercial paper                          | 35,372         | —                     | —                 | 35,372
Corporate debt securities                 | 158,538        | 14                    | (669)             | 157,883
Total investments                         | $327,640       | $14                   | $(860)            | $326,794


Strategic Investments
In December 2019, the Company made a minority investment in a privately-held company, Talespin, Inc., for $8.0 million, representing approximately 13% equity ownership. The investment is accounted for using the equity method of accounting due to the Company’s ability to exercise significant influence.
The Company’s non-marketable investments are composed of the following (in thousands):

                                                             | December 31, |
------------------------------------------------------------ | ------------ | ------
                                                             | 2019         | 2018
Accounted for at cost, adjusted for observable price changes | $1,750       | $1,250
Accounted for using the equity method                        | 8,000        | —
Total non-marketable investments                             | $9,750       | $1,250


Other Contractual Obligations
Our other contractual obligations include finance lease obligations (including interest portion), facility leases, leases of certain computer and other equipment, agreements to purchase data and telecommunication services, the payment of principal and interest on debt and pension fund obligations.
At December 31, 2019, the minimum annual payments under these agreements and other contracts that had initial or remaining non-cancelable terms in excess of one year are as listed in the following table. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax positions at December 31, 2019, we are unable to make reasonably reliable estimates of the timing of any potential cash settlements with the respective taxing authorities. Therefore, $189 million in uncertain tax positions (which includes interest and penalties of $25 million) have been excluded from the contractual obligations table below. See Note 15 – “Income Taxes” – to the consolidated financial statements for a discussion on income taxes.
(a) Our short-term and long-term debt obligations are described in Note 12 – “Long-Term Debt and Other Financing Arrangements” and our short-term and long-term finance lease obligations are described in Note 5 “Leases”,– to our consolidated financial statements.
(b) Our operating lease obligations are described in Note 17 – “Commitments and Contingencies” – to our consolidated financial statements.

                                             | Payments due by period |        |        |        |        |      |
-------------------------------------------- | ---------------------- | ------ | ------ | ------ | ------ | ---- | ----------
(IN MILLIONS)                                | Total                  | 2020   | 2021   | 2022   | 2023   | 2024 | Thereafter
Finance lease obligations(a)                 | $162                   | $61    | $42    | $29    | $15    | $7   | $8
Operating leases(b)                          | 574                    | 136    | 99     | 75     | 53     | 40   | 171
Other contractual obligations(c)             | 1,639                  | 627    | 295    | 203    | 190    | 185  | 139
Long-term debt, including current portion(a) | 8,164                  | 854    | 702    | 2,399  | 3,710  | —    | 499
Interest(d)                                  | 1,038                  | 354    | 315    | 216    | 115    | 25   | 13
Pension fund obligations(e)                  | 28                     | 28     | —      | —      | —      | —    | —
Total                                        | $11,605                | $2,060 | $1,453 | $2,922 | $4,083 | $257 | $830


Land, Property and Equipment
Land, property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, or for leasehold improvements, the shorter of the remaining lease term or the estimated useful life. The estimated useful lives for machinery and equipment range from 5 to 7 years and for office, computer and research equipment from2 to 5 years. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized.
Depreciation and amortization expense was $0.6 million and $0.8 million for fiscal years2019 and 2018, respectively. In accordance with ASC Topic 360, Property, Plant and Equipment (ASC 360), the Company assesses all of its long-lived assets, including intangibles, for impairment when impairment indicators are identified. If the carrying value of an asset exceeds its undiscounted cash flows, an impairment loss may be necessary. An impairment loss is calculated as the difference between the carrying value and the fair value of the asset.
The Company acquired 16 acres of land with an acquisition and sold4 acres in April 2015 for$264,000. The Company still owns 12 acres of land that remains on the market. The Company concluded that a sale transaction for the remaining land is not probable within the next year; therefore, unsold land is classified as held-and-used as of March 31, 2019 and 2018.
The components of fixed assets are as follows:

