Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities are as follows:
At December 31, 2019, undistributed earnings of our foreign subsidiaries indefinitely invested outside the U.S. amounted to approximately $3.8 billion. The majority of Verizon’s cash flow is generated from domestic operations and we are not dependent on foreign cash or earnings to meet our funding requirements, nor do we intend to repatriate these undistributed foreign earnings to fund U.S. operations.
Furthermore, a portion of these undistributed earnings represents amounts that legally must be kept in reserve in accordance with certain foreign jurisdictional requirements and are unavailable for distribution or repatriation. As a result, we have not provided U.S. deferred taxes on these undistributed earnings because we intend that they will remain indefinitely reinvested outside of the U.S. and therefore unavailable for use in funding U.S. operations. Determination of the amount of unrecognized deferred taxes related to these undistributed earnings is not practicable.
At December 31, 2019, we had net after-tax loss and credit carry forwards for income tax purposes of approximately $3.0 billion that primarily relate to state and foreign taxes. Of these net after-tax loss and credit carry forwards, approximately $2.0 billion will expire between 2020 and 2039 and approximately $1.0 billion may be carried forward indefinitely.
During 2019, the valuation allowance decreased approximately $481 million. The balance of the valuation allowance at December 31, 2019 and the 2019 activity is primarily related to state and foreign taxes.

                                           |          | (dollars in millions)
------------------------------------------ | -------- | ---------------------
At December 31,                            | 2019     | 2018
Deferred Tax Assets                        |          |
Employee benefits                          | $ 5,048  | $ 5,403
Tax loss and credit carry forwards         | 3,012    | 3,576
Other – assets                             | 5,595    | 1,650
                                           | 13,655   | 10,629
Valuation allowances                       | (2,260)  | (2,741)
Deferred tax assets                        | 11,395   | 7,888
Deferred Tax Liabilities                   |          |
Spectrum and other intangible amortization | 22,388   | 21,976
Depreciation                               | 16,884   | 15,662
Other—liabilities                          | 6,742    | 3,976
Deferred tax liabilities                   | 46,014   | 41,614
Net deferred tax liability                 | $ 34,619 | $ 33,726


Net Revenues by Platform
The following tables detail our net revenues by platform (amounts in millions):
(1) Net revenues from “Mobile and ancillary” include revenues from mobile devices, as well as non-platform-specific game-related revenues, such as standalone sales of toys and accessories.
(2) Net revenues from “Other” primarily includes revenues from our Distribution business and the Overwatch League.
Console
The decrease in net revenues from console for 2019, as compared to 2018, was primarily due to:
lower revenues recognized from the Destiny franchise (reflecting our sale of the publishing rights for Destiny to Bungie in December 2018); and lower revenues recognized from Call of Duty franchise catalog titles.
The decrease was partially offset by revenues recognized from Crash Team Racing Nitro-Fueled, which was released in June 2019.
PC
The decrease in net revenues from PC for 2019, as compared to 2018, was primarily due to:
lower revenues recognized from the Destiny franchise; and lower revenues recognized from Hearthstone.
Mobile and Ancillary
The increase in net revenues from mobile and ancillary for 2019, as compared to 2018, was primarily due to revenues recognized from Call of Duty: Mobile, which was released in October 2019.

                                |        | For the Years | Ended December 31,   |
------------------------------- | ------ | ------------- | -------------------- | --------
                                | 2019   | 2018          | Increase/ (decrease) | % Change
Net revenues by platform:       |        |               |                      |
Console                         | $1,920 | $2,538        | $(618)               | (24)%
PC                              | 1,718  | 2,180         | (462)                | (21)
Mobile and ancillary (1)        | 2,203  | 2,175         | 28                   | 1
Other (2)                       | 648    | 607           | 41                   | 7
Total consolidated net revenues | $6,489 | $7,500        | $(1,011)             | (13)


NOTE 3. ACQUISITIONS
MGI
On April 4, 2019, we acquired substantially all of the assets comprising the business of MGI Grain Processing, LLC, a Minnesota limited liability company, now conducting business as MGI Grain Incorporated (MGI) for an aggregate purchase price of $3.8 million. The purchase price included $0.3 million deposited in an escrow account at closing which was subsequently released to the sellers in June 2019. MGI owns and operates a grain mill and processing facility in East Grand Forks, Minnesota. We acquired MGI as part of our strategy to expand our product portfolio. The acquisition has been accounted for as a business combination. The results of MGI’s operations are included in our consolidated financial statements beginning April 4, 2019. In 2019, we incurred $0.1 million of MGI acquisition-related costs which are included in selling, general and administrative expenses.
The purchase price for MGI was subject to adjustment if the estimated closing working capital with respect to the assets purchased and the liabilities assumed was different than the actual closing working capital, as defined in the purchase agreement. The seller of MGI paid a working capital adjustment of $18 thousand in 2019. The following table summarizes the purchase price allocation, the consideration transferred to acquire MGI and the amounts of identified assets acquired and liabilities assumed (in thousands).
In the fourth quarter of 2019, our appraiser finalized certain fair value calculations and we completed our review of the calculations. The fair value of MGI’s trade receivables at acquisition, equaled the gross amount of trade receivables. The fair value of the customer relationship intangible at acquisition was estimated using an income approach based on expected future cash flows. As discussed in Note 9, we are amortizing the customer relationship intangible to expense over the 15-year period of expected future economic benefit, in proportion to the discounted expected future cash flows used to estimate the value of the intangible at acquisition. Goodwill primarily was attributed to intangible assets that do not qualify for separate recognition and synergies generated by MGI when combined with our existing operations. The $0.7 million allocated to goodwill is deductible for tax purposes over the next fifteen years.

                                                                               | Estimated at June 30, 2019     | Adjustments                     | Final as of December 31, 2019
------------------------------------------------------------------------------ | ------------------------------ | ------------------------------- | ------------------------------
Cash                                                                           | $3,795                         | $ -                             | $3,795
Working capital adjustment to purchase price                                   | (38)                           | 20                              | (18)
Total fair value of consideration transferred                                  | 3,757                          | 20                              | 3,777
Accounts receivable                                                            | 591                            | -                               | 591
Inventories                                                                    | 149                            | -                               | 149
Deposits and other current assets                                              | 4                              | 8                               | 12
Property and equipment                                                         | 1,560                          | -                               | 1,560
Customer relationship                                                          | 930                            | -                               | 930
Other finite-lived intangible assets                                           | 35                             | -                               | 35
Accounts payable                                                               | (219)                          | -                               | (219)
Finance lease liabilities                                                      | (18)                           | -                               | (18)
Net recognized amounts of identifiable assets acquired and liabilities assumed | 3,032                          | 8                               | 3,040
Goodwill                                                                       | $                          725 | $                            12 | $                          737


Deferred Revenue
The following table summarizes contract liabilities which are shown as deferred revenue (in thousands):
Total deferred revenue increased primarily due to the extended duration period of new maintenance contracts during fiscal year 2019.

                                  | June 30,
2019 | June 30,
2018
--------------------------------- | ------------- | -------------
Deferred maintenance              | $192,955      | $164,986
Other deferred revenue            | 10,287        | 9,539
Total deferred revenue, net       | 203,242       | 174,525
Less: current portion             | 144,230       | 130,865
Non-current deferred revenue, net | $59,012       | $43,660


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Note 5. Accounts Receivable
Accounts receivable consisted of the following as of the dates indicated

                    | Accounts Receivable, Gross | Allowance for Losses | Accounts Receivable, Net
------------------- | -------------------------- | -------------------- | ------------------------
December 31, 2019   |                            |                      |
Transaction related | $12,863                    | $(238)               | $12,625
Servicing related   | 6,868                      | —                    | 6,868
Total               | $19,731                    | $(238)               | $19,493
December 31, 2018   |                            |                      |
Transaction related | $14,704                    | $(168)               | $14,536
Servicing related   | 864                        | —                    | 864
Total               | $15,568                    | $(168)               | $15,400


(a) EBITDA is calculated as operating profit less interest income and other gains/losses, net and adding back depreciation of property, plant and equipment, investment properties as well as right-of-use assets, and amortisation of intangible assets. Adjusted EBITDA is calculated as EBITDA plus equity-settled share-based compensation expenses.
(b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.
(c) Net debt represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus borrowings and notes payable.
(d) Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment properties, land use rights and intangible assets (excluding video and music contents, game licences and other contents).

