ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated Performance Summary. The following table presents selected consolidated financial data for the indicated fiscal years (dollars in millions, except per share data):
*Non-GAAP metric; refer to "Return on Invested Capital ("ROIC") and Economic Return" below for more information and Exhibit 99.1 for a reconciliation.
Net sales. Fiscal 2019 net sales increased $290.9 million, or 10.1%, as compared to fiscal 2018.
Net sales are analyzed by management by geographic segment, which reflects the Company's reportable segments, and by market sector. Management measures operational performance and allocates resources on a geographic segment basis. The Company’s global business development strategy is based on our targeted market sectors.

                             | 2019     | 2018
---------------------------- | -------- | --------
Net sales                    | $3,164.4 | $2,873.5
Cost of sales                | 2,872.6  | 2,615.9
Gross profit                 | 291.8    | 257.6
Gross margin                 | 9.2%     | 9.0%
Operating income             | 142.1    | 118.3
Operating margin             | 4.5%     | 4.1%
Other expense                | 16.1     | 10.7
Income tax expense           | 17.3     | 94.6
Net income                   | 108.6    | 13.0
Diluted earnings per share   | $3.50    | $0.38
Return on invested capital*  | 13.1%    | 16.1%
Economic return*             | 4.1%     | 6.6%

. DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS
 Consolidated Performance Summary. table presents consolidated financial data years
-GAAP metric Invested Capital Economic Return Exhibit 99.
. 2019 increased $290. million. 1% 2018.
 analyzed geographic segment market sector. measures performance allocates resources. business development strategy targeted market sectors.
 Net sales $3,164. $2,873.
 Cost sales 2,872. 2,615.
 Gross profit 291. 257.
 margin 9. 2%
 Operating income 142. 118.
.
 expense.
 tax expense 17.
 income 108.
 earnings per share $3.
 Return invested capital 13. 1% 16.
 Economic return 4. 6%


Geographic and Other Information
Revenue by geographic region, based on ship-to destinations, was as follows (in thousands):
The United States represented 56%, 58% and 58% of revenue for 2019, 2018 and 2017, respectively. Revenue in the United Kingdom was $159.9 million in 2019 and $196.0 million in 2017, representing 11% of revenue in 2019 and 12% of revenue for 2017. Revenue in the United Kingdom was less than 10% of revenue in 2018. No other single country represented more than 10% of revenue during these periods. As of December 31, 2019 and 2018, long-lived assets, which represent property and equipment, located outside the United States were $27.9 million and $36.9 million, respectively.

                                 |            | December 31, |
-------------------------------- | ---------- | ------------ | ----------
                                 | 2019       | 2018         | 2017
United States                    | $799,016   | $880,534     | $944,052
Americas excluding United States | 94,961     | 101,282      | 116,330
Europe, Middle East, and Africa  | 410,485    | 384,196      | 440,135
Asia Pacific                     | 130,326    | 145,971      | 115,002
Total                            | $1,434,788 | $1,511,983   | $1,615,519

 Revenue region destinations
 United States 56% 58% revenue 2019 2018 2017. Kingdom $159. million 2019 $196. million 2017 11% 12%. less 10% 2018. No country 10%. December 31, 2019 2018 long-lived assets outside States $27. million $36. million.
 States $799,016 $880,534 $944,052
 Americas 94,961 101,282 116,330
 Europe Middle East Africa 410,485,196
 Asia Pacific 130,326 145,971 115
 $1,434,788 $1,511,983 $1,615,519


Operating income in 2019 was $1,203 million, decreasing by $197 million compared to 2018, reflecting normal price pressure, increased unsaturation charges and higher R&D spending, partially offset by higher level of grants and favorable currency effects, net of hedging.
Operating income in 2018 was $1,400 million, improved by $395 million compared to 2017, reflecting higher volumes, improved manufacturing efficiencies and product mix and lower restructuring charges, partially offset by unfavorable currency effects, net of hedging, normal price pressure and higher operating expenses.

                              |        | Year Ended December 31, |
----------------------------- | ------ | ----------------------- | ------
                              | 2019   | 2018                    | 2017
                              |        | (In millions)           |
Operating income              | $1,203 | $1,400                  | $1,005
As percentage of net revenues | 12.6%  | 14.5%                   | 12.0%

2019 $1,203 million $197 million 2018 price charges higher R&D spending offset grants currency hedging.
 2018 $1,400 million improved $395 million 2017 higher manufacturing efficiencies lower restructuring charges offset currency hedging higher operating expenses.
 Ended December 31,
 income $1,203 $1,400 $1,005
 net revenues 12. 6%. 5%.


