ITEM NO. 2 – RATIFICATION OF KPMG AS OUR
2020 INDEPENDENT AUDITOR
ITEM NO. 2 – RATIFICATION OF KPMG AS OUR 2020 INDEPENDENT AUDITOR
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR
THIS PROPOSAL
The Audit Committee of the Board has appointed KPMG LLP as our independent auditor for the fiscal year
ending December 31, 2020, and we are submitting that appointment to our shareholders for ratification on an
advisory basis at the meeting. Although shareholder ratification of KPMG’s appointment is not legally required,
we are submitting this matter to the shareholders, as in the past, as a matter of good corporate practice. In
determining whether to reappoint KPMG as our independent auditor, the Audit Committee considered a number
of factors, including, among others, the firm’s qualifications, industry expertise, prior performance, control
procedures, proposed staffing and the reasonableness of its fees on an absolute basis and as compared with
fees paid by comparable companies.
The Audit Committee of the Board has appointed KPMG LLP as our independent auditor for the fiscal year ending December 31, 2020, and we are submitting that appointment to our shareholders for ratification on an advisory basis at the meeting. Although shareholder ratification of KPMG’s appointment is not legally required, we are submitting this matter to the shareholders, as in the past, as a matter of good corporate practice. In determining whether to reappoint KPMG as our independent auditor, the Audit Committee considered a number of factors, including, among others, the firm’s qualifications, industry expertise, prior performance, control procedures, proposed staffing and the reasonableness of its fees on an absolute basis and as compared with fees paid by comparable companies.
If the shareholders fail to vote on an advisory basis in favor of the appointment, the Audit Committee will reconsider whether to retain KPMG, and may appoint that firm or another without resubmitting the matter to the shareholders. Even if the shareholders ratify the appointment, the Audit Committee may, in its discretion, select a different independent auditor at any time during the year if it determines that such a change would be in the Company’s best interests.
In connection with the audit of the 2019 financial statements, we entered into an engagement letter with KPMG
which sets forth the terms by which KPMG will provide audit services to us. Any future disputes between KPMG
and us under that letter will be subject to certain specified alternative dispute resolution procedures, none of
which are intended to restrict the remedies that our shareholders might independently pursue against KPMG.
In connection with the audit of the 2019 financial statements, we entered into an engagement letter with KPMG which sets forth the terms by which KPMG will provide audit services to us. Any future disputes between KPMG and us under that letter will be subject to certain specified alternative dispute resolution procedures, none of which are intended to restrict the remedies that our shareholders might independently pursue against KPMG.
The following table lists the aggregate fees and costs billed to us by KPMG and its affiliates for the 2018 and
2019 services identified below:
(1) Includes the cost of services rendered in connection with (i) auditing our annual consolidated financial statements, (ii) auditing our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, (iii) reviewing our quarterly financial statements, (iv) auditing the financial statements of several of our subsidiaries, (v) reviewing our registration statements and issuing related comfort letters, (vi) statutory audits for certain of our foreign subsidiaries, and (vii) consultations regarding accounting standards. In addition, the amount listed for 2018 includes a final billing of $785,000 that was received after we finalized our 2019 proxy statement and consequently was not reflected in the auditor fee table included in our 2019 proxy statement.
(2) Includes the cost of preparing agreed upon procedures reports and providing general accounting consulting services.
(3) Includes costs associated with general tax planning, consultation and compliance (which were approximately $1,300,000 in 2018 and approximately $100,000 in 2019).
The Audit Committee maintains written procedures that require it to annually review and pre-approve the scope
of all services to be performed by our independent auditor. This review includes an evaluation of whether the
provision of non-audit services by our independent auditor is compatible with maintaining the auditor’s independence in providing audit and audit-related services. The Committee’s procedures prohibit the independent auditor from providing any non-audit services unless the service is permitted under applicable law and is pre-approved by the Audit Committee or its Chairman. The Chairman is authorized to pre-approve projects if the total anticipated cost of all projects pre-approved by him during any fiscal quarter does not exceed $250,000. The Audit Committee has pre-approved the Company’s independent auditor to provide up to $75,000 per quarter of miscellaneous permitted tax services that do not constitute discrete and separate projects. The Chairman and the Chief Financial Officer are required periodically to advise the full Committee of the scope and cost of services not pre-approved by the full Committee. Although applicable regulations permit us to waive these pre-approval requirements in certain limited circumstances, the Audit Committee did not use these waiver provisions in either 2018 or 2019.
KPMG has advised us that one or more of its partners will be present at the meeting. We understand that these
representatives will be available to respond to appropriate questions and will have an opportunity to make a
statement if they desire to do so.
Ratification of KPMG’s appointment as our independent auditor for 2020 will require the affirmative vote of a
majority of the votes cast on the proposal at the meeting.

                      | Amount Billed |
--------------------- | ------------- | -----------
                      | 2018          | 2019
Audit Fees(1)         | $16,014,014   | $17,639,702
Audit-Related Fees(2) | 106,528       | 153,203
Tax Fees(3)           | 1,318,798     | 119,098
Other                 | —             | —
Total Fees            | $17,439,340   | $17,912,003


Movements in total self‐insured risks, restructuring, onerous contracts, store exit costs, and other provisions
(1) The increase in restructuring, onerous contracts, and store exit costs in 2019 is primarily attributable to the recognition of provisions associated with the BIG W network review as outlined in Note 1.4.
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made as to the amount of the obligation. The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
A liability is recognised for benefits accruing to employees in respect of annual leave and long service leave.
Liabilities expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.
Liabilities which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date.
The provision for self-insured risks primarily represents the estimated liability for workers’ compensation and public liability claims.
Provision for restructuring is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected by the restructuring that the restructuring will occur.
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

                                         |                    |       | RESTRUCTURING, ONEROUS       |
---------------------------------------- | ------------------ | ----- | ---------------------------- | -----
                                         |                    |       | CONTRACTS, STORE EXIT COSTS, |
                                         | SELF‑INSURED RISKS |       | AND OTHER                    |
                                         | 2019               | 2018  | 2019                         | 2018
                                         | $M                 | $M    | $M                           | $M
Movement:                                |                    |       |                              |
Balance at start of period               | 596                | 593   | 679                          | 800
Net provisions recognised/(reversed) (1) | 177                | 161   | 225                          | 55
Cash payments                            | (157)              | (148) | (162)                        | (178)
Other                                    | (13)               | (10)  | (5)                          | 2
Balance at end of period                 | 603                | 596   | 737                          | 679
Current                                  | 173                | 177   | 280                          | 256
Non‑current                              | 430                | 419   | 457                          | 423
                                         | 603                | 596   | 737                          | 679


Purchases of Accenture plc Class A Ordinary Shares
The following table provides information relating to our purchases of Accenture plc Class A ordinary shares during the fourth quarter of fiscal 2019. For year-to-date information on all of our share purchases, redemptions and exchanges and further discussion of our share purchase activity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Purchases and Redemptions.”
(1) Average price paid per share reflects the total cash outlay for the period, divided by the number of shares acquired, including those acquired by purchase or redemption for cash and any acquired by means of employee forfeiture.
(2) Since August 2001, the Board of Directors of Accenture plc has authorized and periodically confirmed a publicly
announced open-market share purchase program for acquiring Accenture plc Class A ordinary shares. During
the fourth quarter of fiscal 2019, we purchased 2,048,307 Accenture plc Class A ordinary shares under this
program for an aggregate price of $389 million. The open-market purchase program does not have an expiration
date
(3) As of August 31, 2019, our aggregate available authorization for share purchases and redemptions was $3,674 million, which management has the discretion to use for either our publicly announced open-market share purchase program or our other share purchase programs. Since August 2001 and as of August 31, 2019, the Board of Directors of Accenture plc has authorized an aggregate of $35.1 billion for share purchases and redemptions by Accenture plc and Accenture Canada Holdings Inc
(4) During the fourth quarter of fiscal 2019, Accenture purchased 66,017 Accenture plc Class A ordinary shares in transactions unrelated to publicly announced share plans or programs. These transactions consisted of acquisitions of Accenture plc Class A ordinary shares primarily via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture plc Class A ordinary shares under our various employee equity share plans. These purchases of shares in connection with employee share plans do not affect our aggregate available authorization for our publicly announced open-market share purchase and our other share purchase programs.