                              | Unaudited                           |              |             |             |
----------------------------- | ----------------------------------- | ------------ | ----------- | ----------- | -----------
                              | Three months ended                  |              |             | Year ended  |
                              | 31 December                         | 30 September | 31 December | 31 December | 31 December
                              | 2019                                | 2019         | 2018        | 2019        | 2018
                              | (RMB in millions, unless specified) |              |             |             |
EBITDA (a)                    | 35,675                              | 35,378       | 27,180      | 137,268     | 110,404
Adjusted EBITDA (a)           | 38,572                              | 38,123       | 29,701      | 147,395     | 118,273
Adjusted EBITDA margin (b)    | 36%                                 | 39%          | 35%         | 39%         | 38%
Interest and related expenses | 2,348                               | 2,086        | 1,345       | 7,690       | 4,898
Net debt (c)                  | (15,552)                            | (7,173)      | (12,170)    | (15,552)    | (12,170)
Capital expenditures (d)      | 16,869                              | 6,632        | 4,564       | 32,369      | 23,941


Note 7 Other expense
Impairment of Assets
2019
Impairment charges in 2019 included $85 million allocated to indefinite-life intangible assets, and $8 million allocated primarily to property, plant and equipment. These impairment charges relate to broadcast licences and certain assets for various radio markets within our Bell Media segment. The impairment charges were a result of continued advertising demand and ratings pressures in the industry resulting from audience declines, as well as competitive pressure from streaming services. The charges were determined by comparing the carrying value of the CGUs to their fair value less cost of disposal. We estimated the fair value of the CGUs using both discounted cash flows and market-based valuation models, which include five-year cash flow projections derived from business plans reviewed by senior management for the period of January 1, 2020 to December 31, 2024, using a discount rate of 7.5% and a perpetuity growth rate of nil as well as market multiple data from public companies and market transactions. The carrying value of these CGUs was $464 million at December 31, 2019.
2018
Impairment charges in  2018 included $145  million allocated to indefinite-life intangible assets, and $14 million allocated to finite-life intangible assets. These impairment charges primarily relate to our French TV channels within our Bell Media segment. These impairments were the result of revenue and profitability declines from lower audience levels and subscriber erosion. The charges were determined by comparing the carrying value of the CGUs to their fair value less costs of disposal. We estimated the fair value of the CGUs using both discounted cash flows and market-based valuation models, which include five-year cash flow projections derived from business plans reviewed by senior management for the period of January 1, 2019 to December 31, 2023, using a discount rate of 8.0% to 8.5% and a perpetuity growth rate of nil, as well as market multiple data from public companies and market transactions. The carrying value of these CGUs was $515 million at December 31, 2018. In the previous year’s impairment analysis, the company’s French Pay and French Specialty TV channels were tested for recoverability separately. In 2018, the CGUs were grouped to form one French CGU which reflects the evolution of the cash flows from our content strategies as well as the CRTC beginning to regulate Canadian broadcasters under a group licence approach based on language.
Additionally, in 2018, we recorded an indefinite-life intangible asset impairment charge of $31 million within our Bell Media segment as a result of a strategic decision to retire a brand.
EQUITY LOSSES FROM INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
We recorded a loss on investment of $53 million and $20 million in 2019 and 2018, respectively, related to equity losses on our share of an obligation to repurchase at fair value the minority interest in one of BCE’s joint ventures. The obligation is marked to market each reporting period and the gain or loss on investment is recorded as equity gains or losses from investments in associates and joint ventures.
GAINS (LOSSES) ON INVESTMENTS
In 2019 we recorded gains of $13 million which included a gain on an obligation to repurchase at fair value the minority interest in one of our subsidiaries.
In 2018, we recorded losses of $34 million which included a loss on an obligation to repurchase at fair value the minority interest in one of our subsidiaries.

FOR THE YEAR ENDED DECEMBER 31                                                                                | NOTE   | 2019  | 2018
------------------------------------------------------------------------------------------------------------------------- | ------ | ----- | -----
Impairment of assets                                                                                | 14, 16 | (102) | (200)
Equity losses from investments in associates and joint ventures                                                           | 17     |       |
Losses on investments                                                                                |        | (53)  | (20)
Operations                                                                                |        | (19)  | (15)
Early debt redemption costs                                                                                | 22     | (18)  | (20)
(Losses) gains on retirements and disposals of property, plant and equipment and intangible assets                        |        | (9)   | 11
Net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans |        | 138   | (80)
Gains (losses) on investments                                                                                |        | 13    | (34)
Other                                                                                |        | 37    | 10
Total other expense                                                                                |        | (13)  | (348)


Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data, which should be read in conjunction with our consolidated financial statements and notes thereto in Item 8 and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included under Item 7 in this Annual Report on Form 10-K. The selected consolidated financial data presented below at and for each of the years in the five-year period ended December 31, 2019, is derived from our consolidated financial statements and include the operations of King commencing on February 23, 2016. All amounts set forth in the following tables are in millions, except per share data.
(1) On January 1, 2018, we adopted a new revenue accounting standard utilizing the modified retrospective method of transition. As a result, periods prior to January 1, 2018 have not been restated to reflect the new accounting standard and continue to be reported under the accounting standards that were in effect for those periods.
(2) Net income for 2019, 2018, and 2017 includes the impact of significant discrete tax-related impacts, including incremental income tax expense and benefits in 2017 and 2018 due to the application of the U.S. Tax Reform Act. See further discussion in Note 19 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(3) Cash and investments consists of cash and cash equivalents along with short-term and long-term investments. We had total investments of $69 million, $155 million, $62 million, $26 million, and $17 million, as of December 31, 2019, December 31, 2018, December 31, 2017, December 31, 2016, and December 31, 2015, respectively. Cash and investments as of December 31, 2015, excludes $3,561 million of cash placed in escrow for the acquisition of King.
(4) For discussion on our debt obligations, see Note 13 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(5) Net debt is defined as long-term debt, gross less cash and investments
(6) During the three months ended March 31, 2019, we identified an amount which should have been recorded in the three months and year ended December 31, 2018 to reduce income tax expense by $35 million. Our selected financial data for the year ended December 31, 2018, as presented above, has been revised to reflect the correction. See further discussion in Note 2 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

                                  |        |         | For the Years Ended December 31, |        |
--------------------------------- | ------ | ------- | -------------------------------- | ------ | ------
                                  | 2019   | 2018(6) | 2017                             | 2016   | 2015
Statement of Operations Data (1): |        |         |                                  |        |
Net revenues                      | $6,489 | $7,500  | $7,017                           | $6,608 | $4,664
Net income (2)                    | 1,503  | 1,848   | 273                              | 966    | 892
Basic net income per share        | 1.96   | 2.43    | 0.36                             | 1.30   | 1.21
Diluted net income per share      | 1.95   | 2.40    | 0.36                             | 1.28   | 1.19
Cash dividends declared per share | 0.37   | 0.34    | 0.30                             | 0.26   | 0.23
Operating cash flows              | $1,831 | $1,790  | $2,213                           | $2,155 | $1,259
Balance Sheet Data:               |        |         |                                  |        |
Cash and investments (3)          | $5,863 | $4,380  | $4,775                           | $3,271 | $1,840
Total assets                      | 19,845 | 17,890  | 18,668                           | 17,452 | 15,246
Long-term debt, net (4)           | 2,675  | 2,671   | 4,390                            | 4,887  | 4,074
Long-term debt, gross             | 2,700  | 2,700   | 4,440                            | 4,940  | 4,119
Net debt (5)                      | —      | —       | —                                | 1,669  | 2,279


Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
nm -not meaningful
The change in Other income (expense), net during the year ended December 31, 2019, compared to the similar period in 2018, was primarily driven by early debt redemption costs of $3.6 billion recorded during 2019, compared to $725 million recorded during 2018 (see “Special Items”) as well as pension and benefit charges of $126 million recorded in 2019, compared with pension and benefit credits of $2.1 billion recorded in 2018 (see “Special Items”).