The following table presents franchise revenues and costs in each fiscal year and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):
Franchise rental revenues increased $13.8 million, or 5.3%, in 2019 versus a year ago due primarily to an increase in the number of franchised restaurants and, to a lesser extent, an increase in franchise same-store sales. The increase in the number of restaurants leased or subleased from the Company due to our refranchising strategy, contributed additional rental revenues of $12.4 million in 2019.

                                                                       | 2019       | 2018
---------------------------------------------------------------------- | ---------- | ----------
Franchise rental revenues                                              | $272,815   | $259,047
Royalties                                                              | 163,047    | 155,939
Franchise fees and other                                               | 6,764      | 6,646
Franchise royalties and other                                          | 169,811    | 162,585
Franchise contributions for advertising and other services             | 170,674    | —
Total franchise revenues                                               | $613,300   | $421,632
                                                                       |            |
Franchise occupancy expenses (excluding depreciation and amortization) | $166,584   | $158,319
Franchise support and other costs                                      | 12,110     | 11,593
Franchise advertising and other services expenses                      | 178,093    | —
Total franchise costs                                                  | $356,787   | $169,912
Franchise costs as a % of total franchise revenues                     | 58.2%      | 40.3%
                                                                       |            |
Average number of franchise restaurants                                | 2,081      | 2,028
% increase                                                             | 2.6%       |
Franchised restaurant sales                                            | $3,167,920 | $3,018,067
Franchise restaurant AUV                                               | $1,523     | $1,488
Increase in franchise-operated same-store sales                        | 1.3%       | 0.1%
Royalties as a percentage of total franchise restaurant sales          | 5.1%       | 5.2%

table presents franchise revenues costs fiscal year results
 Franchise rental revenues increased $13. 8 million 5. 3% 2019 franchised restaurants same-store sales. increase restaurants leased refranchising contributed additional rental revenues $12. 4 million 2019.
 rental revenues $272,815 $259,047
 Royalties 163,047
 fees 6
 contributions 170,674
 Total revenues $613,300 $421,632
 occupancy expenses $166,584 $158,319
 support costs
 178,093
 Total costs $356,787 $169,912
 revenues 58. 2% 40. 3%
 Average number franchise restaurants 2,081
 increase 2. 6%
 Franchised restaurant sales $3,167,920 $3,018,067
 $1,523 $1,488
 Increase same-store sales. 3%.
 Royalties sales. 1%.


Hardware
Hardware sales, net decreased $1.5 million, or -10% in 2019 compared to 2018. We adopted the new ASC 606 standard as of January 1, 2018 and elected to use the modified retrospective method. Historical hardware sales prior to the adoption of ASC 606 were recorded on a gross basis, as we were the principal in the transaction in accordance with the previous standard, ASC 605-45. Under the new standard, we are an agent in the transaction as we do not physically control the hardware which we sell. Accordingly, starting January 1, 2018, we recognize our hardware revenue net of related cost which reduces both hardware revenue and cost of sales as compared to our accounting prior to 2018. For comparison purposes only, had we implemented ASC 606 using the full retrospective method, we would have also presented hardware revenue net of cost for prior periods as shown below.
The majority of hardware sales are derived from our Americas segment. Sales of hardware are largely dependent upon customer- specific desires, which fluctuate.

                                              |         |         |          | Year Ended December 31, |
--------------------------------------------- | ------- | ------- | -------- | ----------------------- | ----
                                              |         |         |          | % Change vs.Prior Year  |
2019                                          | 2019    | 2018    | 2017     | 2019                    | 2018
Hardware Revenue (Pre ASC 606 Adoption)       | $44,972 | $49,914 | $43,190  | -10%                    | 16%
Cost of hardware                              | -32,455 | -35,947 | - 32,205 | -10%                    | 12%
Hardware Revenue, net (Post ASC 606 Adoption) | $12,517 | $13,967 | $ 10,985 | -10%                    | 27%

 sales decreased $1. 5 million -10% 2019 compared to 2018. adopted ASC 606 standard January 1, 2018 modified retrospective method. Historical hardware sales recorded gross principal transaction previous. new standard agent control hardware. starting January 1, 2018 hardware revenue net cost reduces revenue cost sales 2018. implemented ASC 606 full retrospective method presented hardware revenue net cost prior periods.
 majority hardware sales Americas segment. dependent upon customer desires.
 December 31,
 % Change. Prior Year
 Hardware Revenue (Pre ASC 606 Adoption $44,972 -10%
 Cost hardware -32,455
 Revenue net (Post ASC 606 Adoption $12,517  $13,967 -10% 27%