March 31,                                      |         |
---------------------------------------------- | ------- | -------
(in thousands)                                 | 2019    | 2018
Land                                           | $672    | $672
Machinery and equipment                        | 1,372   | 1,296
Office, computer and research equipment        | 5,267   | 5,175
Leasehold improvements                         | 798     | 1,238
Land, property and equipment, gross            | $8,109  | $8,381
Less accumulated depreciation and amortization | (6,811) | (6,780)
Land, property and equipment, net              | $1,298  | $1,601


UK SIP
The weighted average market value per ordinary share for SIP awards released in 2019 was 386.1p (2018: 372.0p). The SIP shares outstanding at 31 March 2018 have fully vested (2018: had a weighted average remaining vesting period of 0.1 years). Shares released prior to the vesting date relate to those attributable to good leavers as defined by the scheme rules.

                                   | 2019      | 2018
---------------------------------- | --------- | --------
                                   | Number    | Number
Outstanding at 1 April             | 690,791   | 776,045
Dividend shares awarded            | 4,518     | 9,778
Forfeited                          | (9,275)   | (75,986)
Released                           | (365,162) | (19,046)
Outstanding at 31 March            | 320,872   | 690,791
Vested and outstanding at 31 March | 320,872   | –


Assets Measured at Fair Value on a Recurring Basis
Assets measured at fair value on a recurring basis at March 31, 2018 are as follows (amounts in millions):
There were no transfers between Level 1 or Level 2 during fiscal 2019 or fiscal 2018. There were no assets measured on a recurring basis during fiscal 2019 or fiscal 2018 using significant unobservable inputs (Level 3).

                                    | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Total Balance
----------------------------------- | ------------------------------------------------------------------- | --------------------------------------------- | -------------
Assets                              |                                                                     |                                               |
Cash and cash equivalents:          |                                                                     |                                               |
Money market mutual funds           | $121.0                                                              | $—                                            | $121.0
Deposit accounts                    | —                                                                   | 641.6                                         | 641.6
Commercial Paper                    | —                                                                   | 118.7                                         | 118.7
Government agency bonds             | —                                                                   | 20.0                                          | 20.0
Short-term investments:             |                                                                     |                                               |
Marketable equity securities        | 2.8                                                                 | —                                             | 2.8
Corporate bonds and debt            | —                                                                   | 542.9                                         | 542.9
Time deposits                       | —                                                                   | 11.5                                          | 11.5
Government agency bonds             | —                                                                   | 723.2                                         | 723.2
Municipal bonds - taxable           | —                                                                   | 14.9                                          | 14.9
Total assets measured at fair value | $123.8                                                              | $2,072.8                                      | $2,196.6


Item 2. Properties
Our corporate headquarters are located in Culver City, California, where we occupy facilities totaling approximately 8,000 square feet on a monthto-month basis pursuant to a Shared Services Agreement with NantWorks. We use these facilities for administration, sales and marketing, research and development, engineering, client support, and professional services. In addition, we have 5 U.S. locations across four states and one international location. Our key facilities include the following:
United States
Boston, Massachusetts
Panama City, Florida
Philadelphia, Pennsylvania
Phoenix, Arizona
International
◦ Belfast, Northern Ireland
Note that on February 3, 2020, the Company completed the sale of its Connected Care business which includes the Panama City, Florida property.
We believe that our facilities are adequate to meet our needs in the near term, and that, if needed, suitable additional space will be available to accommodate any expansion of our operations.
The following table outlines our facilities location, square footage, and use:

City         | State | Country | Sq ft   | Type  | Business Nature/Use
------------ | ----- | ------- | ------- | ----- | ------------------------------------------------------------------------------
Boston       | MA    | USA     | 31,752  | Lease | Administrative, sales, client support, R&D, engineering, professional services
Panama City  | FL    | USA     | 51,288  | Lease | Administrative, sales, client support, R&D, engineering, professional services
Belfast      | NI    | UK      | 15,500  | Lease | R&D, engineering, administrative
Phoenix      | AZ    | USA     | 4,865   | Lease | Data Centre
Philadelphia | PA    | USA     | 14,183  | Lease | Administrative, sales, client support, R&D, engineering, professional services
             |       |         | 117,588 |       |


Significant components of the Company’s deferred tax assets and liabilities are outlined below.
The increase in the Company's deferred tax liability is primarily attributable to the Company's decision to take bonus depreciation on qualifying assets placed in service during fiscal 2019.
Included in the deferred tax assets at October 31, 2019, is a federal NOL carryforward of $255.4 million. All of the NOL carryforward was incurred subsequent to the enactment of the TCJA and therefore has an indefinite carryforward period. The Company has significant deferred tax liabilities, primarily related to property, plant and equipment, which are expected to reverse and allow for the full utilization of the NOL carryforward. As such, the Company has not recorded a valuation allowance related to the NOL carryforward. Also included in the deferred tax assets are North Carolina Investing in Business Property Credit and North Carolina Jobs Credits totaling $4.9 million, as well as Georgia Job Tax Credits totaling $2.6 million. The North Carolina Investing in Business Property Credit provides a 7% investment tax credit for property located in a North Carolina development area, the North Carolina Creating Jobs Credit provides a tax credit for increased employment in North Carolina, and the Georgia Job Tax Credit provides a tax credit for creation and retention of qualifying jobs in Georgia. It is management’s opinion that the majority of the North Carolina and Georgia income tax credits will not be utilized before they expire, and a $5.6 million valuation allowance has been recorded as of October 31, 2019. The North Carolina credits began to expire during fiscal 2018, and the remaining credits expire between fiscal years 2020 and 2023.

October 31,                               |          |
----------------------------------------- | -------- | --------
                                          | 2019     | 2018
(In thousands)                            |          |
Deferred tax liabilities:                 |          |
Property, plant and equipment             | $148,505 | $88,351
Prepaid and other assets                  | 1,911    | 1,751
Total deferred tax liabilities            | 150,416  | 90,102
Deferred tax assets:                      |          |
Accrued expenses and accounts receivable  | 8,172    | 7,814
Inventory                                 | 1,155    | 2,862
Compensation on restricted stock          | 7,528    | 8,280
State income tax credits                  | 9,333    | 12,235
Other                                     | 1,272    | 654
Valuation allowance                       | (5,637)  | (11,017)
Net operating loss                        | 54,461   | 6,481
Total deferred tax assets                 | 76,284   | 27,309
Net deferred tax liabilities              | $74,132  | $62,793


Notes: (1) TWDV – Tax written down value
(2) NBV – Net book value
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities, and when deferred income taxes relate to the same fiscal authority.

Company - 2018                       | Provisions | Others          | Total
------------------------------------ | ---------- | --------------- | -------
Deferred tax assets                  | S$ Mil     | S$ Mil          | S$ Mil
Balance as at 1 April 2017           | 0.3        | 2.8             | 3.1
Effects of adoption of SFRS(I) 15    | -          | (1.0)           | (1.0)
Balance as at 1 April 2017, restated | 0.3        | 1.8             | 2.1
Credited to income statement         | 0.2        | 9.0             | 9.2
Balance as at 31 March 2018          | 0.5        | 10.8            | 11.3
                                     |            | Accelerated tax |
Company - 2018                       |            | depreciation    | Total
Deferred tax liabilities             |            | S$ Mil          | S$ Mil
Balance as at 1 April 2017           |            | (285.3)         | (285.3)
Effects of adoption of SFRS(I) 1     |            | 10.2            | 10.2