                                               |           |        | (dollars in millions)  Increase/ (Decrease) | Increase/ (Decrease)
---------------------------------------------- | --------- | ------ | ------------------------------------------- | --------------------
Years Ended December 31,                       | 2019      | 2018   | (dollars in millions)                       | 2019 vs. 2018
Interest income                                | $ 121     | $ 94   | $ 27                                        | 28.7%
Other components of net periodic benefit cost  | 627       | 3,068  | (2,441)                                     | (79.6)
Early debt extinguishment costs                | (3,604)   | (725)  | (2,879)                                     | nm
Other, net                                     | (44)      | (73)   | 29                                          | 39.7
Total                                          | $ (2,900) | $2,364 | $ (5,264)                                   | nm


The assumptions used to calculate these amounts for fiscal 2019 are set forth under Note 16 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for fiscal year 2019 filed with the SEC on August 27, 2019.
(2) Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown in this column represent the grant date fair values of stock options issued pursuant to the Company’s 2003 Equity Incentive Plan and certain inducement grants, computed in accordance with FASB ASC Topic 718. The assumptions used to calculate these amounts for fiscal 2019 are set forth under Note 16 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for fiscal year 2019 filed with the SEC on August 27, 2019.
(3) All non-equity incentive plan compensation was paid pursuant to the Variable Pay Plan.
(4) The amounts in the “All Other Compensation” column for fiscal 2019 include: $4,000 401(k) matching contribution by the Company for each NEOs other than Mr. McNab.
(5) The Compensation Committee awarded Mr. Maletira a one-time discretionary bonus in the amount of $180,000 in connection with his work on the AvComm and Wireless acquisition. Please see “Discretionary Bonuses” under the Compensation Discussion and Analysis on page 36 of this proxy statement.
(6) Mr. Staley was awarded a $60,000 sign-on bonus when he joined the Company in February 2017.
The amounts in the salary, bonus, and non-equity incentive plan compensation columns of the Summary Compensation Table reflect actual amounts paid for the relevant years, while the amounts in the stock awards column reflect accounting values. The tables entitled “Outstanding Equity Awards at Fiscal Year-End Table” and “Option Exercises and Stock Vested Table” provide further information on the named executive officers’ potential realizable value and actual value realized with respect to their equity awards. The Summary Compensation Table should be read in conjunction with the Compensation Discussion and Analysis and the subsequent tables and narrative descriptions.

Name            | Fiscal Year | Maximum Possible Value of MSUs Using Grant Date Fair Value | Maximum Possible Value of PSUs Using Grant Date Fair Value
--------------- | ----------- | ---------------------------------------------------------- | ----------------------------------------------------------
Oleg Khaykin    | 2019        | 4,067,526                                                  | —
                | 2018        | 2,457,750                                                  | 909,900
                | 2017        | 659,618                                                    | —
Amar Maletira   | 2019        | 1,379,350                                                  | —
                | 2018        | 1,015,870                                                  | 454,950
                | 2017        | 574,500                                                    | —
Paul McNab      | 2019        | 591,150                                                    | —
                | 2018        | 442,395                                                    | —
                | 2017        | 373,425                                                    | —
Luke Scrivanich | 2019        | 591,150                                                    | —
                | 2018        | 442,395                                                    | —
                | 2017        | 393,600                                                    | —
Gary Staley     | 2019        | 591,150                                                    | —
                | 2018        | 943,527                                                    | —
                | 2017        | 303,948                                                    | —


Cost of Revenues
Our Products and Licensing segment costs increased $8.6 million to $16.7 million for the year ended December 31, 2019 compared to $8.1 million for the year ended December 31, 2018. This increase primarily resulted from $3.9 million of cost of revenues from the legacy business of MOI and $4.4 million of cost of revenues from the legacy business of GP during the year ended December 31, 2019, as well as an increase in sales volume.
Our Technology Development segment costs increased $3.2 million, to $18.6 million for the year ended December 31, 2019 compared to $15.4 million for the year ended December 31, 2018. The overall increase in Technology Development segment costs was driven by increases in direct labor and subcontractor costs consistent with the rate of growth in Technology Development segment revenues.

                             | Years ended December 31, |             |               |
---------------------------- | ------------------------ | ----------- | ------------- | ------------
                             | 2019                     | 2018        | $ Difference  | % Difference
Products and licensing costs | $16,684,172              | $8,078,870  | $8,605,302    | 106.5%
Technology development costs | 18,649,161               | 15,400,475  | 3,248,686     | 21.1%
Total costs of revenues      | $35,333,333              | $23,479,345 | $11,853,988   | 50.5%


NantHealth, Inc
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
(1) Cash and cash equivalents included restricted cash of $1,136, $1,136, and $350 at December 31, 2019, 2018, and 2017 included in other assets, respectively. Restricted cash consists of funds that are contractually restricted as to usage or withdrawal related to the Company's security deposits in the form of standby letters of credit for leased facilities. No amounts have been drawn upon the letters of credit as of December 31, 2019.
The accompanying notes are an integral part of these Consolidated Financial Statements.

Year Ended December 31,                                               |        |
--------------------------------------------------------------------- | ------ | ------
                                                                      | 2019   | 2018
Supplemental disclosure of cash flow information                      |        |
Income taxes paid                                                     | $318   | $15
Interest paid                                                         | $5,909 | $5,885
Interest received                                                     | —      | 13
Noncash investing and financing activities                            |        |
Purchases of property and equipment (including internal use software) | 1,068  | 529
Assignment of NantHealth Labs (see Note 20)                           | —      | 8,956


The following table presents the percentage relationship of our Consolidated Statement of Operations line items to our consolidated net revenues for the periods presented:
Net revenue. Total revenue decreased $0.3 million, or 0.2% in fiscal 2018 compared to fiscal 2017. Products revenue decreased $4.6 million or 12.1% while support, maintenance and subscription services revenue increased 5.8 million, or 9.1%, as a result of continued focus on selling hosted perpetual and subscription services which increased 35% year over year. Hosted perpetual and subscription services revenue comprised 16% of total consolidated revenues in 2018 compared to 12% in 2017. Professional services revenue decreased $1.4 million, or 5.5%, primarily as a result of a decrease in proprietary services of $1.5 million offset by an increase in remarketed services of $0.1 million.
Gross profit and gross profit margin. Our total gross profit increased $0.6 million, or 1.0%, in fiscal 2018 and total gross profit margin increased 0.6% to 50.6%. Products gross profit decreased $2.8 million and gross profit margin decreased 4.6% to 21.7% primarily as a result of lower product revenue coupled with higher amortization of developed technology by $2.0 million related to the previously announced general availability of the latest version of our rGuest Buy and rGuest Stay software that were placed into service in the first and second quarters of fiscal 2017, and the second quarter of fiscal 2018.
Support, maintenance and subscription services gross profit increased $6.0 million and gross profit margin increased 260 basis points to 75.8% due to the scalable nature of our infrastructure supporting and hosting customers. Professional services gross profit decreased $2.6 million and gross profit margin decreased 9.0% to 19.2% due to lower professional services revenues on higher cost structure following a recent alignment toward enabling the Company to provide more customer-centric services going forward.
Operating expenses Operating expenses, excluding legal settlements and restructuring, severance and other charges, increased $1.0 million, or 1.4%, in fiscal 2018 compared with fiscal 2017. As a percent of total revenue, operating expenses have increased 0.9% in fiscal 2018 compared with fiscal 2017
Product development. Product development includes all expenses associated with research and development. Product development decreased $1.1 million, or 3.8%, during fiscal 2018 as compared to fiscal 2017. This decrease is primarily driven by our shift from contract labor to internal resources resulting in a decrease in contract labor of $5.9 million and an increase in payroll related expenses of $4.7 million.
Sales and marketing. Sales and marketing decreased $2.7 million, or 13.2%, in fiscal 2018 compared with fiscal 2017. The change is due primarily to a decrease of $2.2 million in incentive commissions related to revision of our commission plan from total contract value to annual contract value coupled with lower sales in fiscal 2018.
Depreciation of fixed assets. Depreciation of fixed assets increased $0.2 million or 9.2% in fiscal 2018 as compared to fiscal 2017.
Amortization of intangibles. Amortization of intangibles increased $0.5 million, or 35.0%, in fiscal 2018 as compared to fiscal 2017 due to our latest version of rGuest Pay being placed into service on March 31, 2017.
Restructuring, severance and other charges. Restructuring, severance, and other charges increased $0.2 million during fiscal 2018 compared to fiscal 2017 related to our ongoing efforts to create more efficient teams across the business, which included certain executive changes during the year.
Our restructuring actions are discussed further in Note 4, Restructuring Charges.
Legal settlements. During fiscal 2018 and 2017, we recorded $0.2 million and $0.1 million, respectively, in legal settlements for employment and other business-related matters.