32. Provisions for post-employment benefits plans and similar obligations
Provisions for post-employment benefits plans are recognised in accordance with IAS 19 (Employee Benefits).
Provisions for post-employment benefits plans consist of commitments primarily related to benefits defined by the provisions of company pension plans. These take the form of defined benefit plans directly from the employer (employer’s commitments) and defined benefit plans from external pension providers (benevolent funds in Germany and international pension funds). The external providers’ assets serve exclusively to finance the pension entitlements and qualify as plan assets. The benefits under the different plans are based on performance and length of service.
The most important performance-based pension plans are described in the following.

€ million                                                              | 30/9/2018 | 30/9/2019
---------------------------------------------------------------------- | --------- | ---------
Provisions for post-employment benefits plans (employer’s commitments) | 344       | 414
Provisions for indirect commitments                                    | 12        | 17
Provisions for voluntary pension benefits                              | 0         | 0
Provisions for post-employment benefit plans                           | 71        | 78
                                                                       | 427       | 509
Provisions for obligations similar to pensions                         | 41        | 34
                                                                       | 468       | 543

. Provisions post-employment benefits plans obligations
 recognised IAS 19.
 related company pension plans. employer external pension providers. external providers’ assets finance pension entitlements plan assets. benefits based on performance length service.
 important performance-based pension plans.
 € million 30/9/2018 30/9/2019
 Provisions post-employment benefits  414
 indirect commitments 12 17
 voluntary pension benefits 0
 post-employment plans 71  78
 427  509
 obligations similar pensions 41
 468 543


Earnings Per Share
Calculations of net income per common share attributable to ON Semiconductor Corporation are as follows (in millions, except per share data):
Basic income per common share is computed by dividing net income attributable to ON Semiconductor Corporation by the weighted average number of common shares outstanding during the period.
To calculate the diluted weighted-average common shares outstanding, the number of incremental shares from the assumed exercise of stock options and assumed issuance of shares relating to RSUs is calculated by applying the treasury stock method. Share-based awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per share calculation.
The excluded number of anti-dilutive share-based awards was approximately 0.8 million, 0.6 million and 0.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The dilutive impact related to the Company’s 1.00% Notes and 1.625% Notes is determined in accordance with the net share settlement requirements, under which the Company’s convertible notes are assumed to be convertible into cash up to the par value, with the excess of par value being convertible into common stock.
Additionally, if the average price of the Company’s common stock exceeds $ 25.96 per share, with respect to the 1.00% Notes, or $30.70 per share, with respect to the 1.625% Notes, during the relevant reporting period, the effect of the additional potential shares that may be issued related to the warrants that were issued concurrently with the issuance of the convertible notes will also be included in the calculation of diluted weighted-average common shares outstanding.
Prior to conversion, the convertible note hedges are not considered for purposes of the earnings per share calculations, as their effect would be anti-dilutive. Upon conversion, the convertible note hedges are expected to offset the dilutive effect of the 1.00% Notes and 1.625% Notes, respectively, when the stock price is above $18.50 per share, with respect to the 1.00% Notes, and $20.72 per share, with respect to the 1.625% Notes.

                                                                          |        | Year ended December 31, |
------------------------------------------------------------------------- | ------ | ----------------------- | ------
                                                                          | 2019   | 2018                    | 2017
Net income attributable to ON Semiconductor Corporation                   | $211.7 | $627.4                  | $810.7
Basic weighted average common shares outstanding                          | 410.9  | 423.8                   | 421.9
Add: Incremental shares for:                                              |        |                         |
Dilutive effect of share-based awards                                     | 1.9    | 4.3                     | 5.5
Dilutive effect of convertible notes                                      | 3.2    | 7.8                     | 0.9
Diluted weighted average common shares outstanding                        | 416.0  | 435.9                   | 428.3
Net income per common share attributable to ON Semiconductor Corporation: |        |                         |
Basic                                                                     | $0.52  | $1.48                   | $1.92
Diluted                                                                   | $0.51  | $1.44                   | $1.89