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 13 — Derivatives
Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We selectively use derivative financial instruments including foreign currency forward contracts and interest rate swaps to manage our exposure to these risks.
The use of derivative financial instruments exposes the Company to credit risk, which relates to the risk of nonperformance by a counterparty to the derivative contracts. We manage our credit risk by entering into derivative contracts with only highly rated financial institutions and by using netting agreements.
The effective portion of derivative gains and losses are recorded in accumulated other comprehensive loss until the hedged transaction affects earnings upon settlement, at which time they are reclassified to cost of goods sold or net sales. If it is probable that an anticipated hedged transaction will not occur by the end of the originally specified time period, we reclassify the gains or losses related to that hedge from accumulated other comprehensive loss to other income (expense).
We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default. No recognition of ineffectiveness was recorded in our Consolidated Statement of Earnings for the twelve months ended December 31, 2019.
Foreign Currency Hedges
We use forward contracts to mitigate currency risk related to a portion of our forecasted foreign currency revenues and costs. The currency forward contracts are designed as cash flow hedges and are recorded in the Consolidated Balance Sheets at fair value.
We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future. At December 31, 2019, we had a net unrealized gain of $655 in accumulated other comprehensive loss, of which $595 is expected to be reclassified to income within the next 12 months. The notional amount of foreign currency forward contracts outstanding was $8,011 at December 31, 2019.
Interest Rate Swaps
We use interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest to a fixed rate. As of December 31, 2019, we have agreements to fix interest rates on $50,000 of long-term debt through February 2024. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense when settled.
These swaps are treated as cash flow hedges and consequently, the changes in fair value are recorded in other comprehensive loss. The estimated net amount of the existing gains or losses that are reported in accumulated other comprehensive loss that are expected to be reclassified into earnings within the next twelve months is approximately $82.
The location and fair values of derivative instruments designated as hedging instruments in the Consolidated Balance Sheets as of December 31, 2019, are shown in the following table:
The Company has elected to net its foreign currency derivative assets and liabilities in the balance sheet in accordance with ASC 210-20 (Balance Sheet, Offsetting). On a gross basis, there were foreign currency derivative assets of $648 and foreign currency derivative liabilities of $68 at December 31, 2019.

                                                            | As of December 31, |
----------------------------------------------------------- | ------------------ | ----
                                                            | 2019               | 2018
Interest rate swaps reported in Other current assets        | $82                | $576
Interest rate swaps reported in Other assets                | $—                 | $369
Interest rate swaps reported in Other long-term obligations | $(78)              | $—
Foreign currency hedges reported in Other current assets    | $580               | $393


Deferred Tax Assets and Liabilities
Significant components of the deferred tax assets and liabilities are summarized below (in thousands):
Based on the Company’s historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and tax planning strategies, management believes that it is more likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded. The net increase in the total valuation allowance for the fiscal year ended August 31, 2019 is primarily related to the increase of a net operating loss carry forward due to a release of a non-U.S. unrecognized tax benefit and the increase of deferred tax assets in sites with existing valuation allowances. The decrease in domestic federal and state tax credits is primarily related to the utilization of tax credits against the one-time transition tax.
As of August 31, 2019, the Company intends to indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the most significant component of the basis difference which is indefinitely reinvested. As of August 31, 2019, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were approximately $1.9 billion. The estimated amount of the unrecognized deferred tax liability on these reinvested earnings was approximately $0.2 billion.