                                                          | Year ended March 31, |
--------------------------------------------------------- | -------------------- | ------
                                                          | 2018                 | 2017
Net revenue:                                              |                      |
Products                                                  | 26.5%                | 30.0%
Support, maintenance and subscription services            | 54.2                 | 49.6
Professional services                                     | 19.3                 | 20.4
Total net revenue                                         | 100.0                | 100.0
Cost of goods sold:                                       |                      |
Products (inclusive of developed technology amortization) | 20.7                 | 22.1
Support, maintenance and subscription services            | 13.1                 | 13.3
Professional services                                     | 15.6                 | 14.6
Total cost of goods sold                                  | 49.4                 | 50.0
Gross profit                                              | 50.6                 | 50.0
Operating expenses:                                       |                      |
Product development                                       | 21.9                 | 22.8
Sales and marketing                                       | 14.2                 | 16.3
General and administrative                                | 18.9                 | 15.6
Depreciation of fixed assets                              | 2.1                  | 1.9
Amortization of intangibles                               | 1.5                  | 1.1
Restructuring, severance and other charges                | 1.4                  | 1.2
Legal settlements                                         | 0.1                  | 0.1
Operating loss                                            | (9.5)%               | (8.9)%


Operating expenses
nm—not meaningful
Research and development expenses
Research and development expenses increased $15.8 million in the year ended March 31, 2018 compared to the year ended March 31, 2017, which was primarily attributable to increases in personnel-related costs of $10.1 million, information technology and facility costs of $2.3 million, professional services costs of $0.9 million, share-based compensation expense of $0.7 million, travel and other costs of $0.5 million and data center costs of $0.5 million.
Research and development expenses for the year ended March 31, 2018 as compared to the year ended March 31, 2017 were negatively impacted by approximately $0.5 million primarily as a result of the weakening of the U.S. dollar relative to the British pound.
Personnel-related cost increased primarily as a result of salaries and benefits associated with increased headcount throughout the year, information technology and facility costs increased primarily as a result of increased headcount, professional services costs increased primarily as a result of the use of research and development contractors and share-based compensation expense increased primarily as a result of share option grants since the prior year.
Sales and marketing expenses
Sales and marketing expenses increased $25.1 million in the year ended March 31, 2018 compared to the year ended March 31, 2017, which was primarily attributable to increases in personnel-related costs of $13.5 million, marketing costs of $4.7 million, information technology and facilities costs of $3.6 million, travel and other costs of $2.3 million and professional services of $0.8 million.
Sales and marketing expenses for the year ended March 31, 2018 as compared to the year ended March 31, 2017 were negatively impacted by approximately $1.4 million primarily as a result of the weakening of the U.S. dollar relative to the South African rand and British pound. Personnel-related costs increased primarily as a result of salaries and benefits associated with increased headcount. Information technology and facility costs and travel and other costs increased primarily as a result of increased headcount.
General and administrative expenses
General and administrative expenses increased $9.1 million in the year ended March 31, 2018 compared to the year ended March 31, 2017, which was primarily attributable to increases in personnel-related costs of $5.0 million, share-based compensation expense of $1.2 million, information technology and facilities costs of $1.0 million and professional services costs and material supplies of $0.6 million each.
General and administrative expenses for the year ended March 31, 2018 as compared to the year ended March 31, 2017 were negatively impacted by approximately $0.3 million primarily as a result of the weakening of the U.S. dollar against the British pound and South African rand. Personnel-related costs increased primarily as a result of salaries and benefits associated with increased headcount.
Share-based compensation expense increased primarily as a result of share option grants since the prior year. Information technology and facility and material supplies costs increased primarily as a result of increased headcount.
Restructuring and Impairment of long-lived assets
In the fourth quarter of fiscal 2018, upon the exit of our Watertown, Massachusetts corporate office space, we recorded a restructuring charge of $0.8 million for remaining non-cancelable rent and estimated operating expenses for the vacated premises, net of sublease rentals, and a non-cash impairment charge of $1.7 million primarily related to leasehold improvements.

                                    | Year ended March 31, |                        | Period-to-period change |
----------------------------------- | -------------------- | ---------------------- | ----------------------- | --------
% Change                            | 2018                 | 2017                   | Amount                  | % Change
                                    |                      | (dollars in thousands) |                         |
Operating expenses:                 |                      |                        |                         |
Research and development            | $38,373              | $22,593                | $15,780                 | 70%
Sales and marketing                 | 121,246              | 96,154                 | 25,092                  | 26%
General and administrative          | 36,989               | 27,875                 | 9,114                   | 33%
Impairment of long-lived assets     | 1,712                | —                      | 1,712                   | nm
Restructuring                       | 832                  | —                      | 832                     | nm
Total operating expenses            | $199,152             | $146,622               | $52,530                 | 36%


The following table provides reconciliation from U.S. GAAP Net income to non-GAAP Adjusted EBITDA (amounts in thousands):
(1) Fiscal years ending March 31, 2018 and 2017 adjusted due to the adoption of ASC 606.
(2) $0.9 million in costs incurred during fiscal year 2018 related to the relocation of the Company's tantalum powder facility equipment from Carson City, Nevada to its existing Matamoros, Mexico plant were reclassified from “Plant start-up costs” to “Restructuring charges” during fiscal year 2019.

                                                            |          | Fiscal Years Ended March 31, |
----------------------------------------------------------- | -------- | ---------------------------- | --------
                                                            | 2019     | 2018                         | 2017
Net income (U.S. GAAP) (1)                                  | $206,587 | $254,127                     | $47,157
Non-GAAP adjustments:                                       |          |                              |
Income tax expense (benefit)                                | (39,460) | 9,132                        | 4,294
Interest expense, net                                       | 19,204   | 32,073                       | 39,731
Depreciation and amortization                               | 52,628   | 50,661                       | 38,151
EBITDA (non-GAAP) (1)                                       | 238,959  | 345,993                      | 129,333
Excluding the following items:                              |          |                              |
Equity (income) loss from equity method investments         | 3,304    | (76,192)                     | (41,643)
Acquisition (gain) loss                                     | —        | (130,880)                    | —
Change in value of TOKIN options                            | —        | —                            | (10,700)
(Gain) loss on write down and disposal of long-lived assets | 1,660    | (992)                        | 10,671
ERP integration costs/IT transition costs                   | 8,813    | 80                           | 7,045
Stock-based compensation                                    | 12,866   | 7,657                        | 4,720
Restructuring charges (2)                                   | 8,779    | 14,843                       | 5,404
R&D grant reimbursements and grant income                   | (4,559)  | —                            | —
Legal expenses/fines related to antitrust class actions     | 11,896   | 16,636                       | 2,640
Net foreign exchange (gain) loss                            | (7,230)  | 13,145                       | (3,758)
TOKIN investment-related expenses                           | —        | —                            | 1,101
Plant start-up costs (2)                                    | (927)    | 929                          | 427
Loss on early extinguishment of debt                        | 15,946   | 486                          | —
Adjusted EBITDA (non-GAAP) (1)                              | $289,507 | $191,705                     | $105,240


We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are subject to variability in raw material prices which continue to fluctuate for many of the raw materials we use, including copper, gold, and silver. In fiscal 2019, we purchased approximately 172 million pounds of copper, 122,000 troy ounces of gold, and 2.6 million troy ounces of silver. The following table presents the average prices incurred related to copper, gold, and silver:
In fiscal 2020, we expect to purchase approximately 170 million pounds of copper, 120,000 troy ounces of gold, and 2.4 million troy ounces of silver.

       |          |        | Fiscal
------ | -------- | ------ | -------
       | Measure  | 2019   | 2018
Copper | Lb.      | $ 2.93 | $  2.86
Gold   | Troy oz. | 1,309  | 1,281
Silver | Troy oz. | 16.42  | 17.15


Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheets are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2019, the Company had state net operating loss carryforwards of $337.6 million expiring between 2020 and 2039. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that, under current law, is likely to limit future tax benefits to approximately $3.3 million. Valuation allowances increased by $0.7 million during fiscal year 2019 primarily due to increases in net operating losses incurred in certain tax jurisdictions for which no tax benefit was recognized.
The Company does not have unrecognized tax benefits as of June 30, 2019, 2018 and 2017. The Company
recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
All years prior to fiscal year 2013 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.
In December 2017, an Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the “Act”) was enacted. The Act included provisions that reduced the federal statutory income tax rate from 35 percent to 21 percent, created a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings (i.e. transition tax), and changed certain business deductions including allowing for immediate expensing of certain qualified capital expenditures and limitations on deductions of interest expense. The SEC staff issued guidance on income tax accounting for the Act which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. In accordance with this guidance, during fiscal year 2018, we recorded a provisional tax charge of $5.0 million for the transition tax and a provisional tax benefit of $74.6 million for the remeasurement of deferred tax assets and liabilities. During fiscal year 2019, we recorded a discrete tax benefit of $0.2 million in measurement period adjustments for the transition tax offset by a discrete tax charge of $0.2 million for the remeasurement of deferred tax assets and liabilities. Our accounting for the impact of the Act was completed as of the period ending December 31, 2018. Under the Act, the transition tax is being paid over an eight year period beginning in fiscal year 2019.
The Act also established new tax provisions that became effective in fiscal year 2019, including but not limited to eliminating the corporate alternative minimum tax, creating the base erosion anti-abuse tax (“BEAT”), establishing new limitations on deductible interest expense and certain executive compensation, creating a new provision designed to tax global intangible low-tax income (“GILTI”) and generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries. The Company has made an accounting policy election to treat the tax effect of GILTI as a current period expense when incurred.
Undistributed earnings of our foreign subsidiaries, totaling $77.8 million were considered permanently reinvested. Following enactment of the Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes. If these earnings were to be repatriated, approximately $0.3 million of tax expense would be incurred.

                                   | June 30, |
---------------------------------- | -------- | --------
($ in millions)                    | 2019     | 2018
Deferred tax assets:               |          |
Pensions                           | $86.9    | $66.8
Postretirement provisions          | 35.7     | 33.7
Net operating loss carryforwards   | 28.8     | 26.5
Derivatives and hedging activities | 4.1      | —
Other                              | 32.1     | 29.4
Gross deferred tax assets          | 187.6    | 156.4
Valuation allowances               | (24.6)   | (23.9)
Total deferred tax assets          | 163.0    | 132.5
Deferred tax liabilities:          |          |
Depreciation                       | (249.5)  | (235.2)
Intangible assets                  | (11.3)   | (11.9)
Inventories                        | (36.1)   | (30.5)
Derivatives and hedging activities | (0.3)    | (8.7)
Other                              | (4.3)    | (3.5)
Total deferred tax liabilities     | (301.5)  | (289.8)
Deferred tax liabilities, net      | $(138.5) | $(157.3)


Revenues. Revenues increased by 25% to RMB105.8 billion for the fourth quarter of 2019 on a year-on-year basis. The following table sets forth our revenues by line of business for the fourth quarter of 2019 and the fourth quarter of 2018:
Revenues from VAS increased by 20% to RMB52,308 million for the fourth quarter of 2019 on a year-on-year basis. Online games revenues grew by 25% to RMB30,286 million. The increase was primarily driven by revenue growth from smart phone games in both domestic and overseas markets, including titles such as Peacekeeper Elite and PUBG Mobile, as well as revenue contributions from Supercell titles, partly offset by lower revenues from PC client games such as DnF. Social networks revenues increased by 13% to RMB22,022 million. The increase mainly reflected greater contributions from digital content services such as live broadcast and music streaming services. Total smart phone games revenues (including smart phone games revenues attributable to our social networks business) were RMB26,035 million and PC client games revenues were RMB10,359 million for the fourth quarter of 2019.
Revenues from FinTech and Business Services increased by 39% to RMB29,920 million for the fourth quarter of 2019 on a year-on-year basis. The increase was primarily due to greater revenue contributions from commercial payment, as well as revenue growth from cloud services as a result of deeper penetration in key verticals.
Revenues from Online Advertising increased by 19% to RMB20,225 million for the fourth quarter of 2019 on a year-onyear basis. Social and others advertising revenues increased by 37% to RMB16,274 million. The increase was mainly driven by advertising revenue growth from Weixin Moments and our mobile advertising network. Media advertising revenues decreased by 24% to RMB3,951 million. The decrease primarily reflected lower advertising revenues from our media platforms including Tencent Video and Tencent News due to uncertain broadcasting schedules and fewer telecasts of sports events.

                              | Unaudited                           |            |                  |
----------------------------- | ----------------------------------- | ---------- | ---------------- | ----------
                              | Three months ended                  |            |                  |
                              | 31 December 2019                    |            | 31 December 2018 |
                              |                                     | % of total |                  | % of total
                              | Amount                              | revenues   | Amount           | revenues
                              |                                     |            | (Restated)       | (Restated)
                              | (RMB in millions, unless specified) |            |                  |
VAS                           | 52,308                              | 50%        | 43,651           | 51%
FinTech and Business Services | 29,920                              | 28%        | 21,597           | 26%
Online Advertising            | 20,225                              | 19%        | 17,033           | 20%
Others                        | 3,314                               | 3%         | 2,615            | 3%
Total revenues                | 105,767                             | 100%       | 84,896           | 100%


ADJUSTED NET EARNINGS AND ADJUSTED EPS
The terms adjusted net earnings and adjusted EPS do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and NCI. We define adjusted EPS as adjusted net earnings per BCE common share.
We use adjusted net earnings and adjusted EPS, and we believe that certain investors and analysts use these measures, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring
The most comparable IFRS financial measures are net earnings attributable to common shareholders and EPS.
The following table is a reconciliation of net earnings attributable to common shareholders and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.

                                                                                | 2019  |           | 2018  |
------------------------------------------------------------------------------------------------------------------------- | ----- | --------- | ----- | ---------
                                                                                | TOTAL | PER SHARE | TOTAL | PER SHARE
Net earnings attributable to common shareholders                                                                          | 3,040 | 3.37      | 2,785 | 3.10
Severance, acquisition and other costs                                                                                | 83    | 0.10      | 100   | 0.11
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans | (101) | (0.11)    | 58    | 0.07
Net (gains) losses on investments                                                                                | 44    | 0.05      | 47    | 0.05
Early debt redemption costs                                                                                | 13    | 0.01      | 15    | 0.02
Impairment charges                                                                                | 74    | 0.08      | 146   | 0.16
Adjusted net earnings                                                                                | 3,153 | 3.50      | 3,151 | 3.51


Disaggregation of Revenue
We generate revenue from the sale of services and sale of software for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. The following table depicts the disaggregation of revenue (in thousands) according to revenue type and is consistent with how we evaluate our financial performance:
Revenue from Contracts with Customers:

                            | Twelve months ended December 31, |
--------------------------- | -------------------------------- | -------
                            | 2019                             | 2018
Services                    | $59,545                          | $64,476
Software and other          | 3,788                            | 5,073
             Total revenue  | $63,333                          | $69,549


Net periodic benefit expense for our post-retirement benefit plans includes the following components:
We report service costs for our Combined Pension Plan and post-retirement benefit plans in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017. Additionally, a portion of the service cost is also allocated to certain assets under construction, which are capitalized and reflected as part of property, plant and equipment in our consolidated balance sheets. The remaining components of net periodic benefit expense (income) are reported in other income, net in our consolidated statements of operations. As a result of ongoing efforts to reduce our workforce, we recognized a one-time charge in 2019 of $6 million and in 2018 of $15 million for special termination benefit enhancements paid to certain eligible employees upon voluntary retirement.