Earnings Per Share
 net income per share ON Semiconductor Corporation millions
 income computed net income by average common shares.
 diluted common shares from stock options RSUs treasury stock method. Share-based awards anti-dilutive excluded from net income.
 anti-dilutive awards approximately 0. 8 million 0. 6 million 0. 2 million for years ended December 31, 2019 2018 2017.
 dilutive impact 1. 00% Notes 1. 625% Notes determined net share settlement requirements notes convertible into cash par value excess convertible into common stock.
 if average price common stock exceeds $ 25. 96 per share 1. or $30. 70 per share. 625% Notes additional potential shares included in diluted common shares.
 convertible note hedges not considered anti-dilutive. Upon offset dilutive effect. when stock price above $18. 50 per share.$20. 72 share 1. 625%.
 December 31,
 2019
 Net income ON Semiconductor Corporation $211. $627. $810.
 average shares 410. 423. 421.
 shares
 share-based awards 1. 4. 5.
 3. 7.
 average shares 416. 435. 428.
 Net income common share ON Semiconductor Corporation
 $0. 52 $1. 48 $1.
. 51 $1. 44 $1.


6.4 Deed of cross guarantee
Pursuant to the iSelect Deed of Cross Guarantee (“the Deed”) and in accordance with ASIC Class Order 98/1418, the subsidiaries identified with a ‘2’ in note 6.2 are relieved from the requirements of the Corporations Act 2001 relating to the preparation, audit and lodgment of their financial reports.
iSelect Limited and the subsidiaries identified with a ‘2’ in note 6.2 together are referred to as the “Closed Group”. The Closed Group, with the exception of General Brokerage Services Pty Ltd, Energy Watch Trading Pty Ltd, Procure Power Pty Ltd, Energy Watch Services Pty Ltd and iSelect International Pty Ltd entered into the Deed on 26 June 2013.
General Brokerage Services Pty Ltd, Energy Watch Trading Pty Ltd, Procure Power Pty Ltd and Energy Watch Services Pty Ltd entered into the Deed on 1 July 2014, the date they were acquired as part of the Energy Watch Group acquisition. iSelect International entered the Deed on 8 September 2014. The effect of the Deed is that iSelect Limited guarantees to each creditor payment in full of any debt in the event of winding up any of the entities in the Closed Group.
The consolidated income statement of the entities that are members of the Closed Group is as follows:

                                                  | CONSOLIDATED |
------------------------------------------------- | ------------ | ----------
                                                  | 2019 $’000   | 2018 $’000
Consolidated income statement                     |              |
Loss from continuing operations before income tax | (20,111)     | (21,033)
Income tax benefit                                | 5,949        | 6,734
Net loss for the year                             | (14,162)     | (14,299)
Retained earnings at the beginning of the period  | 4,101        | 30,790
Transferred in from divested subsidiary           | (8,676)      | -
Net loss for the year                             | (14,162)     | (14,299)
Dividends paid                                    | -            | (12,390)
Retained earnings at the end of the year          | (18,737)     | 4,101

. Deed cross guarantee
 iSelect Deed Cross Guarantee ASIC Class Order 98/1418 subsidiaries 6. 2 relieved requirements Corporations Act 2001 financial reports.
 iSelect Limited subsidiaries. “Closed Group”. General Brokerage Services Energy Watch Trading Procure Power Pty Energy Watch Services Ltd iSelect International Deed 26 June 2013.
 1 July 2014,. iSelect International Deed 8 September 2014. iSelect Limited guarantees creditor payment debt entities Closed Group.
 consolidated income statement entities
 2019 2018
 Loss operations before income tax (20,111) (21,033)
 Income tax benefit 5,949 6,734
 Net loss year (14,162),299)
 Retained earnings 4 30,790
 Transferred divested subsidiary (8,676
 Net loss (14,162),299)
 Dividends paid (12,390
 Retained earnings end year (18,737) 4,101


CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET OBLIGATIONS
Our disclosures regarding contractual obligations and commercial commitments are located in various parts of our regulatory filings. Information in the following table provides a summary of our contractual obligations and commercial commitments as of September 28, 2019 (dollars in millions):
1) Includes $150.0 million in principal amount of 2018 Notes as well as interest; see Note 4, "Debt, Capital Lease Obligations and Other Financing," in Notes to Consolidated Financial Statements for further information.
2) As of September 28, 2019, capital lease obligations consists of capital lease payments and interest as well as the non-cash financing obligation related to the failed sale-leasebacks in Guadalajara, Mexico; see Note 4, "Debt, Capital Lease Obligations and Other Financing," in Notes to Consolidated Financial Statements for further information.
3) As of September 28, 2019, purchase obligations consist primarily of purchases of inventory and equipment in the ordinary course of business.
4) Consists of U.S. federal income taxes on the deemed repatriation of undistributed foreign earnings due to Tax Reform. Refer to "Liquidity and Capital Resources" above for further detail.
5) As of September 28, 2019, other obligations on the balance sheet included deferred compensation obligations to certain of our former and current executive officers, as well as other key employees, and an asset retirement obligation. We have excluded from the above table the impact of approximately $2.3 million, as of September 28, 2019, related to unrecognized income tax benefits. The Company cannot make reliable estimates of the future cash flows by period related to these obligations.
6) As of September 28, 2019, other obligations not on the balance sheet consist of guarantees and a commitment for salary continuation and certain benefits in the event employment of one executive officer of the Company is terminated without cause. Excluded from the amounts disclosed are certain bonus and incentive compensation amounts, which would be paid on a prorated basis in the year of termination.
7) Includes future minimum lease payments for two facilities in Guadalajara, Mexico, leased under 10-year and 15-year base lease agreements, both of which include two 5-year renewal options; see Note 4, "Debt, Capital Lease Obligations and Other Financing," in Notes to Consolidated Financial Statements for further information.