Period                           | Total Number of Shares Purchased | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3)
-------------------------------- | -------------------------------- | -------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------
                                 |                                  |                                  |                                                                                | (in millions of U.S. dollars)
June 1, 2019 — June 30, 2019     | 801,659                          | $183.18                          | 785,600                                                                              | $3,924
July 1, 2019 — July 31, 2019     | 462,629                          | $194.65                          | 442,846                                                                              | $3,832
August 1, 2019 — August 31, 2019 | 850,036                          | $193.23                          | 819,861                                                                              | $3,674
Total (4)                        | 2,114,324                        | $189.73                          | 2,048,307                                                                            |


The following table sets forth our sources of revenue for each of the periods indicated (in thousands, except for percentages):
Subscription revenue increased by $69.9 million, or 15%, in 2019 when compared to 2018. Subscription revenue growth on a constant currency basis increased 16% in 2019 when compared to 2018. The increase was attributable to new business, which includes new customers, upsells, cross-sells, and renewals from existing customers.
Professional services revenue decreased by $31.3 million, or 48%, in 2019 when compared to 2018. The decrease of professional services revenue is attributable to the continued migration of implementation services to our global partners.
Subscription revenue increased by $76.3 million, or 19%, in 2018 when compared to 2017. The increase was attributable to new business, which included new customers, upsells, and renewals from existing customers. Professional services revenue decreased by $20.4 million, or 24%, in 2018 when compared to 2017. The decrease of professional services revenue is attributable to the execution of our strategic initiative to migrate much of our implementation services to our global partners.

                                                     |          | Year Ended December 31, |
---------------------------------------------------- | -------- | ----------------------- | --------
                                                     | 2019     | 2018                    | 2017
Subscription revenue                                 | $542,968 | $473,052                | $396,764
Percentage of subscription revenue to total revenue  | 94.2%    | 87.9%                   | 82.3%
Professional services revenue                        | $33,555  | $64,839                 | $85,221
Percentage of professional services to total revenue | 5.8%     | 12.1%                   | 17.7%
Total revenue                                        | $576,523 | 537,891                 | 481,985


Liquidity and Capital Resources
Cash Flows
A summary of the sources and uses of cash, cash equivalents, restricted cash and restricted cash equivalents is as follows:
Operating Activities
Net cash used in operating activities for the year ended December 29, 2019 was $270.4 million and was primarily the result of: (i) $158.3 million mark-to-market gain on equity investments with readily determinable fair value; (ii) $143.4 million gain on business divestiture; (iii) $128.4 million increase in inventories to support the construction of our solar energy projects; (iv) $66.2 million increase in accounts receivable, primarily driven by billings in excess of collections; (v) $38.2 million increase in contract assets driven by construction activities; (vi) $25.2 million gain on sale of assets; (vii) $17.3 million gain on sale of equity investments without readily determinable fair value; (viii) $8.9 million decrease in operating lease liabilities; (ix) $8.8 million increase in prepaid expenses and other assets, primarily related to movements in prepaid inventory; (x) net loss of $7.7 million; and (xi) $2.2 million increase in project assets, primarily related to the construction of our commercial solar energy projects. This was offset by: (i) $80.1 million depreciation and amortization; (ii) $79.3 million increase in accounts payable and other accrued liabilities; (iii) $50.2 million increase in advances to suppliers; (iv) $33.8 million loss on sale and impairment of residential lease assets; (v) $27.5 million increase in contract liabilities driven by construction activities; (vi) stock-based compensation of $26.9 million; (vii) $9.5 million non-cash interest expense; (viii) $8.6 million decrease in operating lease right-of-use assets; (ix) $7.1 million loss in equity in earnings of unconsolidated investees; (x) $5.9 million non-cash restructuring charges; and (xi) $5.0 million net change in deferred income taxes; and (xii) impairment of long-lived assets of $0.8 million.
In December 2018 and May 2019, we entered into factoring arrangements with two separate third-party factor agencies related to our accounts receivable from customers in Europe. As a result of these factoring arrangements, title of certain accounts receivable balances was transferred to third-party vendors, and both arrangements were accounted for as a sale of financial assets given effective control over these financial assets has been surrendered. As a result, these financial assets have been excluded from our consolidated balance sheets. In connection with the factoring arrangements, we sold accounts receivable invoices amounting to $119.4 million and $26.3 million in fiscal 2019 and 2018, respectively. As of December 29, 2019 and December 30, 2018, total uncollected accounts receivable from end customers under both arrangements were $11.6 million and $21.0 million, respectively.
Net cash used in operating activities in fiscal 2018 was $543.4 million and was primarily the result of: (i) net loss of $917.5 million; (ii) $182.9 million increase in long-term financing receivables related to our net investment in sales-type leases; (iii) $127.3 million decrease in accounts payable and other accrued liabilities, primarily attributable to payments of accrued expenses; (iv) $59.3 million gain on business divestiture; (v) $54.2 million gain on the sale of equity investments; (vi) $43.5 million increase in contract assets driven by construction activities; (vii) $39.2 million increase in inventories due to the support of various construction projects; (viii) $30.5 million decrease in contract liabilities driven by construction activities; (ix) $6.9 million increase in deferred income taxes; (x) $6.8 million increase due to other various activities; and (xi) $0.2 million increase in accounts receivable, primarily driven by billings. This was partially offset by: (i) impairment of property, plant and equipment of $369.2 million; (ii) impairment of residential lease assets of $189.7 million; (iii) net non-cash charges of $162.1 million related to depreciation, stock-based compensation and other non-cash charges; (iv) loss on sale of residential lease assets of $62.2 million; (v) $44.4 million decrease in advance payments made to suppliers; (vi) $39.5 million decrease in project assets, primarily related to the construction of our Commercial solar energy projects; (vii) $22.8 million decrease in prepaid expenses and other assets, primarily related to the receipt of prepaid inventory; (viii) $17.8 million decrease in equity in earnings of unconsolidated investees; (ix) $6.9 million net change in income taxes; (x) $6.4 million unrealized loss on equity investments with readily determinable fair value; and (xi) $3.9 million dividend from equity method investees.
Net cash used in operating activities in fiscal 2017 was $267.4 million and was primarily the result of: (i) net loss of $1,170.9 million; (ii) $216.3 million decrease in accounts payable and other accrued liabilities, primarily attributable to payment of accrued expenses; (iii) $123.7 million increase in long-term financing receivables related to our net investment in sales-type leases; (iv) $38.2 million increase in inventories to support the construction of our solar energy projects; (vi) $25.9 million increase in equity in earnings of unconsolidated investees; (vii) $7.0 million net change in income taxes; (viii) $5.3 million gain on sale of equity method investment; and (ix) $1.2 million decrease in accounts receivable, primarily driven by collections; This was partially offset by: (i) $624.3 million impairment of residential lease assets; (ii) other net non-cash charges of $239.6 million related to depreciation, stock-based compensation and other non-cash charges; (iii) $145.2 million increase in contract liabilities driven by construction activities; (iv) $110.5 million decrease in prepaid expenses and other assets, primarily related to the receipt of prepaid inventory; (v) $89.6 million impairment of 8point3 Energy Partners investment balance; (vi) $68.8 million decrease in advance payments made to suppliers; (vii) $30.1 million dividend from 8point3 Energy Partners; (viii) $10.7 million decrease in contract assets driven by milestone billings; (ix) $2.3 million decrease in project assets, primarily related to the construction of our commercial and power plant solar energy projects
Investing Activities
Net cash provided by investing activities in the year ended December 29, 2019 was $21.4 million, which included (i) proceeds of $60.0 million from sale of property, plant, and equipment; (ii) $42.9 million proceeds from sale of investments; (iii) net proceeds of $40.5 million from business divestiture; and (iv) $2.0 million of proceeds resulting from realization of estimated receivables from a business divestiture. This was offset by (i) cash paid for solar power systems of $53.3 million; (ii) $47.4 million of purchases of property, plant and equipment; (iii) cash paid for investments in unconsolidated investees of $12.4 million; and (iv) $10.9 million of cash de-consolidated from the sale of residential lease assets.
Net cash provided by investing activities in fiscal 2018 was $274.9 million, which included (i) proceeds from the sale of investment in joint ventures and non-public companies of $420.3 million; (ii) proceeds of $23.3 million from business divestiture; and (iii) a $13.0 million dividend from equity method investees. This was partially offset by: (i) $167.0 million in capital expenditures primarily related to the expansion of our solar cell manufacturing capacity and costs associated with solar power systems, leased and to be leased; and (ii) $14.7 million paid for investments in consolidated and unconsolidated investees.
Net cash used in investing activities in fiscal 2017 was $293.1 million, which included (i) $283.0 million in capital expenditures primarily related to the expansion of our solar cell manufacturing capacity and costs associated with solar power systems, leased and to be leased; (ii) $18.6 million paid for investments in consolidated and unconsolidated investees; and (iii) $1.3 million purchase of marketable securities. This was partially offset by proceeds from the sale of investment in joint ventures of $6.0 million and a $3.8 million dividend from equity method investees.
Financing Activities
Net cash provided by financing activities in the year ended December 29, 2019 was $344.3 million, which included: (i) $171.9 million from the common stock offering; (ii) $110.9 million in net proceeds of bank loans and other debt; (iii) $69.2 million net proceeds from the issuance of non-recourse residential financing, net of issuance costs; (iv) $35.5 million of net contributions from noncontrolling interests and redeemable noncontrolling interests related to residential lease projects; (v) $3.0 million of proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs. This was partially offset by (i) $39.0 million of payment associated with prior business combination; (ii) $5.6 million in purchases of treasury stock for tax withholding obligations on vested restricted stock; and (iii) $1.6 million settlement of contingent consideration arrangement, net of cash received.
Net cash provided by financing activities in fiscal 2018 was $85.8 million, which included: (i) $174.9 million in net proceeds from the issuance of non-recourse residential financing, net of issuance costs; (ii) $129.3 million of net contributions from noncontrolling interests and redeemable noncontrolling interests related to residential lease projects; and (iii) $94.7 million in net proceeds from the issuance of non-recourse power plant and commercial financing, net of issuance costs. This was partially offset by: (i) $307.6 million in net repayments of 0.75% debentures due 2018, bank loans and other debt; and (ii) $5.5 million in purchases of treasury stock for tax withholding obligations on vested restricted stock.
Net cash provided by financing activities in fiscal 2017 was $589.9 million, which included: (i) $351.8 million in net proceeds from the issuance of non-recourse power plant and commercial financing, net of issuance costs; (ii) $179.2 million of net contributions from noncontrolling interests and redeemable noncontrolling interests primarily related to residential lease projects; and (iii) $82.7 million in net proceeds from the issuance of non-recourse residential financing, net of issuance costs. This was partially offset by: (i) 19.1 million in net repayments of bank loans and other debt; and (ii) $4.7 million in purchases of treasury stock for tax withholding obligations on vested restricted stock.