                                             | Post-Retirement Plans    |      |
-------------------------------------------- | ------------------------ | ---- | ----
                                             | Years Ended December 31, |      |
                                             | 2019                     | 2018 | 2017
                                             | (Dollars in milions)     |      |
Service cost                                 | $15                      | 18   | 18
Interest cost                                | 110                      | 97   | 100
Expected return on plan assets               | (1)                      | (1)  | (2)
Recognition of prior service cost            | 16                       | 20   | 20
Net periodic post-retirement benefit expense | $140                     | 134  | 136


NOTE 8—OTHER ASSETS
Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of certain contractual-based agreements.
Deferred implementation costs relate to direct and relevant costs on implementation of long-term contracts, to the extent such costs can be recovered through guaranteed contract revenues. As a result of the adoption of Topic 606, deferred implementation costs are no longer capitalized, but rather expensed as incurred as these costs do not relate to future performance obligations. Accordingly, these costs were adjusted through opening retained earnings as of July 1, 2018 (see note 3 "Revenues").
Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see note 3 "Revenues").
Investments relate to certain non-marketable equity securities in which we are a limited partner. Our interests in each of these investees range from 4% to below 20%. These investments are accounted for using the equity method. Our share of net income or losses based on our interest in these investments is recorded as a component of other income (expense), net in our Consolidated Statements of Income. During the year ended June 30, 2019, our share of income (loss) from these investments was $13.7 million (year ended June 30, 2018 and 2017 — $6.0 million and $6.0 million, respectively).
Long-term prepaid expenses and other long-term assets includes advance payments on long-term licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets.

                                                      | As of June 30, 2019 | As of June 30, 2018
----------------------------------------------------- | ------------------- | -------------------
Deposits and restricted cash                          | $13,671             | $9,479
Deferred implementation costs                         | —                   | 13,740
Capitalized costs to obtain a contract                | 35,593              | 13,027
Investments                                           | 67,002              | 49,635
Long-term prepaid expenses and other long-term assets | 32,711              | 25,386
Total                                                 | $148,977            | $111,267


3. Operating (loss)/profit
Detailed below are the key amounts recognised in arriving at our operating (loss)/profit
Notes: 1 The year ended 31 March 2019 included €nil (2018: €80 million credit, 2017: €127 million charge) reported in other income and expense in the consolidated income statement
2 Reported in other income and expense in the consolidated income statement.

                                                                                | 2019  | 2018  | 2017
------------------------------------------------------------------------------------------------------ | ----- | ----- | -------
                                                                                | €m    | €m    | €m
Net foreign exchange losses/(gains)1                                                                   | 1     | (65)  | 133
Depreciation of property, plant and equipment (note 11):                                               |       |       |
Owned assets                                                                                | 5,795 | 5,963 | 6,253
Leased assets                                                                                | 59    | 47    | 12
Amortisation of intangible assets (note 10)                                                            | 3,941 | 4,399 | 4,821
Impairment of goodwill in subsidiaries, associates and joint arrangements (note 4)                     | 3,525 | –     | –
Staff costs (note 23)                                                                                | 5,267 | 5,295 | 5,519
Amounts related to inventory included in cost of sales                                                 | 5,886 | 6,045 | 6,464
Operating lease rentals payable                                                                        | 3,826 | 3,788 | 3,976
Loss on disposal of property, plant and equipment and intangible assets                                | 33    | 36    | 22
Own costs capitalised attributable to the construction or acquisition of property, plant and equipment | (844) | (829) | (800)
Net gain on formation of VodafoneZiggo (note 26)2                                                      | –     | –     | (1,275)


Note 6 – Accrued Expenses
Accrued expenses consisted of the following:

                                                     |         | December 31,
---------------------------------------------------- | ------- | ------------
                                                     | 2019    | 2018
Payroll and incentive compensation                   | $ 3,009 | $ 1,937
Current portion of operating lease liabilities     – | 285     | -
Real estate taxes                                    | 398     | 398
Other                                                | 395     | 442
Total accrued expenses                               | $ 4,087 | $ 2,777


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the financial statements. The reconciliation of our total gross unrecognized tax benefits is as follows:
The unrecognized tax benefits of $13.0 million, if recognized, will impact the Company’s effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $3.0 million and $1.2 million of accrued interest and penalties at December 31, 2019 and 2018, respectively. We expect the total amount of tax contingencies will decrease by approximately $3.5 million in 2020 based on statute of limitation expiration.
With few exceptions, the Company is no longer subject to federal, state or foreign income tax examinations by tax authorities for years before 2016.

                                                                            |         | Years Ended December 31, |
--------------------------------------------------------------------------- | ------- | ------------------------ | -------
                                                                            | 2019    | 2018                     | 2017
Balance at beginning of period                                              | $13,162 | $15,990                  | $11,401
Additions based on tax positions taken during a prior period                | 484     | 94                       | 1,258
Additions based on tax positions taken during a prior period - acquisitions | 4,479   | 757                      | —
Additions based on tax positions taken during the current period            | —       | —                        | 4,433
Reductions based on tax positions taken during a prior period               | (4,295) | (153)                    | —
Reductions related to a lapse of applicable statute of limitations          | (821)   | (3,144)                  | (1,102)
Reductions related to a settlement with taxing authorities                  | —       | (382)                    | —
Balance at end of period                                                    | $13,009 | $13,162                  | $15,990


On February 6, 2018, the Company announced that its Board of Directors had unanimously approved the pursuit of a separation of its smart camera business “Arlo” from NETGEAR (the “Separation”) to be effected by way of initial public offering (“IPO”) and spin-off. On August 2, 2018, Arlo Technologies, Inc. (“Arlo”) and NETGEAR announced the pricing of Arlo's initial public offering (“IPO”) at a price to the public of $16.00 per share, subsequently listing on the New York Stock Exchange on August 3, 2018 under the symbol "ARLO". On August 7, Arlo completed the IPO and generated proceeds of approximately $170.2 million, net of offering costs, which Arlo used for its general corporate purposes. Upon completion of the IPO, Arlo common stock outstanding amounted to 74,247,000 shares, of which NETGEAR held 62,500,000 shares, representing approximately 84.2% of the outstanding shares of Arlo common stock. On December 31, 2018, NETGEAR completed the distribution of these 62,500,000 shares of common stock of Arlo (the “Distribution”). After the completion of the Distribution, NETGEAR no longer owns any shares of Arlo common stock. The Distribution took place by way of a pro rata common stock dividend to each NETGEAR stockholder of record on the record date of the Distribution, December 17, 2018, and NETGEAR stockholders received 1.980295 shares of Arlo common stock for every share of NETGEAR common stock held as of the record date.
Upon completion of the Distribution, the Company ceased to own a controlling financial interest in Arlo and Arlo's assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the Consolidated Financial Statements.
In connection with Arlo's Separation, the Company incurred Separation expense of $34.2 million since commencing in December 2017. Separation expense primarily consists of third-party advisory, consulting, legal and professional services, IT costs and employee bonuses directly related to the separation, as well as other items that are incremental and one-time in nature that are related to the separation. The majority of these costs are reflected in the Company's consolidated statement of operations as discontinued operations for all periods presented. In addition, in the third fiscal quarter of 2018, the Company contributed $70.0 million in cash to Arlo and provided for, among other things, the transfer from NETGEAR to Arlo of assets and the assumption by Arlo of liabilities comprising its business effected through a master separation agreement between NETGEAR and Arlo. The master separation agreement governs the separation of Arlo's business from NETGEAR as well as various interim arrangements. In connection with these arrangements, during the third and fourth quarter of 2018, NETGEAR recorded a reduction to operating expenses of $6.3 million relating to the transition services, which are reflected in the Company's consolidated statement of operations as discontinued operations for the periods presented. In the third quarter of 2018, NETGEAR provided billing and collection services to Arlo in respect of its trade receivables and trade payments. As of December 31, 2018, NETGEAR had a net liability to Arlo of $12.2 million relating to these transition service, billing and collection services, and the net liability was classified within accounts payable on the consolidated balance sheets. The Company does not expect the amounts relating to such services to be material after the Distribution. Additionally, the Company entered into certain other agreements that provide a framework for the relationship between NETGEAR and Arlo after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property rights cross-license agreement, and a registration rights agreement. In connection with Arlo's Separation, the Company incurred Separation expense of $34.2 million since commencing in December 2017. Separation expense primarily consists of third-party advisory, consulting, legal and professional services, IT costs and employee bonuses directly related to the separation, as well as other items that are incremental and one-time in nature that are related to the separation. The majority of these costs are reflected in the Company's consolidated statement of operations as discontinued operations for all periods presented. In addition, in the third fiscal quarter of 2018, the Company contributed $70.0 million in cash to Arlo and provided for, among other things, the transfer from NETGEAR to Arlo of assets and the assumption by Arlo of liabilities comprising its business effected through a master separation agreement between NETGEAR and Arlo. The master separation agreement governs the separation of Arlo's business from NETGEAR as well as various interim arrangements. In connection with these arrangements, during the third and fourth quarter of 2018, NETGEAR recorded a reduction to operating expenses of $6.3 million relating to the transition services, which are reflected in the Company's consolidated statement of operations as discontinued operations for the periods presented. In the third quarter of 2018, NETGEAR provided billing and collection services to Arlo in respect of its trade receivables and trade payments. As of December 31, 2018, NETGEAR had a net liability to Arlo of $12.2 million relating to these transition service, billing and collection services, and the net liability was classified within accounts payable on the consolidated balance sheets. The Company does not expect the amounts relating to such services to be material after the Distribution. Additionally, the Company entered into certain other agreements that provide a framework for the relationship between NETGEAR and Arlo after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property rights cross-license agreement, and a registration rights agreement.
The financial results of Arlo through the Distribution date are presented as income (loss) from discontinued operations, net of tax, in the consolidated
statements of operations. The following table presents financial results of Arlo:

                                                               |           | Year Ended December 31,
-------------------------------------------------------------- | --------- | -----------------------
                                                               | 2018      | 2017
                                                               |           | (In thousands)
Net revenue                                                    | $464,649  | $367,751
Cost of net revenue                                            | 372,843   | 279,425
Gross profit                                                   | 91,806    | 88,326
Operating expenses:                                            |           |
Research and development                                       | 48,696    | 22,710
Sales and marketing                                            | 39,713    | 19,490
General and administrative                                     | 17,762    | 691
Separation expense                                             | 31,583    | 1,384
Litigation reserves, net                                       | —         | 28
Total operating expenses                                       | 137,754   | 44,303
Income (loss) from operations of discontinued operations       | (45,948)  | 44,023
Interest income, net                                           | 1,239     | —
Other income (expense), net                                    | (41)      | 467
Income (loss) from discontinued operations before income taxes | (44,750)  | 44,490
Provision (benefit) for income taxes                           | (9,095)   | 13,921
Income (loss) from discontinued operations, net of tax         | $(35,655) | $30,569


Lockheed Martin Transaction
On August 16, 2016, a wholly-owned subsidiary of Leidos Holdings, Inc. merged with the IS&GS Business in a Reverse Morris Trust transaction (the "IS&GS Transactions").
During fiscal 2017, the Company recorded adjustments to finalize the fair value of acquired assets and liabilities assumed which resulted in a $337 million increase in goodwill. Significant changes included intangible assets, property, plant and equipment, deferred tax assets, other assets, accounts payable and accrued liabilities and deferred tax liabilities.
On January 10, 2018, the final amount of the net working capital of the IS&GS Business was determined through a binding arbitration proceeding in accordance with the Separation Agreement with Lockheed Martin. As a result, $24 million was recorded as acquisition costs in the consolidated statements of income for fiscal 2017. On January 18, 2018, the final working capital amount of $105 million was paid to Lockheed Martin, of which $24 million and $81 million was presented as cash flows from operating and investing activities, respectively, on the consolidated statements of cash flows.
During fiscal 2018, a tax indemnification liability of $23 million was paid to Lockheed Martin in accordance with the Tax Matters Agreement, which was presented as cash flows from financing activities on the consolidated statements of cash flows.
The Company incurred the following expenses related to the acquisition and integration of the IS&GS Business:
These acquisition and integration costs have been recorded within Corporate and presented in "Acquisition, integration and restructuring costs" on the consolidated statements of income.

                                        |                 | Year Ended        |
--------------------------------------- | --------------- | ----------------- | -----------------
                                        | January 3, 2020 | December 28, 2018 | December 29, 2017
                                        |                 | (in millions)     |
Acquisition costs                       | $—              | $—                | $25
Integration costs                       | 3               | 29                | 77
Total acquisition and integration costs | $3              | $29               | $102


8 Directors’ emoluments
Directors represent the key management personnel of the Group under the terms of IAS 24 (Related Party Disclosures). Total remuneration is shown below.
Further details of salaries and short-term benefits, post-retirement benefits, share plans and long-term share incentive plans are shown in the Annual Report on Remuneration 2019 on pages 102 to 132. The share-based payments charge comprises a charge in relation to the Performance Share Plan and the Employee Share Ownership Plan (as described in Note 23).

                                 | 2019 | 2018
-------------------------------- | ---- | ----
                                 | £m   | £m
Salaries and short-term benefits | 4.1  | 3.7
Post-retirement benefits         | 0.5  | 0.4
Share-based payments             | 1.7  | 1.3
Total Directors' remuneration    | 6.3  | 5.4


The following is a summary of amounts reclassified from AOCI for the years ended June 30, 2019 and 2018:
(a) Amounts in parentheses indicate debits to income/loss.
(b) These AOCI components are included in the computation of net periodic benefit cost (see Note 11 for additional details).

                                                                    |                         | Amount Reclassified from AOCI |
------------------------------------------------------------------- | ----------------------- | ----------------------------- | -------
                                                                    |                         | Years Ended June 30,          |
($ in millions) (a)                                                 | Location of gain (loss) | 2019                          | 2018
Details about AOCI Components                                       |                         |                               |
Cash flow hedging items                                             |                         |                               |
Commodity contracts                                                 | Cost of sales           | $5.1                          | $1.8
Foreign exchange contracts                                          | Net sales               | 1.0                           | (1.0)
Forward interest rate swaps                                         | Interest expense        | 0.4                           | 0.4
                                                                    | Total before tax        | 6.5                           | 1.2
                                                                    | Tax expense             | (1.6)                         | (0.4)
                                                                    | Net of tax              | $4.9                          | $0.8
Amortization of pension and other postretirement benefit plan items |                         |                               |
Net actuarial loss                                                  | (b)                     | $(12.0)                       | $(16.4)
Prior service cost                                                  | (b)                     | 3.1                           | 3.1
                                                                    | Total before tax        | (8.9)                         | (13.3)
                                                                    | Tax benefit             | 2.1                           | 4.4
                                                                    | Net of tax              | $(6.8)                        | $(8.9)


RESULTS OF OPERATIONS
Revenue
(1) Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.
We expect our revenue mix to continue to shift in favor of our subscription offerings, particularly cloud arrangements, which could result in slower total revenue growth in the near term. Revenue from cloud arrangements is generally recognized over the service period, while revenue from term and perpetual license arrangements is generally recognized upfront when the license rights become effective.
Subscription revenue
The increase in cloud revenue in 2019 reflects the shift in client preferences to cloud arrangements from other types of arrangements. The increase in term license revenue in 2019 was due to several large, multi-year term license contracts executed in 2019. This increase was partially offset by term license contracts with multi-year committed maintenance periods, where a greater portion of the contract value is allocated to maintenance.
The increase in maintenance revenue in 2019 was primarily due to the continued growth in the aggregate value of the installed base of our software and strong renewal rates in excess of 90%
Perpetual license
The decrease in perpetual license revenue in 2019 reflects the shift in client preferences in favor of our subscription offerings, particularly cloud arrangements
Consulting
Our consulting revenue fluctuates depending upon the mix of new implementation projects we perform as compared to those performed by our enabled clients or led by our partners. See "Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and cloud arrangements" in Item 1A of this Annual Report for additional information.
The decrease in consulting revenue in 2019 was primarily due to a decrease in billable hours.

(Dollars in thousands) | 2019     |      | 2018     |      | Change   |
---------------------- | -------- | ---- | -------- | ---- | -------- | -----
Cloud                  | $133,746 | 15%  | 82,627   | 9%   | $51,119  | 62%
Term license           | 199,433  | 22%  | 178,256  | 20%  | 21,177   | 12%
Maintenance            | 280,580  | 30%  | 263,875  | 30%  | 16,705   | 6%
Subscription (1)       | 613,759  | 67%  | 524,758  | 59%  | 89,001   | 17%
Perpetual license      | 80,015   | 9%   | 109,863  | 12%  | (29,848) | (27)%
Consulting             | 217,609  | 24%  | 256,960  | 29%  | (39,351) | (15)%
                       | $911,383 | 100% | $891,581 | 100% | $19,802  | 2%


VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Foreign exchange and other includes the impact of foreign exchange and certain immaterial reclassifications.