                                                                                | Fiscal Year Ended August 31, |
---------------------------------------------------------------------------------------------- | ---------------------------- | ---------
                                                                                | 2019                         | 2018
Deferred tax assets:                                                                           |                              |
Net operating loss carry forward                                                               | $183,297                     | $119,259
Receivables                                                                                | 6,165                        | 7,111
Inventories                                                                                | 9,590                        | 7,634
Compensated absences                                                                           | 10,401                       | 8,266
Accrued expenses                                                                               | 81,731                       | 81,912
Property, plant and equipment, principally due to differences in depreciation and amortization | 66,268                       | 97,420
Domestic federal and state tax credits                                                         | 42,464                       | 70,153
Foreign jurisdiction tax credits                                                               | 15,345                       | 25,887
Equity compensation–Domestic                                                                   | 7,617                        | 7,566
Equity compensation–Foreign                                                                    | 2,179                        | 2,401
Domestic federal interest carry forward                                                        | 5,853                        | —
Cash flow hedges                                                                               | 9,878                        | —
Unrecognized capital loss carry forward                                                        | 7,799                        | —
Revenue recognition                                                                            | 19,195                       | —
Other                                                                                | 21,907                       | 18,176
Total deferred tax assets before valuation allowances                                          | 489,689                      | 445,785
Less valuation allowances                                                                      | (287,604)                    | (223,487)
Net deferred tax assets                                                                        | $202,085                     | $222,298
Deferred tax liabilities:                                                                      |                              |
Unremitted earnings of foreign subsidiaries                                                    | 75,387                       | 74,654
Intangible assets                                                                              | 39,242                       | 39,122
Other                                                                                | 4,447                        | 4,655
Total deferred tax liabilities                                                                 | $119,076                     | $118,431
Net deferred tax assets                                                                        | $83,009                      | $103,867


A. Selected Financial Data The table set forth below presents our selected historical consolidated financial data for the periods and at the dates indicated. The selected historical consolidated statements of income data for each of the three years ended March 31, 2019, 2018, and 2017 and the selected statements of financial position data as of March 31, 2019 and 2018 have been derived from and should be read in conjunction with “Part I — Item 5.
Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this Annual Report on Form 20-F. The selected historical consolidated statements of income data for each of the two years ended March 31, 2016 and 2015 and the selected historical statements of financial position data as of March 31, 2017, 2016, and 2015 have been derived from audited consolidated financial statements not included in this Annual Report on Form 20-F.
(1) References to “net income” in this document correspond to “profit/(loss) for the period” or “profit/(loss) for the year” line items in our consolidated financial statement appearing elsewhere in this document. (2) Gross Revenue is defined as reported revenue adjusted in respect of significant financing component that arises on account of normal credit terms provided to catalogue customers.
(3) We use EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA as supplemental financial measures. EBITDA is defined by us as net income before interest expense, income tax expense and depreciation and amortization (excluding amortization of capitalized film content and debt issuance costs).
Adjusted EBITDA is defined as EBITDA adjusted for (gain)/impairment of available-for-sale financial assets, profit/loss on held for trading liabilities (including profit/loss on derivative financial instruments), transactions costs relating to equity transactions, share based payments, Loss / (Gain) on sale of property and equipment, Loss on de-recognition of financial assets measured at amortized cost, net,
Credit impairment loss, net, Loss on financial liability (convertible notes) measured at fair value through profit and loss, Loss on deconsolidation of a subsidiary and exceptional items such as impairment of goodwill, trademark, film & content rights and content advances.
Gross Adjusted EBITDA is defined as Adjusted EBITDA adjusted for amortization of intangible films and content rights. EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA as used and defined by us, may not be comparable to similarly-titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP.
EBITDA Adjusted EBITDA and Gross Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. EBITDA, Adjusted EBITDA and Gross Adjusted EBITDA provide no information regarding a Company’s capital structure, borrowings, interest costs, capital expenditures and working capital movement or tax position.