                                                    |                   | Fiscal Year Ended |
--------------------------------------------------- | ----------------- | ----------------- | -----------------
(In thousands)                                      | December 29, 2019 | December 30, 2018 | December 31, 2017
Net cash used in operating activities               | $(270,413)        | $(543,389)        | $(267,412)
Net cash provided by (used in) investing activities | $21,366           | $274,900          | $(293,084)
Net cash provided by financing activities           | $344,314          | $85,847           | $589,932


6. Supplemental Financial Information
Cash and cash equivalents (in millions):
The following table presents cash and cash equivalents as reported in our consolidated balance sheets, as well as the sum of cash, cash equivalents and restricted cash as reported on our consolidated statement of cash flows in accordance with our adoption of the ASU discussed in Note 1 – Description of Business and Significant Accounting Policies.

                                           | April 26, 2019 | April 26, 2018
------------------------------------------ | -------------- | --------------
Cash                                       | $ 2,216        | $ 2,727
Cash equivalents                           | 109            | 214
Cash and cash equivalents                  | $ 2,325        | $ 2,941
Short-term restricted cash                 | 5              | 5
Long-term restricted cash                  | 1              | 1
Restricted cash                            | $ 6            | $ 6
Cash, cash equivalents and restricted cash | $ 2,331        | $ 2,947


Preliminary Purchase Price Allocation
For the Assemble Systems, PlanGrid, and BuildingConnected acquisitions that were accounted for as business combinations, Autodesk recorded the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair values assigned to the identifiable intangible assets acquired were based on estimates and assumptions determined by management. Autodesk recorded the excess of consideration transferred over the aggregate fair values as goodwill. The goodwill recorded is primarily attributable to synergies expected to arise after the acquisition. There is no amount of goodwill that is deductible for U.S. income tax purposes.
The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for the business combinations that were completed during the fiscal year ended January 31, 2019:
(1) During Q4 of fiscal 2019, Autodesk recorded a measurement period adjustment related to the valuation of the deferred tax liability associated with the Assemble Systems acquisition. This adjustment increased goodwill and reduced net tangible assets by $0.1 million.
For the three business combinations in fiscal 2019, the determination of estimated fair values of certain assets and liabilities is derived from estimated fair value assessments and assumptions by Autodesk. For PlanGrid and BuildingConnected, Autodesk's estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). For the three business combinations in fiscal 2019, the tax impact of the acquisition is also subject to change within the measurement period. Different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.

                                                               | Assemble Systems (1) | PlanGrid | BuildingConnected | Total
-------------------------------------------------------------- | -------------------- | -------- | ----------------- | --------
Developed technologies                                         | $4.4                 | $78.0    | $12.5             | $94.9
Customer relationships and other non-current intangible assets | 12.0                 | 98.0     | 26.9              | 136.9
Trade name                                                     | 2.8                  | 20.0     | 6.8               | 29.6
Goodwill                                                       | 72.0                 | 588.7    | 206.3             | 867.0
Deferred revenue (current and non-current)                     | (1.7)                | (25.5)   | (2.8)             | (30.0)
Net tangible assets                                            | 4.1                  | 18.4     | 3.5               | 26.0
Total                                                          | $93.6                | $777.6   | $253.2            | $1,124.4


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in millions, unless otherwise disclosed)
10. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consisted of the following:
The reduction in Deferred rent liability is a result of the Company’s adoption of the new lease accounting standard.

                                | As of             |
------------------------------- | ----------------- | -----------------
                                | December 31, 2019 | December 31, 2018
Deferred rent liability         | $—                | $506.7
Unearned revenue                | 525.9             | 504.6
Other miscellaneous liabilities | 411.1             | 253.8
Other non-current liabilities   | $937.0            | $1,265.1


Contractual Obligations
The following table summarizes our contractual obligations as of November 29, 2019:
As of November 29, 2019, our Term Loan’s carrying value was $2.25 billion. At our election, the Term Loan will bear interest at either (i) the London Interbank Offered Rate (“LIBOR”) plus a margin, based on our debt ratings, ranging from 0.500% to 1.000% or (ii) a base rate plus a margin, based on our debt ratings, ranging from 0.040% to 0.110%. Interest is payable periodically, in arrears, at the end of each interest period we elect. Based on the LIBOR rate at November 29, 2019, our estimated maximum commitment for interest payments was $23.2 million for the remaining duration of the Term Loan.
As of November 29, 2019, the carrying value of our Notes payable was $1.89 billion. Interest on our Notes is payable semi-annually, in arrears on February 1 and August 1. At November 29, 2019, our maximum commitment for interest payments was $200.1 million for the remaining duration of our Notes.
Our Term Loan and Revolving Credit Agreement contain similar financial covenants requiring us not to exceed a maximum leverage ratio. As of November 29, 2019, we were in compliance with this covenant. We believe this covenant will not impact our credit or cash in the coming fiscal year or restrict our ability to execute our business plan. Our senior notes do not contain any financial covenants.
Under the terms of our Term Loan and Revolving Credit Agreement, we are not prohibited from paying cash dividends unless payment would trigger an event of default or if one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.

(in millions)                           |          |                  | Payment Due by Period |           |
--------------------------------------- | -------- | ---------------- | --------------------- | --------- | -----------------
                                        | Total    | Less than 1 year | 1-3 years             | 3-5 years | More than 5 years
Term Loan and Notes, including interest | $4,373.3 | $3,227.0         | $65.0                 | $65.0     | $1,016.3
Operating lease obligations, net        | 711.5    | 88.7             | 158.0                 | 126.9     | 337.9
Purchase obligations                    | 2,036.5  | 545.0            | 935.8                 | 555.7     | —
Total                                   | $7,121.3 | $3,860.7         | $1,158.8              | $747.6    | $1,354.2


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (United States Dollars in thousands, except per share data and unless otherwise indicated)
Fair value change in FCR liability
The following table reconciles the beginning and ending measurements of our FCR liability and highlights the activity that drove the fair value change in FCR liability included in our cost of revenue.
(1) Includes: (i) incentive payments from Bank Partners, which is the surplus of finance charges billed to borrowers over an agreedupon portfolio yield, a fixed servicing fee and realized net credit losses, (ii) cash received from recoveries on previously charged-off Bank Partner loans, and (iii) the proceeds received from transferring our rights to Charged-Off Receivables (as defined below) attributable to previously charged-off Bank Partner loans. We consider all monthly incentive payments from Bank Partners during the period to be related to billed finance charges on deferred interest products until monthly incentive payments exceed total billed finance charges on deferred products, which did not occur during any of the periods presented.
(2) Represents the reversal of previously billed finance charges associated with deferred payment loan principal balances that were repaid within the promotional period.
(3) A fair value adjustment is made based on the expected reversal percentage of billed finance charges (expected settlements), which is estimated at each reporting date. The fair value adjustment is recognized in cost of revenue in the Consolidated Statements of Operations.