                                                       |          | Payments Due by Fiscal Year |            |            |
------------------------------------------------------ | -------- | --------------------------- | ---------- | ---------- | -------------------
Contractual Obligations                                | Total    | 2020                        | 2021-2022  | 2023-2024  | 2025 and
thereafter
Debt Obligations (1)                                   | $288.3   | $101.2                      | $12.4      | $12.2      | $162.5
Capital Lease Obligations (2)                          | 49.8     | 6.7                         | 6.4        | 2.5        | 34.2
Operating Lease Obligations                            | 40.8     | 10.4                        | 12.2       | 8.8        | 9.4
Purchase Obligations (3)                               | 620.0    | 598.8                       | 20.7       | 0.4        | 0.1
Repatriation Tax on Undistributed Foreign Earnings (4) | 65.1     | 5.5                         | 11.4       | 16.3       | 31.9
Other Liabilities on the Balance Sheet (5)             | 15.0     | 3.3                         | 4.0        | 0.6        | 7.1
Other Liabilities not on the Balance Sheet (6)         | 8.6      | 1.8                         | —          | 1.3        | 5.5
Other Financing Obligations (7)                        | 119.0    | 4.3                         | 9.0        | 9.4        | 96.3
Total Contractual Cash Obligations                     | $1,206.6 | $732.0                      | $76.1      | $51.5      | $347.0

CONTRACTUAL OBLIGATIONS COMMITMENTS OFF-BALANCE SHEET OBLIGATIONS
 disclosures contractual obligations commercial commitments in regulatory filings. table summary contractual obligations commercial commitments September 28, 2019
 Includes $150. 0 million principal 2018 Notes interest Note 4 "Debt Capital Lease Obligations Financing.
 capital lease obligations payments interest non financing failed sale-leasebacks Guadalajara, Mexico.
 purchase obligations purchases inventory equipment.
 U. S. federal income taxes repatriation undistributed foreign earnings Tax Reform. "Liquidity Capital Resources.
 other obligations deferred compensation former executive officers key employees retirement obligation. excluded impact $2. 3 million unrecognized income tax benefits. estimates future cash flows.
 other obligations not balance guarantees commitment salary continuation benefits employment executive officer terminated without cause. Excluded bonus incentive compensation amounts paid year termination.
Includes future lease payments facilities Guadalajara Mexico 15-year lease agreements 5-year renewal options Note 4 Capital Lease Obligations Financing Consolidated Financial Statements information.
 Payments Due Fiscal Year
 Contractual Obligations 2021-2022 2023-2024
 Debt Obligations $288. $101. $12. $12. $162.
 Capital Lease Obligations 49. 6. 34.
 Operating Lease Obligations 40. 10. 12.
 Purchase Obligations 620. 598. 20.
 Repatriation Tax Undistributed Foreign Earnings 65. 5. 11. 31.
 Liabilities Balance Sheet 15. 3.
 Liabilities.
 Financing Obligations 119. 9. 96.
 Contractual Cash Obligations $1,206. $732. $76. $51. $347.


No deferred tax assets were capitalised for the following tax loss carry-forwards and interest carry-forwards or temporary differences because realisation of the assets in the short-to-medium term is not expected:
The loss carry-forwards as of the closing date predominantly concern the German consolidation group. They can be carried forward without limitation.