                                           |            |           | Year ended March 31,                             |           |
------------------------------------------ | ---------- | --------- | ------------------------------------------------ | --------- | ---------
                                           | 2019       | 2018      | 2017                                             | 2016      | 2015
                                           |            |           | (in thousands, except (Loss)/Earnings per share) |           |
Selected Statement of Income Data          |            |           |                                                  |           |
Revenue                                    | $270,126   | $261,253  | $252,994                                         | $274,428  | $284,175
Cost of sales                              | (155,396)  | (134,708) | (164,240)                                        | (172,764) | (155,777)
Gross profit                               | 114,730    | 126,545   | 88,754                                           | 101,664   | 128,398
Administrative costs                       | (87,134)   | (68,029)  | (63,309)                                         | (64,019)  | (49,546)
Operating profit before exceptional item   | 27,596     | 58,516    | 25,445                                           | 37,645    | 78,852
Impairment loss                            | (423,335)  | —         | —                                                | —         | —
Operating profit/(loss)                    | (395,739)  | 58,516    | 25,445                                           | 37,645    | 78,852
Net finance costs                          | (7,674)    | (17,813)  | (17,156)                                         | (8,010)   | (5,861)
Other gains/(losses), net                  | 288        | (41,321)  | 14,205                                           | (3,636)   | (10,483)
Profit/(loss) before tax                   | (403,125)  | (618)     | 22,494                                           | 25,999    | 62,508
Income tax                                 | (7,328)    | (9,127)   | (11,039)                                         | (12,711)  | (13,178)
Profit/(loss) for the year (1)             | $(410,453) | $(9,745)  | $11,455                                          | $13,288   | $49,330
(Loss)/Earnings per share (cents)          |            |           |                                                  |           |
Basic (loss)/earnings per share            | (599.5)    | (36.3)    | 6.4                                              | 6.6       | 74.3
Diluted (loss)/earnings per share          | (599.5)    | (36.3)    | 5.1                                              | 5.2       | 72.4
Weighted average number of ordinary shares |            |           |                                                  |           |
Basic                                      | 70,707     | 62,151    | 59,410                                           | 57,732    | 54,278
Diluted                                    | 72,170     | 63,482    | 60,943                                           | 59,036    | 54,969
Other non-GAAP measures                    |            |           |                                                  |           |
Gross Revenue (2)                          | $304,593   | $268,069  | $252,994                                         | $274,428  | $284,175
EBITDA (3)                                 | $(393,188) | $20,186   | $42,548                                          | $36,294   | $70,066
Adjusted EBITDA (3)                        | $103,845   | $82,955   | $55,664                                          | $70,852   | $101,150
Gross Adjusted EBITDA (3)                  | $234,000   | $198,240  | $190,980                                         | $199,155  | $218,404


Management Discussion and Analysis
Cash Flow
"nm" denotes not meaningful
Note: (1) Refers to Singtel Group excluding Optus.
The Group’s free cash flow grew 1.2% to S$3.65 billion. The increase was driven by lower capital expenditure partly offset by lower operating cash flow, higher cash taxes and lower associates’ dividends.
Net cash inflow from operating activities declined 9.9% to S$5.37 billion. Dividends received from the associates fell 6.0% mainly from Telkomsel, the Southern Cross consortium and NetLink Trust.

Net cash inflow from operating activities declined 9.9% to S$5.37 billion. Dividends received from the associates fell 6.0% mainly from Telkomsel, the Southern Cross consortium and NetLink Trust.
The investing cash outflow was S$2.33 billion. During the year, Singtel received proceeds of S$118 million from the disposal of a property in Singapore. Payments of S$123 million were made for the acquisition of Videology assets in August 2018 and S$344 million for the acquisition of a 5.7% equity interest in Airtel Africa in October 2018. Capital expenditure totalled S$1.72 billion, comprising S$587 million for Singtel and S$1.13 billion (A$1.14 billion) for Optus. In Singtel, major capital investments in the year included S$215 million for fixed and data infrastructure, S$183 million for mobile networks and S$189 million for ICT and other investments.  The investing cash outflow was S$2.33 billion. During the year, Singtel received proceeds of S$118 million from the disposal of a property in Singapore. Payments of S$123 million were made for the acquisition of Videology assets in August 2018 and S$344 million for the acquisition of a 5.7% equity interest in Airtel Africa in October 2018. Capital expenditure totalled S$1.72 billion, comprising S$587 million for Singtel and S$1.13 billion (A$1.14 billion) for Optus. In Singtel, major capital investments in the year included S$215 million for fixed and data infrastructure, S$183 million for mobile networks and S$189 million for ICT and other investments.
In Optus, capital investments in mobile networks amounted to A$633 million with the balance in fixed and other investments.