                                                    |           | Year Ended December 31, |
--------------------------------------------------- | --------- | ----------------------- | ---------
                                                    | 2019      | 2018                    | 2017
Beginning balance                                   | $138,589  | $94,148                 | $68,064
Receipts(1)                                         | 159,527   | 129,153                 | 109,818
Settlements(2)                                      | (262,449) | (181,590)               | (127,029)
Fair value changes recognized in cost of revenue(3) | 170,368   | 96,878                  | 43,295
Ending balance                                      | $206,035  | $138,589                | $94,148


Non-operating Corporate
Selling, general and administrative: Selling, general and administrative expenses from our Non-operating Corporate segment for the year ended December 31, 2019 decreased $8.6 million to $24.9 million from $33.5 million for the year ended December 31, 2018. The decrease was driven by reductions in bonus expense, consulting and professional service fees, and employee wage and benefits expenses.
The HC2 Compensation Committee establishes annual salary, cash and equity-based bonus arrangements for certain HC2 executive employees on an annual basis. In determining the amounts payable pursuant to such cash and equity-based bonus arrangements for these employees, the Company has historically measured the growth in the Company’s NAV in accordance with a formula established by HC2’s Compensation Committee ("Compensation NAV") in 2014.
The Compensation NAV is generally determined by dividing the end of year Compensation NAV per share by the beginning year Compensation NAV per share and subtracting 1 from this amount (the "NAV Return"), and then subtracting the required threshold return rate from the NAV Return. The hurdle rate has consistently been set at 7%, and the plan allows for the share of up to 12% of growth over and above the hurdle rate.
HC2’s accrual for cash and equity-based bonus arrangements of HC2 executive employees as of December 31, 2019 and 2018 resulted in a $4.4 million decrease in expense recognized. These changes reflect the underlying performance in the Compensation NAV in the respective periods. In 2019 the NAV did not meet the hurdle rate, while in 2018 it grew approximately 21%.
For 2019, Compensation NAV did not meet the hurdle rate, and declined by 26.1%, resulting primarily from external events that occurred in the fourth quarter at our Insurance segment, with respect to our views on the future of the management fee agreement, along with our expectations of future dividends, after recent and ongoing discussions with our domestic regulator.
In accordance with the terms of the plan, this decline in Compensation NAV directly reduces the deferred cash compensation awarded in 2017 and 2018. The total reduction recognized in 2019 was $0.8 million, related to the claw back of a portion of the 2017 and 2018 awards which were unpaid as of December 31, 2019. In addition, the plan requires that future NAV growth continues to be determined using the high water mark based on the beginning Compensation NAV established at the beginning of 2019.

                                    |         | Years Ended December 31, |
----------------------------------- | ------- | ------------------------ | ---------------------
                                    | 2019    | 2018                     | Increase / (Decrease)
Selling, general and administrative | $24.9   | $33.5                    | $(8.6)
Depreciation and amortization       | 0.1     | 0.1                      | —
Loss from operations                | $(25.0) | $(33.6)                  | $8.6


The table below summarizes our cash flows from continuing operations activities for each of the last two fiscal years (in thousands):
Operating Activities. Operating cash flows increased $64.4 million in 2019 compared with 2018 primarily due to favorable changes in working capital of  $37.0 million, primarily due to lower income tax payments of$41.3 million, and higher net income adjusted for non-cash items of $27.3 million
Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law. As of January 1, 2019, the date of our last actuarial funding valuation for our qualified pension plan, there was no minimum contribution funding requirement. In 2019 and 2018, we contributed $6.2 million and $5.5 million, respectively, to our pension and postretirement plans. We do not anticipate making any contributions to our qualified defined benefit pension plan in fiscal 2020. For additional information, refer to Note 12, Retirement Plans, of the notes to the consolidated financial statements.

                                                           | 2019     | 2018
---------------------------------------------------------- | -------- | ----------
Total cash provided by (used in) continuing operations:    |          |
Operating activities                                       | $168,405 | $104,055
Investing activities                                       | (13,819) | 65,661
Financing activities                                       | (5,730)  | (445,529)
Net increase (decrease) in cash from continuing operations | $148,856 | $(275,813)


18. Trade and other payables  Significant accounting policies that apply to trade and other payables We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently carry them at amortised cost using the effective interest method.
a Deferred income recognised in prior periods has substantially been reclassified to contract liabilities on adoption of IFRS 15, see notes 1 and 2. The remaining balance includes £51m (2017/18: £132m, 2016/17: £71m) current and £586m (2017/18: £404m, 2016/17: £375m) non-current liabilities relating to the Broadband Delivery UK programme, for which grants received by the group may be subject to re-investment or repayment depending on the level of take-up.
b Other payables relate to operating lease liabilities and deferred gains on a 2001 sale and finance leaseback transaction.

                                   | 2019  | 2018  | 2017
---------------------------------- | ----- | ----- | -----
At 31 March                        | £m    | £m    | £m
Current                            |       |       |
Trade payables                     | 4,141 | 3,991 | 4,205
Other taxation and social security | 564   | 704   | 704
Other payables                     | 387   | 456   | 672
Accrued expenses                   | 630   | 492   | 382
Deferred income a                  | 68    | 1,525 | 1,474
                                   | 5,790 | 7,168 | 7,437


ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the Nasdaq Global Market under the symbol “LWAY.” Trading commenced on March 29, 1988. As of March 16, 2020, there were approximately 147 holders of record of Lifeway’s Common Stock.
Common stock price
The following table shows the high and low sale prices per share of our common stock as reported on the Nasdaq Global Market for each quarter during the two most recent fiscal years:

               |        | Common Stock Price Range 2018
-------------- | ------ | -----------------------------
               | Low    | High
First Quarter  | $ 5.99 | $ 8.40
Second Quarter | $ 4.79 | $ 6.48
Third Quarter  | $ 2.66 | $ 4.63
Fourth Quarter | $ 1.88 | $ 3.39


TERM DEPOSITS
An analysis of the Group’s term deposits by currencies are as follows:
The effective interest rate for the term deposits of the Group with initial terms of over three months to three years during the year ended 31 December 2019 was 3.57% (2018: 4.08%).
Term deposits with initial terms of over three months were neither past due nor impaired. As at 31 December 2019, the carrying amounts of the term deposits with initial terms of over three months approximated their fair values.

                                | As at 31 December |
------------------------------- | ----------------- | -----------
                                | 2019              | 2018
                                | RMB’Million       | RMB’Million
Included in non-current assets: |                   |
RMB term deposits               | 19,000            | –
Included in current assets:     |                   |
RMB term deposits               | 28,598            | 55,180
USD term deposits               | 16,325            | 6,349
Other currencies                | 1,988             | 1,389
                                | 46,911            | 62,918
                                | 65,911            | 62,918


Note 19—Earnings Per Share ("EPS")
Basic EPS is computed by dividing net income attributable to Leidos common stockholders by the basic weighted average number of shares outstanding. Diluted EPS is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted EPS by application of the treasury stock method, only in periods in which such effect would have been dilutive for the period.
The Company issues unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are dilutive common share equivalents subject to the treasury stock method.
The weighted average number of shares used to compute basic and diluted EPS attributable to Leidos stockholders were:
Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS. For fiscal 2019 and 2017, there were no significant anti-diluted equity awards. For fiscal 2018, there was 1 million of outstanding stock options and vesting stock awards that were anti-dilutive.

                                                                       |                 | Year Ended        |
---------------------------------------------------------------------- | --------------- | ----------------- | -----------------
                                                                       | January 3, 2020 | December 28, 2018 | December 29, 2017
                                                                       |                 | (in millions)     |
Basic weighted average number of shares outstanding                    | 143             | 151               | 152
Dilutive common share equivalents—stock options and other stock awards | 2               | 2                 | 2
Diluted weighted average number of shares outstanding                  | 145             | 153               | 154


Segment Results
General
Reconciliation of segment revenue to total operating revenue is below:
(1) On May 1, 2017 we sold a portion of our data centers and colocation business. See Note 3—Sale of Data Centers and Colocation Business to our consolidated financial statements in Item 8 of Part II of this report, for additional information.

                                  |         | Year Ended December 31, |
--------------------------------- | ------- | ----------------------- | ------
                                  | 2019    | 2018                    | 2017
                                  |         | (Dollars in millions)   |
Operating revenue                 |         |                         |
International and Global Accounts | $3,596  | 3,653                   | 1,382
Enterprise                        | 6,133   | 6,133                   | 4,186
Small and Medium Business         | 2,956   | 3,144                   | 2,418
Wholesale                         | 4,074   | 4,397                   | 3,026
Consumer                          | 5,642   | 6,116                   | 6,451
Total segment revenue             | $22,401 | 23,443                  | 17,463
Operations and Other(1)           | —       | —                       | 193
Total operating revenue           | $22,401 | 23,443                  | 17,656


ITEM 3. KEY INFORMATION
Selected Financial Data
The following table sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2019. The consolidated financial data has been derived from, and should be read in conjunction with, our Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), presented in “Item 18. Financial Statements” of this report.
Our selected financial data and our Consolidated Financial Statements are presented in euros, unless otherwise stated.
(1) See Note (C.6) to our Consolidated Financial Statements for more information on earnings per share.
(2) The balances include primarily bonds, private placements and bank loans. See Note (E.3) to our Consolidated Financial Statements for more information on our financial liabilities.