€ million               | 30/9/2018 | 30/9/2019
----------------------- | --------- | ---------
Corporate tax losses    | 4,320     | 4,883
Trade tax losses        | 3,296     | 3,679
Interest carry-forwards | 57        | 83
Temporary differences   | 104       | 120

deferred tax assets capitalised tax loss interest differences
 loss-forwards German consolidation group. carried.
 million 30/9/2018 30/9/2019
 Corporate tax losses 4,320
 Trade tax losses 3,296
 Interest-forwards 57
 Temporary differences 104


Section D: People
This section provides information about our employee benefit obligations, including annual leave, long service leave and post-employment benefits. It also includes details about our share plans and the compensation paid to Key Management Personnel.
15. EMPLOYEE BENEFITS.
1. Included within current provisions in the statement of financial position.
2. Included within non-current provisions in the statement of financial position.
Employee benefits liability
Employee benefits liability represents amounts provided for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service.
Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. These amounts are presented as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement.

                                  | 2019   | 2018
--------------------------------- | ------ | ------
                                  | $’000  | $’000
Current employee benefits1        | 13,859 | 12,710
Non-current employee benefits2    | 189    | 675
Total employee benefits liability | 14,048 | 13,385

Section D People
 employee benefit obligations annual leave long service leave post-employment benefits. share plans compensation Key Management Personnel.
. EMPLOYEE BENEFITS.
. current.
. non-current provisions.
 Employee benefits liability
 annual leave long service leave. includes annual leave long service leave service.
 Group expect full annual leave long service leave balances current liabilities next 12 months. unconditional right defer settlement leave.
 2019 2018
 Current employee benefits1 13,859  12,710
 Non-current benefits2 189  675
 Total benefits liability 14,048  13,385


9.4. Trade and other payables
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables and accruals are paid when amounts fall due. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature.

                                 | 2019   | 2018
-------------------------------- | ------ | ------
                                 | $'000  | $'000
Current                          |        |
Trade payables                   | 3,486  | 4,184
Accrued expenses                 | 6,706  | 2,717
GST and employment taxes payable | 2,644  | 1,256
Other payables                   | 6,157  | 4,161
Total                            | 18,993 | 12,318

. Trade payables
 unsecured paid 30 days recognition. paid due. carrying amounts same values short-term nature.
 Trade payables 3,486 4,184
 Accrued expenses 2,717
 GST employment taxes 2,644 1,256
 Other payables 6,157 4,161
 Total 18,993 12,318


Restricted Share Awards
Restricted share awards, which are generally in the form of restricted share units, are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. All restrictions on an award will lapse upon death or disability of the employee. If the employee satisfies retirement requirements, a portion of the award may vest, depending on the terms and conditions of the particular grant. Recipients of restricted share units have no voting rights, but do receive dividend equivalents. For grants that vest through passage of time, the fair value of the award at the time of the grant is amortized to expense over the period of vesting. The fair value of restricted share awards is determined based on the closing value of our shares on the grant date. Restricted share awards generally vest in increments over a period of four years as determined by the management development and compensation committee.
Restricted share award activity was as follows:
The weighted-average grant-date fair value of restricted share awards granted during fiscal 2019, 2018, and 2017 was $77.77, $93.45, and $67.72, respectively.
The total fair value of restricted share awards that vested during fiscal 2019, 2018, and 2017 was $48 million, $50 million, and $50 million, respectively.
As of fiscal year end 2019, there was $64 million of unrecognized compensation expense related to nonvested restricted share awards, which is expected to be recognized over a weighted-average period of 1.7 years.

                                  | Shares    | Weighted-Average Grant-Date Fair Value
--------------------------------- | --------- | --------------------------------------
Nonvested at fiscal year end 2018 | 1,631,470 | $  75.39
Granted                           | 692,899   | 77.77
Vested                            | (689,040) | 70.31
Forfeited                         | (232,910) | 78.80
Nonvested at fiscal year end 2019 | 1,402,419 | $  78.36

Restricted Share Awards
 units granted subject restrictions. Conditions vesting determined. restrictions lapse death disability. retirement portion award vest. Recipients no voting rights receive dividend equivalents. fair value amortized over vesting. value determined closing value shares grant. vest over four years management development compensation committee.
 activity
-average grant-date fair value 2019 2017 $77. 77 $93. 45 $67. 72.
 total value $48 million $50 million $50 million.
 2019 $64 million unrecognized compensation expense nonvested awards expected recognized over 1. 7 years.
 Weighted-Average Grant-Date Fair Value
 Nonvested end 2018 1,631,470 $ 75. 39
 Granted 692,899 77.
 Vested (689,040).
 Forfeited (232,910).
 Nonvested end 2019 1,402,419 $ 78. 36


Note 8: Balance Sheet Information
Certain significant amounts included in the Company's Consolidated Balance Sheets consist of the following (in millions):
Assets classified as held-for-sale, consisting primarily of properties, are required to be recorded at the lower of carrying value or fair value less any costs to sell. The carrying value of these assets as of December 31, 2019 was $1.4 million, and is reported as other current assets on the Company’s Consolidated Balance Sheet.
Depreciation expense for property, plant and equipment, including amortization of finance leases, totaled $409.7 million, $359.3 million and $325.2 million for 2019, 2018 and 2017, respectively.
Included within sales related reserves are ship and credit reserves for distributors amounting to $178.7 million and $230.8 million as of December 31, 2019 and 2018, respectively.