In Optus, capital investments in mobile networks amounted to A$633 million with the balance in fixed and other investments.
Net cash outflow for financing activities amounted to S$3.06 billion. Major cash outflows included net interest payments of S$385 million, and payments of S$1.75 billion for final dividends in respect of FY 2018 and S$1.11 billion for interim dividends in respect of FY 2019, partly offset by increase in net borrowings of S$222 million.

                                                              | Financial Year ended 31 March |              |
------------------------------------------------------------- | ----------------------------- | ------------ | ------
                                                              | 2019                          | 2018         | Change
                                                              | (S$ million)                  | (S$ million) | (%)
Net cash inﬂow from operating activities                      | 5,368                         | 5,955        | -9.9
Net cash outﬂow for investing activities                      | (2,329)                       | (1,951)      | 19.4
Net cash outﬂow for ﬁnancing activities                       | (3,056)                       | (4,009)      | -23.8
Net change in cash balance                                    | (16)                          | (5)          | 248.9
Exchange effects on cash balance                              | 4                             | (4)          | nm
Cash balance at beginning of year                             | 525                           | 534          | -1.7
Cash balance at end of year                                   | 513                           | 525          | -2.3
Singtel (1)                                                   | 1,242                         | 1,126        | 10.3
Optus                                                         | 1,006                         | 989          | 1.8
Associates (net dividends after withholding tax)              | 1,402                         | 1,492        | -6.0
Group free cash ﬂow                                           | 3,650                         | 3,606        | 1.2
Optus (in A$ million)                                         | 1,028                         | 947          | 8.5
Cash capital expenditure as a percentage of operating revenue | 10%                           | 14%          |


Net periodic benefit cost — The components of the fiscal year net periodic benefit cost were as follows (in thousands):
Changes in presentation —As discussed in Note 1, Nature of Operations and Summary of Significant Accounting Policies, we adopted ASU 2017-07 during the first quarter of 2019 using the retrospective method, which changed the financial statement presentation of service costs and the other components of net periodic benefit cost. The service cost component continues to be included in operating income; however, the other components are now presented in a separate line below earnings from operations captioned “Other pension and post-retirement expenses, net” in our consolidated statements of earnings. Further, in connection with the adoption, plan administrative expenses historically presented as a component of service cost are now presented as a component of expected return on plan assets. The prior year components of net periodic benefit costs and assumptions on the long-term rate of return on assets have been recast to conform to current year presentation.
Prior service costs are amortized on a straight-line basis from date of participation to full eligibility. Unrecognized gains or losses are amortized using the “corridor approach” under which the net gain or loss in excess of 10% of the greater of the PBO or the market-related value of the assets, if applicable, is amortized. For our Qualified Plan, actuarial losses are amortized over the average future expected lifetime of all participants expected to receive benefits. For our SERP, actuarial losses are amortized over the expected remaining future lifetime for inactive participants, and for our postretirement health plans, actuarial losses are amortized over the expected remaining future lifetime of inactive participants expected to receive benefits.

                                                | 2019     | 2018     | 2017
----------------------------------------------- | -------- | -------- | --------
Qualified Plan:                                 |          |          |
Interest cost                                   | $19,825  | $19,463  | $19,889
Expected return on plan assets                  | (26,334) | (26,467) | (26,811)
Actuarial loss                                  | 2,754    | 3,331    | 4,455
Net periodic benefit credit                     | $(3,755) | $(3,673) | $(2,467)
SERP:                                           |          |          |
Service cost                                    | $—       | $490     | $855
Interest cost                                   | 3,080    | 2,894    | 2,850
Actuarial loss                                  | 1,207    | 1,538    | 1,659
Amortization of unrecognized prior service cost | 115      | 146      | 153
Net periodic benefit cost                       | $4,402   | $5,068   | $5,517
Postretirement health plans:                    |          |          |
Interest cost                                   | $997     | $955     | $1,003
Actuarial (gain) loss                           | (159)    | (27)     | 162
Net periodic benefit cost                       | $838     | $928     | $1,165