SELECTED FINANCIAL DATA: IFRS                         |        |        |        |        |
----------------------------------------------------- | ------ | ------ | ------ | ------ | ------
€ millions, unless otherwise stated                   | 2019   | 2018   | 2017   | 2016   | 2015
Income Statement Data: Years ended December 31,       |        |        |        |        |
Cloud revenue                                         | 6,933  | 4,993  | 3,769  | 2,993  | 2,286
Software licenses and support revenue                 | 16,080 | 15,628 | 15,780 | 15,431 | 14,928
Cloud and software revenue                            | 23,012 | 20,622 | 19,549 | 18,424 | 17,214
Total revenue                                         | 27,553 | 24,708 | 23,461 | 22,062 | 20,793
Operating profit                                      | 4,473  | 5,703  | 4,877  | 5,135  | 4,252
Profit after tax                                      | 3,370  | 4,088  | 4,046  | 3,629  | 3,056
Profit attributable to owners of parent               | 3,321  | 4,083  | 4,008  | 3,642  | 3,064
Earnings per share(1)                                 |        |        |        |        |
Basic in €                                            | 2.78   | 3.42   | 3.35   | 3.04   | 2.56
Diluted in €                                          | 2.78   | 3.42   | 3.35   | 3.04   | 2.56
Other Data:                                           |        |        |        |        |
Weighted-average number of shares outstanding         |        |        |        |        |
Basic                                                 | 1,194  | 1,194  | 1,197  | 1,198  | 1,197
Diluted                                               | 1,194  | 1,194  | 1,198  | 1,199  | 1,198
Statement of Financial Position Data: At December 31, |        |        |        |        |
Cash and cash equivalents                             | 5,314  | 8,627  | 4,011  | 3,702  | 3,411
Total assets                                          | 60,215 | 51,502 | 42,484 | 44,262 | 41,390
Current financial liabilities(2)                      | 3,273  | 1,125  | 1,561  | 1,813  | 841
Non-current financial liabilities(2)                  | 12,923 | 10,553 | 5,034  | 6,481  | 8,681
Issued capital                                        | 1,229  | 1,229  | 1,229  | 1,229  | 1,229
Total equity                                          | 30,822 | 28,877 | 25,515 | 26,382 | 23,295


a) Vessels Under Construction and Upgrades
Teekay LNG's share of commitments to fund newbuilding and other construction contract costs as at December 31, 2019 are as follows:
(i) In June 2019, Teekay LNG entered into an agreement with a contractor to supply equipment on certain of its LNG carriers in 2021 and 2022, for an estimated installed cost of approximately $60.6 million. As at December 31, 2019, the estimated remaining cost of this installation is $49.7 million.
(ii) Teekay LNG has a 30% ownership interest in the Bahrain LNG Joint Venture which has an LNG receiving and regasification terminal in Bahrain. The Bahrain LNG Joint Venture has secured undrawn debt financing of $34 million, of which $10 million relates to Teekay LNG's proportionate share of the commitments included in the table above.

                               | Total  | 2020   | 2021   | 2022
------------------------------ | ------ | ------ | ------ | ------
                               | $      | $      | $      | $
Consolidated LNG carriers (i)  | 49,652 | 11,979 | 22,382 | 15,291
Bahrain LNG Joint Venture (ii) | 11,351 | 11,351 | —      | —
                               | 61,003 | 23,330 | 22,382 | 15,291


Disaggregated revenue
The Group’s revenues by geographic region based on end-users who purchased our products or services are as follows:
Revenues from the United States totaled approximately $529 million, $386 million, and $281 million for the fiscal years ended 2019, 2018, and 2017, respectively. Revenues from our country of domicile, the United Kingdom, totaled approximately $86 million, $63 million, and $46 million for the fiscal years ended 2019, 2018, and 2017, respectively. No one customer has accounted for more than 10% of revenue for the fiscal years ended 2019, 2018, and 2017.

             |            | Fiscal Year Ended June 30, |
------------ | ---------- | -------------------------- | ------------
             | 2019       | 2018                       | 2017
             |            | (U.S. $ in thousands)      |
             |            | *As Adjusted               | *As Adjusted
Americas     | $603,959   | $439,363                   | $317,432
EMEA         | 474,712    | 347,509                    | 193,790
Asia Pacific | 131,456    | 94,106                     | 115,462
             | $1,210,127 | $880,978                   | $626,684


(1) Totals may not sum due to rounding.
(2) CEO transition costs include stock-based compensation of $16.4 million related to the acceleration of eligible stock awards in conjunction with the Company's former CEOs' transition agreements for the fiscal year ended January 31, 2018.
Our non-GAAP financial measures may exclude the following:
Stock-based compensation expenses. We exclude stock-based compensation expenses from non-GAAP measures primarily because they are non-cash expenses and management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, we believe excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies.
Amortization of developed technologies and purchased intangibles. We incur amortization of acquisition-related developed technology and purchased intangibles in connection with acquisitions of certain businesses and technologies. Amortization of developed technologies and purchased intangibles is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Management finds it useful to exclude these variable charges from our cost of revenues to assist in budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of developed technologies and purchased intangible assets will recur in future periods.
CEO transition costs. We exclude amounts paid to the Company's former CEOs upon departure under the terms of their transition agreements, including severance payments, acceleration of restricted stock units, and continued vesting of performance stock units, and legal fees incurred with the transition. Also excluded from our non-GAAP measures are recruiting costs related to the search for a new CEO. These costs represent non-recurring expenses and are not indicative of our ongoing operating expenses. We further believe that excluding the CEO transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability
Goodwill impairment. This is a non-cash charge to write-down goodwill to fair value when there was an indication that the asset was impaired. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods
Restructuring and other exit costs, net. These expenses are associated with realigning our business strategies based on current economic conditions. In connection with these restructuring actions or other exit actions, we recognize costs related to termination benefits for former employees whose positions were eliminated, the closure of facilities and cancellation of certain contracts. We exclude these charges because these expenses are not reflective of ongoing business and operating results. We believe it is useful for investors to understand the effects of these items on our total operating expenses.
Acquisition related costs. We exclude certain acquisition related costs, including due diligence costs, professional fees in connection with an acquisition, certain financing costs, and certain integration related expenses. These expenses are unpredictable, and dependent on factors that may be outside of our control and unrelated to the continuing operations of the acquired business, or our Company. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition related costs, may not be indicative of such future costs. We believe excluding acquisition related costs facilitates the comparison of our financial results to the Company's historical operating results and to other companies in our industry.
(Gain) loss on strategic investments and dispositions. We exclude gains and losses related to our strategic investments and dispositions from our non-GAAP measures primarily because management finds it useful to exclude these variable gains and losses on these investments and dispositions in assessing our financial results. Included in these amounts are non-cash unrealized gains and losses on the derivative components, dividends received, realized gains and losses on the sales or losses on the impairment of these investments and dispositions. We believe excluding these items is useful to investors because these excluded items do not correlate to the underlying performance of our business and these losses or gains were incurred in connection with strategic investments and dispositions which do not occur regularly.
Discrete tax items. We exclude the GAAP tax provision, including discrete items, from the non-GAAP measure of net (loss) income, and include a non-GAAP tax provision based upon the projected annual non-GAAP effective tax rate. Discrete tax items include income tax expenses or benefits that do not relate to ordinary income from continuing operations in the current fiscal year, unusual or infrequently occurring items, or the tax impact of certain stock-based compensation. Examples of discrete tax items include, but are not limited to, certain changes in judgment and changes in estimates of tax matters related to prior fiscal years, certain costs related to business combinations, certain changes in the realizability of deferred tax assets or changes in tax law. Management believes this approach assists investors in understanding the tax provision and the effective tax rate related to ongoing operations. We believe the exclusion of these discrete tax items provides investors with useful supplemental information about our operational performance.
Establishment of a valuation allowance on certain net deferred tax assets. This is a non-cash charge to record a valuation allowance on certain deferred tax assets. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various cash expenses to assist in budgeting, planning and forecasting future periods
Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded from the non-GAAP measures relate to the tax impact on the difference between GAAP and non-GAAP expenses, primarily due to stock-based compensation, amortization of purchased intangibles and restructuring charges and other exit costs (benefits) for GAAP and non-GAAP measures.