                                      | Allowances For        |
------------------------------------- | --------------------- | -------------------
                                      | Financing Receivables | Accounts Receivable
Year ended July 29, 2017              |                       |
Balance at beginning of fiscal year . | $375                  | $249
Provisions (benefits)                 | (35)                  | 27
Recoveries (write-offs), net .        | (49)                  | (61)
Foreign exchange and other .          | 4                     | (4)
Balance at end of fiscal year         | $295                  | $211
Year ended July 28, 2018              |                       |
Balance at beginning of fiscal year . | $295                  | $211
Provisions (benefits)                 | (89)                  | (45)
Recoveries (write-offs), net .        | (6)                   | (37)
Foreign exchange and other .          | 5                     | —
Balance at end of fiscal year         | $205                  | $129
Year ended July 27, 2019              |                       |
Balance at beginning of fiscal year   | $205                  | $129
Provisions (benefits)                 | (16)                  | 56
Recoveries (write-offs), net          | (42)                  | (50)
Foreign exchange and other  .         | (21)                  | 1
Balance at end of fiscal year         | $126                  | $136


The following table summarizes net revenues by significant product and services categories:
Endpoint and information protection products include endpoint security, advanced threat protection, and information protection solutions and their related support services. Network and web security products include network security, web security, and cloud security solutions and their related support services. WSS and PKI products consist of the solutions we divested on October 31, 2017. Other products and services primarily consist of email security products, managed security services, consulting, and other professional services.
Consumer security products include Norton security, Norton Secure VPN, and other consumer security solutions. Identity and information protection products include LifeLock identity theft protection and other information protection solutions.
Products and service revenue information

                                    |                | Year Ended     |
----------------------------------- | -------------- | -------------- | --------------
(in millions)                       | March 29, 2019 | March 30, 2018 | March 31, 2017
Enterprise Security:                |                |                |
Endpoint and information protection | $1,027         | $983           | $947
Network and web security            | 748            | 782            | 451
WSS and PKI                         | -              | 238            | 422
Other products and services         | 548            | 551            | 535
Total Enterprise Security           | $2,323         | $2,554         | $2,355
Consumer Cyber Safety:              |                |                |
Consumer security                   | $1,471         | $1,504         | $1,527
Identity and information protection | 937            | 776            | 137
Total Consumer Cyber Safety         | 2,408          | 2,280          | 1,664
Total net revenues                  | $4,731         | $4,834         | $4,019


Note 15. NET INCOME (LOSS) PER SHARE
We calculate basic net income (loss) per share by dividing earnings allocated to common stockholders by the basic weighted-average number of common shares outstanding for the period.
Diluted weighted-average shares is computed using basic weighted-average number of common shares outstanding plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities include stock options, restricted stock units, and the outstanding senior convertible debentures.
The following table presents the calculation of basic and diluted net income (loss) per share attributable to stockholders:
1 As a result of our net loss attributable to stockholders for fiscal 2019, 2018, and 2017, the inclusion of all potentially dilutive stock options, restricted stock units, and common shares under noted warrants and convertible debt would be anti-dilutive. Therefore, those stock options, restricted stock units and shares were excluded from the computation of the weighted-average shares for diluted net loss per share for such periods.

                                                   |                   | Fiscal Year Ended |
-------------------------------------------------- | ----------------- | ----------------- | -----------------
(In thousands, except per share amounts)           | December 29, 2019 | December 30, 2018 | December 31, 2017
Basic net income (loss) per share:                 |                   |                   |
Numerator:                                         |                   |                   |
Net income (loss) attributable to stockholders     | $22,159           | $(811,091)        | $(929,121)
Denominator:                                       |                   |                   |
Basic weighted-average common shares               | 144,796           | 140,825           | 139,370
Basic net income (loss) per share                  | $0.15             | $(5.76)           | $(6.67)
Diluted net income (loss) per share 1              |                   |                   |
Numerator:                                         |                   |                   |
Net income (loss) attributable to stockholders     | $22,159           | $(811,091)        | $(929,121)
Net income (loss) available to common stockholders | $22,159           | $(811,091)        | $(929,121)
Denominator:                                       |                   |                   |
Basic weighted-average common shares               | 144,796           | 140,825           | 139,370
Effect of dilutive securities:                     |                   |                   |
Restricted stock units                             | 2,729             | -                 | -
Dilutive weighted-average common shares:           | 147,525           | 140,825           | 139,370
Dilutive net income (loss) per share               | $ 0.15            | $ (5.76)          | $ (6.67)


As a result of the adoption of ASC 606, our deferred product revenues and deferred product costs for the fleet management and auto vehicle finance verticals increased as balances are now amortized over the estimated average in-service lives of these devices. Deferred income tax assets and accumulated deficit increased as a result of the changes made to our deferred product revenues and deferred product costs. The cumulative effect of the changes made to our consolidated balance sheet for the adoption of ASC 606 were as follows (in thousands):
(1) Deferred product costs included in Prepaid expenses and other current assets and Other assets amounted to $5.4 million and $6.0 million, respectively, as of March 1, 2018.

                                              | Balance at                           | ASC 606     | Balance at
--------------------------------------------- | ------------------------------------ | ----------- | -------------
                                              | February 28, 2018                    | Adjustments | March 1, 2018
                                              | Assets                               |             |
Prepaid expenses and other current assets (1) | $12,000                              | 1,891       | $13,891
Deferred income tax assets                    | 31,581                               | 532         | 32,113
Other assets (1)                              | 18,829                               | 3,145       | 21,974
                                              |                                      |             |
                                              | Liabilities and Stockholders' Equity |             |
Deferred revenue                              | $17,757                              | 2,156       | 19,913
Other non-current liabilities                 | 24,249                               | 5,007       | 29,256
                                              |                                      |             |
                                              | Stockholders' equity                 |             |


Intangible Assets
Internal software development costs of $2,526 and $12,666 were capitalized during the years ended December 31, 2019 and 2018, respectively, and are classified within software development costs as an intangible asset. Amortization expense related to the capitalized internally developed software was $7,464 and $3,832 for the years ended December 31, 2019 and 2018, respectively, and is included in cost of revenues, sales and marketing and general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
Expressed in US $000's except share and per share amounts

                                | December 31, 2018 |                          |
------------------------------- | ----------------- | ------------------------ | --------------
                                | Cost              | Accumulated amortization | Net book value
                                | $                 | $                        | $
Acquired technology             | 15,556            | 7,875                    | 7,681
Software development costs      | 24,963            | 9,226                    | 15,737
Acquired customer relationships | 495               | 346                      | 149
Purchased software              | 6,973             | 4,503                    | 2,470
Other intangible assets         | 591               | 556                      | 35
                                | 48,578            | 22,506                   | 26,072


Note 6 — Accounts Receivable, net
The Company’s net accounts receivable consists of:
At December 31, 2019 and 2018, the Company had recorded allowances for doubtful accounts of $1.8 million and $1.3 million, respectively, against Restaurant/Retail segment accounts receivable. Write-offs of accounts receivable during fiscal years 2019 and 2018 were $0.3 million and $0.4 million, respectively. The bad debt expense which is recorded in the consolidated statements of operations was $0.8 million and $0.8 million in 2019 and 2018, respectively.
Receivables recorded as of December 31, 2019 and 2018 all represent unconditional rights to payments from customers.

                           | December 31,   |
-------------------------- | -------------- | -------
                           | (in thousands) |
                           | 2019           | 2018
Government segment:        |                |
Billed                     | $11,608        | $9,100
Advanced billings          | (608)          | (563)
                           | 11,000         | 8,537
Restaurant/Retail segment: |                |
Accounts receivable - net  | 30,774         | 17,682
                           | $41,774        | $26,219


ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
Expected dividend growth is commensurate with BCE’s dividend growth strategy. Expected volatility is based on the historical volatility of BCE’s share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options

                                               | 2019  | 2018
---------------------------------------------- | ----- | -----
Weighted average fair value per option granted | $2.34 | $2.13
Weighted average share price                   | $58   | $57
Weighted average exercise price                | $58   | $56
Expected dividend growth                       | 5%    | 5%
Expected volatility                            | 14%   | 12%
Risk-free interest rate                        | 2%    | 2%
Expected life (years)                          | 4     | 4