                                     | As of             |
------------------------------------ | ----------------- | -----------------
                                     | December 31, 2019 | December 31, 2018
Inventories:                         |                   |
Raw materials                        | $138.4            | $137.3
Work in process                      | 772.9             | 760.7
Finished goods                       | 321.1             | 327.2
                                     | $1,232.4          | $1,225.2
Property, plant and equipment, net:  |                   |
Land                                 | $125.2            | $125.5
Buildings                            | 860.6             | 820.4
Machinery and equipment              | 4,275.2           | 3,980.2
Property, plant and equipment, gross | 5,261.0           | 4,926.1
Less: Accumulated depreciation       | (2,669.4)         | (2,376.5)
                                     | $2,591.6          | $2,549.6
Accrued expenses:                    |                   |
Accrued payroll and related benefits | $153.4            | $240.8
Sales related reserves               | 247.3             | 294.8
Income taxes payable                 | 22.5              | 38.2
Other                                | 115.6             | 85.3
                                     | $538.8            | $659.1

Balance Sheet
 amounts Sheets
 Assets held-for-sale lower carrying value less costs. carrying value December 31, 2019 $1. 4 million.
 Depreciation property plant equipment amortization finance leases $409. 7 million $359. 3 million $325. 2 million 2019 2018 2017.
 reserves ship credit reserves $178. 7 million $230. 8 million December 31, 2019 2018.
 31,
 Inventories
 Raw materials $138. $137.
 Work process.
 Finished goods.
 $1,232. $1,225.
 Property plant equipment
 $125.
 Buildings 860.
 Machinery equipment 4,275. 3,980.
 5,261.
 Accumulated depreciation (2,669.
 $2,591. $2,549.
 Accrued expenses
 payroll benefits $153. $240.
 Sales reserves. 294.
 Income taxes.
..
 $538. $659.


The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:
Nokia was our largest customer in fiscal 2019, 2018 and 2017. Nokia purchases products directly from us and through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 45%, 36% and 41% of our net revenues in fiscal 2019, 2018 and 2017, respectively. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in any of these periods.

                                                          |       | Fiscal Year Ended |
--------------------------------------------------------- | ----- | ----------------- | -----
                                                          |       | March 31,         |
                                                          | 2019  | 2018              | 2017
Contract manufacturers and consignment warehouses:        |       |                   |
Flextronics Technology                                    | 21.8% | 14.0%             | 10.4%
Sanmina                                                   | 17.7  | 16.0              | 20.4
Distributors:                                             |       |                   |
Avnet Logistics                                           | 31.3  | 35.3              | 25.5
Nexcomm                                                   | 14.8  | 16.1              | 19.7

customers accounted 10% net revenues
 Nokia largest customer 2019 2018 2017. purchases contract manufacturers distributors. purchases Nokia represented 45% 36% 41% net revenues 2019 2018 2017. other OEM customers accounted 10% net revenues.
 Year
 Contract manufacturers consignment warehouses
 Flextronics Technology 21. 8% 14. 0% 10. 4%
 Sanmina 17. 16. 20.
 Distributors
 Avnet Logistics 31. 35. 25.
 Nexcomm 14. 16. 19.


(1) No dividend is proposed by the Board of Directors related to the financial year 2019.
(2) Includes net sales to other segments.
The figures are derived from our consolidated financial
statements prepared in accordance with IFRS. Year-on-year
change is in parenthesis.
All Nokia Technologies IPR and Licensing net sales are allocated to Finland.