                                          |         | Fiscal Year Ended January 31, |
----------------------------------------- | ------- | ----------------------------- | -------
                                          | 2019    | 2018                          | 2017
                                          |         | (Unaudited)                   |
Diluted net (loss) income per share       | $(0.37) | $(2.58)                       | $(2.61)
Stock-based compensation expense          | 1.12    | 1.11                          | 1.00
Amortization of developed technologies    | 0.08    | 0.08                          | 0.18
Amortization of purchased intangibles     | 0.08    | 0.09                          | 0.14
CEO transition costs (2)                  | —       | 0.09                          | —
Acquisition related costs                 | 0.07    | —                             | —
Restructuring and other exit costs, net   | 0.14    | 0.43                          | 0.35
(Gain) loss on strategic investments      | (0.05)  | 0.08                          | —
Discrete tax provision items              | (0.14)  | (0.09)                        | (0.01)
Income tax effect of non-GAAP adjustments | 0.08    | 0.31                          | 0.45
Non-GAAP diluted income (loss) per share  | $1.01   | $(0.48)                       | $(0.50)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 20 — Geographic Data
Financial information relating to our operations by geographic area were as follows:
Sales are attributed to countries based upon the origin of the sale.

                       |          | Years Ended December 31, |
---------------------- | -------- | ------------------------ | --------
Net Sales              | 2019     | 2018                     | 2017
United States          | $279,904 | $313,489                 | $287,092
Singapore              | 32,957   | 6,724                    | 5,596
Taiwan                 | 19,810   | 20,802                   | 18,586
China                  | 87,342   | 79,380                   | 66,510
Czech Republic         | 33,214   | 36,528                   | 34,476
Other non-U.S.         | 15,772   | 13,560                   | 10,733
Consolidated net sales | $468,999 | $470,483                 | $422,993


8. Financing Receivables and Operating Leases
(a) Financing Receivables
Financing receivables primarily consist of lease receivables, loan receivables, and financed service contracts. Lease receivables represent sales-type and direct-financing leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services, which may include additional funding for other costs associated with network installation and integration of our products and services. Loan receivables have terms of three years on average. Financed service contracts include financing receivables related to technical support and advanced services. Revenue related to the technical support services is typically deferred and included in deferred service revenue and is recognized ratably over the period during which the related services are to be performed, which typically ranges from one to three years.
A summary of our financing receivables is presented as follows (in millions):

July 27, 2019             | Lease Receivables | Loan Receivables | Financed Service Contracts | Total
------------------------- | ----------------- | ---------------- | -------------------------- | -------
Gross                     | $2,367            | $5,438           | $2,369                     | $10,174
Residual value            | 142               | —                | —                          | 142
Unearned income           | (137)             | —                | —                          | (137)
Allowance for credit loss | (46)              | (71)             | (9)                        | (126)
Total, net  .             | $2,326            | $5,367           | $2,360                     | $10,053
Reported as:              |                   |                  |                            |
Current .                 | $1,029            | $2,653           | $1,413                     | $5,095
Noncurrent                | 1,297             | 2,714            | 947                        | 4,958
Total, net  .             | $2,326            | $5,367           | $2,360                     | $10,053


Advertising Costs: Advertising costs amounted to $278,057, $365,859, and $378,217, for the years ended September 30, 2019, 2018, and 2017, respectively, and are charged to expense when incurred.
Net Income Per Share: Basic and diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding and the weighted average number of dilutive shares outstanding, respectively.
There were 268,000 and 108,000 shares for the years ended September 30, 2019 and 2018, respectively, that were excluded from the above calculation as they were considered antidilutive in nature. No shares were considered antidilutive for the year ended September 30, 2017.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses and disclosure about contingent assets and liabilities at the date of the financial statements. Significant estimates include the rebates related to revenue recognition, stock based compensation and the valuation of inventory, long-lived assets, finite lived intangible assets and goodwill. Actual results may differ materially from these estimates.
Recently Issued Accounting Pronouncements: In February 2016, the FASB issued ASU 2016-02, Leases. There have been further amendments, including practical expedients, with the issuance of ASU 2018-01 in January 2018, ASU 2018-11 in July 2018 and ASU 2018-20 in December 2018. The amended guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The guidance will be applied on a modified retrospective basis with the earliest period presented. Based on the effective date, this guidance will apply beginning October 1, 2019. The adoption of ASU 2016-02 will have no impact to retained earnings or net income. Upon adoption of ASU 2016-02 on October 1, 2019, we anticipate recording a right-of-use asset and an offsetting lease liability of approximately $2.3 to $2.9 million.
In January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill, which offers amended guidance to simplify the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. A goodwill impairment will now be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, limited to the amount of goodwill allocated to that reporting unit. This guidance is to be applied on a prospective basis effective for the Company’s interim and annual periods beginning after January 1, 2020, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company does not believe the adoption of this ASU will have a material impact on our financial statements.

                                                    | Year ended September 30, |            |
--------------------------------------------------- | ------------------------ | ---------- | ----------
                                                    | 2019                     | 2018       | 2017
Net income                                          | $4,566,156               | $4,274,547 | $3,847,839
Weighted average common shares                      | 13,442,871               | 13,429,232 | 13,532,375
Dilutive potential common shares                    | 8,343                    | 23,628     | 128,431
Weighted average dilutive common shares outstanding | 13,451,214               | 13,452,860 | 13,660,806
Earnings per share:                                 |                          |            |
Basic                                               | $0.34                    | $0.32      | $0.28
Diluted                                             | $0.34                    | $0.32      | $0.28


Restricted Stock Units
The Company grants restricted stock units, or RSUs, to employees with various vesting terms. RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit on the vesting date as it vests. The Company withholds shares in settlement of employee tax withholding obligations upon the vesting of restricted stock units. Stock-based compensation related to grants of vested RSUs and PSUs was $3.0 million, $1.6, million and $1.0 million in 2019, 2018 and 2017, respectively.
The following table summarizes RSU’s activity under the 2019 Plan and 2009 Plan, and the related weighted average grant date fair value, for 2019, 2018 and 2017:

                               |                  | RSUs & PRSUs Outstanding
------------------------------ | ---------------- | --------------------------------------
                               | Number of Shares | Weighted Average Grant Date Fair Value
                               | (in thousands)   |
Nonvested at January 1, 2017   | 98               | $23.52
Granted                        | 132              | 19.74
Vested                         | (43)             | 20.44
Forfeited                      | (19)             | —
Nonvested at January 1, 2018   | 168              | 21.56
Granted                        | 110              | 11.90
Vested                         | (77)             | 19.18
Forfeited                      | (18)             | —
Nonvested at December 30, 2018 | 183              | 17.22
Granted                        | 353              | 10.77
Vested                         | (118)            | 14.48
Forfeited                      | (41)             | —
Nonvested at December 29, 2019 | 377              | $12.55


16. INCOME TAXES (Continued)
The reconciliation of the income tax expense at the U.S. Federal statutory rate (21.0% in fiscal 2019, 24.5% in fiscal 2018 and 35.0% in fiscal 2017) to actual income tax expense is as follows (in thousands):
On December 22, 2017, the Tax Act was enacted. The Tax Act contains significant changes to U.S. tax law, including lowering the U.S. corporate income tax rate to 21.0%, implementing a territorial tax system with a one-time transition tax assessment on previously tax-deferred foreign earnings and imposing new taxes on certain foreign-sourced income. We elected to pay the one-time transition tax over a period of up to eight years.
In conjunction with the Tax Act, the SEC issued guidance under Staff Accounting Bulletin No. 118 (‘‘SAB 118’’) directing taxpayers to record the impact of the Tax Act as ‘‘provisional’’ when they do not have all the necessary information to complete the accounting under ASC 740. The guidance allowed for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impact. In accordance with SAB 118, we recorded provisional estimates to our consolidated financial statements in fiscal 2018 based on the Tax Act. During the first quarter of fiscal 2019, we further analyzed the income tax effects of the Tax Act and determined there were no material changes to the provisional amounts disclosed in our fiscal 2018 financial statements. Although our accounting for the effects of the Tax Act is complete under SAB 118, there may be future adjustments based on interpretations by the U.S. federal and state governments and regulatory organizations, legislative updates or new regulations, or changes in accounting standards for income taxes.
The Tax Act also includes provisions for Global Intangible Low-Taxed Income (‘‘GILTI’’) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. In general, this income will effectively be taxed at a 10.5% tax rate reduced by any available current year foreign tax credits. This provision became effective for taxable years beginning after December 31, 2017, which was our fiscal 2019. We have elected to treat tax generated by the GILTI provisions as a period expense.
The effective tax rate on income from continuing operations before income taxes for fiscal 2019 of 10.4% was lower than the U.S. federal tax rate of 21.0% primarily due to the tax benefit from losses of our German subsidiaries, which are subject to higher tax rates than U.S. tax rates, adjustments related to the Tax Act’s transition tax, the net excess tax benefits from restricted stock unit vesting, the benefit of federal research and development tax credits and our Singapore and South Korea tax exemptions. These amounts are partially offset by an accrual for foreign withholding taxes on certain current year foreign earnings not considered permanently reinvested, stock-based compensation not deductible for tax purposes and limitations on the deductibility of compensation under Internal Revenue Code Section 162(m).