Principal Accounting Fees and Services
The following table sets forth fees for services provided by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, ‘‘Deloitte’’) during fiscal 2019 and 2018:
(1) Represents fees for professional services provided in connection with the integrated audit of our annual financial statements and internal control over financial reporting and review of our quarterly financial statements, advice on accounting matters that arose during the audit and audit services provided in connection with other statutory or regulatory filings.
(2) Represents tax compliance and related services.
(3) Represents the annual subscription for access to the Deloitte Accounting Research Tool, which is a searchable on-line accounting database.

                   | 2019       | 2018
------------------ | ---------- | ----------
Audit fees (1)     | $3,454,348 | $3,589,147
Tax fees (2)       | 546,618    | 931,017
All other fees (3) | 1,895      | 1,895
Total              | $4,002,861 | $4,522,059


Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties associated with unrecognized tax benefits, for the periods presented is as follows (table in millions):
Of the net unrecognized tax benefits, including interest and penalties, $323 million and $296 million were included in income tax payable on the consolidated balance sheets as of January 31, 2020 and February 1, 2019, respectively. Approximately $313 million and $266 million, respectively, would, if recognized, benefit VMware's annual effective income tax rate. VMware includes interest expense and penalties related to income tax matters in the income tax provision. VMware had accrued $48 million and $56 million of interest and penalties associated with unrecognized tax benefits as of January 31, 2020 and February 1, 2019, respectively. Income tax expense during the year ended February 1, 2019 included interest and penalties associated with uncertain tax positions of $15 million. Interest and penalties associated with uncertain tax positions included in income tax expense (benefit) were not significant during the years ended January 31, 2020 and February 2, 2018.
The Dell-owned EMC consolidated group is routinely under audit by the IRS. All U.S. federal income tax matters have been concluded for years through 2015 while VMware was part of the Dell-owned EMC consolidated group. The IRS has started its examination of fiscal years 2015 through 2019 for the Dell consolidated group, which VMware was part of beginning fiscal 2017. In addition, VMware is under corporate income tax audits in various states and non-U.S. jurisdictions. Consistent with the Company’s historical practices under the tax sharing agreement with EMC, when VMware becomes subject to federal tax audits as a member of Dell’s consolidated group, the tax sharing agreement provides that Dell has authority to control the audit and represent Dell’s and VMware’s interests to the IRS.
Open tax years subject to examinations for larger non-U.S. jurisdictions vary beginning in 2008. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. When considering the outcomes and the timing of tax examinations, the expiration of statutes of limitations for specific jurisdictions, or the timing and result of ruling requests from taxing authorities, it is reasonably possible that total unrecognized tax benefits could be potentially reduced by approximately $17 million within the next 12 months.

                                                                |                  | For the Year Ended |
--------------------------------------------------------------- | ---------------- | ------------------ | ----------------
                                                                | January 31, 2020 | February 1, 2019   | February 2, 2018
Balance, beginning of the year                                  | $385             | $305               | $265
Tax positions related to current year:                          |                  |                    |
Additions                                                       | 116              | 57                 | 63
Tax positions related to prior years:                           |                  |                    |
Additions                                                       | 98               | 44                 | 2
Reductions                                                      | (7)              | (1)                | (2)
Settlements                                                     | (28)             | (4)                | (9)
Reductions resulting from a lapse of the statute of limitations | (83)             | (8)                | (24)
Foreign currency effects                                        | (2)              | (8)                | 10
Balance, end of the year                                        | $479             | $385               | $305