                                                           |         | Fiscal   |
---------------------------------------------------------- | ------- | -------- | --------
                                                           | 2019    | 2018     | 2017
Federal statutory tax expense                              | $12,610 | $88,684  | $105,719
Valuation allowance                                        | 7,925   | 4,263    | 4,454
Foreign taxes at rates greater (less) than U.S. rates, net | (8,210) | 8,417    | (12,346)
Stock-based compensation                                   | 556     | (8,536)  | 3,969
State income taxes, net of federal income tax benefit      | 1,131   | (373)    | 398
Research and development credit                            | (3,665) | (6,972)  | (7,884)
Deferred compensation                                      | (206)   | (560)    | (1,022)
Release of unrecognized tax benefits                       | (6,688) | (352)    | (538)
Release of interest accrued for unrecognized tax benefits  | (205)   | (156)    | (78)
U.S. tax reform impact                                     | —       | 26,653   | —
Deferred taxes on foreign earnings                         | 1,215   | —        | —
Write-off of withholding tax credits                       | 1,134   | —        | —
Other, net                                                 | 626     | 3,127    | 739
Provision for income taxes                                 | $6,223  | $114,195 | $93,411
Effective tax rate                                         | 10.4%   | 31.6%    | 30.9%


Cost of Revenues and Gross Margin
Cost of revenues in 2019 decreased by $4.3 million, or 16%, as compared to 2018. The decrease was primarily driven by a reduction in the number of global services and cloud infrastructure personnel, which led to a decrease of $2.2 million in compensation and benefits expense, including stock-based compensation expense, as compared to 2018. This reduction in headcount also contributed to a decrease in allocated facilities and information technology costs of $0.5 million in 2019. We also experienced a decrease of $0.9 million in hosting costs in 2019, due to a decline in the usage of our hosted platform as compared to 2018. Additionally, depreciation decreased $0.5 million in 2019, due to the nature and timing of capital expenditures and internal projects as compared to 2018.
Our gross margin decreased to 53% during 2019, as compared to 54% during 2018. This was primarily due to our revenues, net declining during the year at a slightly faster rate than the corresponding decrease in costs.

                 | Years Ended December 31, |                        | Change   |
---------------- | ------------------------ | ---------------------- | -------- | -----
                 | 2019                     | 2018                   | $        | %
                 |                          | (dollars in thousands) |          |
Cost of revenues | $22,843                  | $27,154                | $(4,311) | (16)%
Gross profit     | 26,193                   | 31,477                 | (6,284)  | (17)
Gross margin     | 53%                      | 54%                    |          |


8. Goodwill
The changes in the carrying amount of goodwill by operating segment are as follows (amounts in millions):
At December 31, 2019, 2018, and 2017, there were no accumulated impairment losses.

                             | Activision | Blizzard | King   | Total
---------------------------- | ---------- | -------- | ------ | ------
Balance at December 31, 2017 | $6,898     | $190     | $2,675 | $9,763
Other                        | (1)        | —        | —      | (1)
Balance at December 31, 2018 | $6,897     | $190     | $2,675 | $9,762
Other                        | 1          | —        | 1      | 2
Balance at December 31, 2019 | $6,898     | $190     | $2,676 | $9,764


Cubic Mission Solutions
Sales: CMS sales increased 59% to $328.8 million in fiscal 2019 compared to $207.0 million in 2018. The increase in sales resulted from increased product deliveries in all of our CMS product lines, and particularly expeditionary satellite communications products and secure network products. Businesses acquired during fiscal years 2019 and 2018 whose operations are included in our CMS operating segment had sales of $8.9 million and $0.6 million for fiscal years 2019 and 2018, respectively.
Amortization of Purchased Intangibles: Amortization of purchased intangibles included in the CMS results amounted to $19.5 million in 2019 and $20.8 million in 2018.
Operating Income: CMS had operating income of $7.8 million in 2019 compared to an operating loss of $0.1 million in 2018. The improvement in operating results was primarily from higher sales from expeditionary satellite communications products and secure networks products. The improvements in operating profits was partially offset by operating losses incurred by businesses that CMS acquired during fiscal 2019 and 2018. Businesses acquired by CMS in fiscal years 2019 and 2018 incurred operating losses of $12.8 million in fiscal 2019 compared to $3.5 million in fiscal 2018. Included in the operating loss incurred by acquired businesses are acquisition transaction costs of $1.6 million and $1.0 million incurred in fiscal years 2019 and 2018, respectively. In addition, the increase in operating profits was partially offset by an increase of $4.4 million in R&D expenditures from fiscal 2018 to fiscal 2019 related primarily to the development of secure communications and ISR-as-a-service technologies.
Adjusted EBITDA: CMS Adjusted EBITDA increased 31% to $34.4 million in 2019 compared to $26.2 million in 2018. The increase in CMS Adjusted EBITDA was primarily due to the same factors that drove the increase in operating income described above, excluding the changes in amortization expense and acquisition transaction costs as such items are excluded from Adjusted EBITDA. Adjusted EBITDA for CMS increased by $0.5 million in 2019 as a result of the adoption of the new revenue recognition standard. The increase in Adjusted EBITDA was partially offset by the increase in R&D expenditures described above.

                        | Fiscal 2019 | Fiscal 2018   | % Change
----------------------- | ----------- | ------------- | --------
                        |             | (in millions) |
Sales                   | $ 328.8     | $  207.0      | 59 %
Operating income (loss) | 7.8         | (0.1)         | n/a
Adjusted EBITDA         | 34.4        | 26.2          | 31


SEGMENT RESULTS OF OPERATIONS
Reportable Segments
Fiscal Year 2019 Compared with Fiscal Year 2018
Productivity and Business Processes
Revenue increased $5.3 billion or 15%. • Office Commercial revenue increased $3.2 billion or 13%, driven by Office 365 Commercial, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to cloud offerings. Office 365 Commercial grew 33%, due to growth in seats and higher average revenue per user. • Office Consumer revenue increased $286 million or 7%, driven by Office 365 Consumer, due to recurring subscription revenue and transactional strength in Japan. • LinkedIn revenue increased $1.5 billion or 28%, driven by growth across each line of business. • Dynamics revenue increased 15%, driven by Dynamics 365 growth.
Operating income increased $3.3 billion or 25%, including an unfavorable foreign currency impact of 2%.

• Gross margin increased $4.1 billion or 15%, driven by growth in Office Commercial and LinkedIn. Gross margin percentage increased slightly, due to gross margin percentage improvement in LinkedIn and Office 365 Commercial, offset in part by an increased mix of cloud offerings.

• Operating expenses increased $806 million or 6%, driven by investments in LinkedIn and cloud engineering, offset in part by a decrease in marketing.
Intelligent Cloud
Revenue increased $6.8 billion or 21%.

• Server products and cloud services revenue, including GitHub, increased $6.5 billion or 25%, driven by Azure. Azure revenue growth was 72%, due to higher infrastructure-as-a-service and platform-as-a-service consumption-based and per user-based services. Server products revenue increased 6%, due to continued demand for premium versions and hybrid solutions, GitHub, and demand ahead of end-of-support for SQL Server 2008 and Windows Server 2008.

• Enterprise Services revenue increased $278 million or 5%, driven by growth in Premier Support Services and Microsoft Consulting Services.
Operating income increased $2.4 billion or 21%.

• Gross margin increased $4.8 billion or 22%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies. Gross margin percentage increased slightly, due to gross margin percentage improvement in Azure, offset in part by an increased mix of cloud offerings.

• Operating expenses increased $2.4 billion or 22%, driven by investments in cloud and AI engineering, GitHub, and commercial sales capacity.
More Personal Computing
Revenue increased $3.4 billion or 8%.

• Windows revenue increased $877 million or 4%, driven by growth in Windows Commercial and Windows OEM, offset in part by a decline in patent licensing. Windows Commercial revenue increased 14%, driven by an increased mix of multi-year agreements that carry higher in-quarter revenue recognition. Windows OEM revenue increased 4%. Windows OEM Pro revenue grew 10%, ahead of the commercial PC market, driven by healthy Windows 10 demand. Windows OEM non-Pro revenue declined 7%, below the consumer PC market, driven by continued pressure in the entry level category.

• Surface revenue increased $1.1 billion or 23%, with strong growth across commercial and consumer.

• Gaming revenue increased $1.0 billion or 10%, driven by Xbox software and services growth of 19%, primarily due to third-party title strength and subscriptions growth, offset in part by a decline in Xbox hardware of 13% primarily due to a decrease in volume of consoles sold.

• Search advertising revenue increased $616 million or 9%. Search advertising revenue, excluding traffic acquisition costs, increased 13%, driven by higher revenue per search.
Operating income increased $2.2 billion or 21%, including an unfavorable foreign currency impact of 2%.

• Gross margin increased $2.0 billion or 9%, driven by growth in Windows, Gaming, and Search. Gross margin percentage increased slightly, due to a sales mix shift to higher gross margin businesses in Windows and Gaming.

• Operating expenses decreased $172 million or 1%.
Fiscal Year 2018 Compared with Fiscal Year 2017
Productivity and Business Processes
Revenue increased $6.0 billion or 20%.

• LinkedIn revenue increased $3.0 billion to $5.3 billion. Fiscal year 2018 included a full period of results, whereas fiscal year 2017 only included results from the date of acquisition on December 8, 2016. LinkedIn revenue primarily consisted of revenue from Talent Solutions.

• Office Commercial revenue increased $2.4 billion or 11%, driven by Office 365 Commercial revenue growth, mainly due to growth in subscribers and average revenue per user, offset in part by lower revenue from products licensed on-premises, reflecting a continued shift to Office 365 Commercial.

• Office Consumer revenue increased $382 million or 11%, driven by Office 365 Consumer revenue growth, mainly due to growth in subscribers.

• Dynamics revenue increased 13%, driven by Dynamics 365 revenue growth.
Operating income increased $1.5 billion or 13%, including a favorable foreign currency impact of 2%.

• Gross margin increased $4.4 billion or 19%, driven by LinkedIn and growth in Office Commercial. Gross margin percentage decreased slightly, due to an increased mix of cloud offerings, offset in part by gross margin percentage improvement in Office 365 Commercial and LinkedIn. LinkedIn cost of revenue increased $818 million to $1.7 billion, including $888 million of amortization for acquired intangible assets.

• Operating expenses increased $2.9 billion or 25%, driven by LinkedIn expenses and investments in commercial sales capacity and cloud engineering. LinkedIn operating expenses increased $2.2 billion to $4.5 billion, including $617 million of amortization of acquired intangible assets.
Intelligent Cloud
Revenue increased $4.8 billion or 18%.

• Server products and cloud services revenue increased $4.5 billion or 21%, driven by Azure and server products licensed on-premises revenue growth. Azure revenue grew 91%, due to higher infrastructure-as-a-service and platform-as-a-service consumption-based and per user-based services. Server products licensed on-premises revenue increased 5%, mainly due to a higher mix of premium licenses for Windows Server and Microsoft SQL Server.

• Enterprise Services revenue increased $304 million or 5%, driven by higher revenue from Premier Support Services and Microsoft Consulting Services, offset in part by a decline in revenue from custom support agreements.
Operating income increased $2.4 billion or 26%.

• Gross margin increased $3.1 billion or 16%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies. Gross margin percentage decreased, due to an increased mix of cloud offerings, offset in part by gross margin percentage improvement in Azure.

• Operating expenses increased $683 million or 7%, driven by investments in commercial sales capacity and cloud engineering.
More Personal Computing
Revenue increased $3.0 billion or 8%.

• Windows revenue increased $925 million or 5%, driven by growth in Windows Commercial and Windows OEM, offset by a decline in patent licensing revenue. Windows Commercial revenue increased 12%, driven by multi-year agreement revenue growth. Windows OEM revenue increased 5%. Windows OEM Pro revenue grew 11%, ahead of a strengthening commercial PC market. Windows OEM non-Pro revenue declined 4%, below the consumer PC market, driven by continued pressure in the entry-level price category.

• Gaming revenue increased $1.3 billion or 14%, driven by Xbox software and services revenue growth of 20%, mainly from third-party title strength.

• Search advertising revenue increased $793 million or 13%. Search advertising revenue, excluding traffic acquisition costs, increased 16%, driven by growth in Bing, due to higher revenue per search and search volume.

• Surface revenue increased $625 million or 16%, driven by a higher mix of premium devices and an increase in volumes sold, due to the latest editions of Surface.

• Phone revenue decreased $525 million.
Operating income increased $1.8 billion or 20%, including a favorable foreign currency impact of 2%.

• Gross margin increased $2.2 billion or 11%, driven by growth in Windows, Surface, Search, and Gaming. Gross margin percentage increased, primarily due to gross margin percentage improvement in Surface.

• Operating expenses increased $391 million or 3%, driven by investments in Search, AI, and Gaming engineering and commercial sales capacity, offset in part by a decrease in Windows marketing expenses.
Corporate and Other

Corporate and Other includes corporate-level activity not specifically allocated to a segment, including restructuring expenses.

Fiscal Year 2019 Compared with Fiscal Year 2018

We did not incur Corporate and Other activity in fiscal years 2019 or 2018.

Fiscal Year 2018 Compared with Fiscal Year 2017

Corporate and Other operating loss decreased $306 million, due to a reduction in restructuring expenses, driven by employee severance expenses primarily related to our sales and marketing restructuring plan in fiscal year 2017.

(In millions, except percentages)   | 2019                    | 2018       | 2017      | Percentage Change 2019 Versus 2018 | Percentage Change 2018 Versus 2017
----------------------------------- | ----------------------- | ---------- | --------- | ---------------------------------- | ----------------------------------
Revenue                             |                         |            |           |                                    |
Productivity and Business Processes | $ 41,160                | $ 35,865   | $ 29,870  | 15%                                | 20%
Intelligent Cloud                   | 38,985                  | 32,219     | 27,407    | 21%                                | 18%
More Personal Computing             | 45,698                  | 42,276     | 39,294    | 8%                                 | 8%
Total                               | $  125,843              | $  110,360 | $  96,571 | 14%                                | 14%
                                    | Operating Income (Loss) |            |           |                                    |
Productivity and Business Processes | $ 16,219                | $ 12,924   | $ 11,389  | 25%                                | 13%
Intelligent Cloud                   | 13,920                  | 11,524     | 9,127     | 21%                                | 26%
More Personal Computing             | 12,820                  | 10,610     | 8,815     | 21%                                | 20%
Corporate and Other                 | 0                       | 0          | (306)     | *                                  | *
Total                               | $42,959                 | $35,058    | $29,025   | 23%                                | 21%
* not meaningful                    |                         |            |           |                                    |


2. Other operating income
Gains from the disposal of fixed assets and gains from the reversal of impairment losses includes €354 million of income from the disposal of real estates (2017/18: €137 million) and €5 million of income from reversal of impairment losses (2017/18: €4 million). Project developments and sale-and-leaseback transactions contributed to the real estate transactions.
The income from logistics services provided by METRO LOGISTICS to companies intended for disposal and non-group companies is offset by expenses from logistics services, which are reported under other operating expenses.
The other operating income includes cost allocations and cost shares as well as a great number of insignificant individual items.
Disclosures on companies intended for sale can be found under no. 43 – discontinued business sectors page 266 .

€ million                                                                                | 2017/2018 | 2018/2019
---------------------------------------------------------------------------------------- | --------- | ---------
Gains from the disposal of fixed assets and gains from the reversal of impairment losses | 145       | 360
Income from logistics services                                                           | 285       | 257
Services                                                                                | 251       | 250
Rents incl. reimbursements of subsidiary rental costs                                    | 268       | 236
Services rendered to suppliers                                                           | 111       | 103
Miscellaneous                                                                            | 211       | 198
                                                                                | 1,271     | 1,405


Non-GAAP Measures
We define Adjusted EBITDA as our net income before interest expense, interest income, other income, net, provision for / (benefit from) income taxes, amortization and depreciation, stock-based compensation expense, acquisition-related expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense, stock-based compensation expense related to stock options and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements. Adjusted EBITDA is not a measure calculated in accordance with GAAP. See the table below for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our
operating results in the same manner as our management and board of directors.We have included Adjusted EBITDA in this report because it is a key measure that our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions. We also use certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures under our executive bonus plan. Further, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly,
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, you should consider Adjusted EBITDA alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

                                                        |          | Year Ended December 31, |
------------------------------------------------------- | -------- | ----------------------- | -------
                                                        | 2019     | 2018                    | 2017
Adjusted EBITDA:                                        |          |                         |
Net income                                              | $53,330  | $21,524                 | $29,251
Adjustments:                                            |          |                         |
Interest expense, interest income and other income, net | (8,483)  | 503                     | 1,133
Provision for / (benefit from) income taxes             | 5,566    | (9,825)                 | 2,990
Amortization and depreciation expense                   | 22,134   | 21,721                  | 17,734
Stock-based compensation expense                        | 20,603   | 13,429                  | 7,413
Acquisition-related expense                             | 2,403    | —                       | 5,895
Litigation expense                                      | 12,754   | 45,729                  | 7,212
Total adjustments                                       | 54,977   | 71,557                  | 42,377
Adjusted EBITDA                                         | $108,307 | $93,081                 | $71,628