Financial highlights                       |        |        |
------------------------------------------ | ------ | ------ | -------
For the year ended December 31,            | 2019   | 2018   | 2017
Continuing operations                      | EURm   | EURm   | EURm
Net sales                                  | 23,315 | 22,563 | 23,147
Gross profit                               | 8,326  | 8,446  | 9,139
Gross margin                               | 35.7%  | 37.4%  | 39.5%
Operating profit/(loss)                    | 485    | (59)   | 16
Operating margin                           | 2.1%   | (0.3)% | 0.1%
Profit/(loss) for the year                 | 18     | (549)  | (1,437)
                                           | EUR    | EUR    | EUR
Earnings per share, diluted                | 0.00   | (0.10) | (0.26)
Dividend per share(1)                      | 0.00   | 0.10   | 0.19
                                           | 2019   | 2018   | 2017
As of December 31                          | EURm   | EURm   | EURm
Net cash and current financial investments | 1,730  | 3,053  | 4,517

dividend proposed Board Directors financial year 2019.
 Includes net sales segments.
 figures consolidated financial
 statements IFRS. Year-on-year
 change parenthesis.
 Nokia Technologies IPR Licensing sales allocated Finland.
 Financial highlights
 year ended December 31, 2019
 operations
 Net sales 23,315 22,563
 Gross profit 8,326 9,139
 margin. 7%. 4% 39. 5%
 Operating profit/(loss 485
 margin. 1%.
 Profit/(loss) year
 Earnings per share diluted.
 Dividend per.
 December 31
 Net cash current financial investments 1,730 3,053


Issuer purchases of equity securities
Common stock repurchased in the three months ended December 31, 2019:
(1) Shares withheld to cover the option exercise price and tax withholding obligations under the net settlement provisions of our stock compensation awards have been included in these amounts.
(2) See "Stock repurchase program" in Item 7 of this Annual Report for additional information.

(in thousands, except per share amounts) | Total Number of Shares Purchased (1) (2) | Average Price Paid per Share (1) (2) | Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program (2) | Approximate Dollar Value of Shares That May Yet Be Purchased at Period End Under Publicly Announced Share Repurchased Programs (2)
---------------------------------------- | ---------------------------------------- | ------------------------------------ | ------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------
October 1, 2019 - October 31, 2019       | 24                                       | $71.89                               | 12                                                                                | $45,484
November 1, 2019 - November 30, 2019     | 108                                      | $75.63                               | -                                                                                | $45,484
December 1, 2019 - December 31, 2019     | 144                                      | $76.64                               | -                                                                                | $45,484
Total                                    | 276                                      | $75.83                               |                                                                                |

Issuer purchases equity securities
 stock repurchased three months December 31, 2019
 Shares withheld option price tax withholding obligations settlement stock compensation awards included.
 repurchase program Item 7 Annual Report information.
 Total Number Shares Purchased Average Price Paid Share Shares Share Repurchase Program Approximate Dollar Value Shares Purchased Programs
 October 1, 2019 31, 24 $71. 89 $45,484
 November 1 30 $75.
 December 1 31, 144 $76. 64
 276 $75. 83


NOTE 19 – DERIVATIVE FINANCIAL INSTRUMENTS
Please refer to note 21 “Financial Instruments” for further information on fair value hierarchies.

USDm                                                                            | 2019  | 2018
------------------------------------------------------------------------------- | ----- | ----
Fair value of derivatives:                                                      |       |
Derivative financial instruments regarding freight and bunkers:                 |       |
Forward freight agreements                                                      | -0.3  | 0.5
Bunker swaps                                                                    | -     | -1.2
Derivative financial instruments regarding interest and currency exchange rate: |       |
Forward exchange contracts                                                      | -0.4  | -1.8
Interest rate swaps                                                             | -11.1 | 2.8
Fair value of derivatives as of 31 December                                     | -11.8 | 0.3

NOTE 19 FINANCIAL INSTRUMENTS
 refer note 21 information fair value hierarchies.
 2019
 Fair value derivatives
 instruments freight bunkers
 freight agreements.
 Bunker swaps.
 interest currency exchange rate
 Forward exchange contracts.
 Interest rate swaps.
 Fair value derivatives 31 December.


(1) Using the euro per US dollar exchange rate on December 31, 2019 of €1 = $1.1213.
(2) Since May 23, 2019 Mr. Manzi has not been a member of the Supervisory Board.
(3) Global indirect employees are all employees other than those directly manufacturing our products.
We do not have any service agreements with members of our Supervisory Board. We did not extend any loans or overdrafts to any of our Supervisory Board members. Furthermore, we have not guaranteed any debts or concluded any leases with any of our Supervisory Board members or their families.

                                                                      | 2019        | 2018      | 2017
--------------------------------------------------------------------- | ----------- | --------- | ---------
Directors' remuneration                                               |             |           |
Average remuneration of Supervisory Board Members(1)                  | $105,066(2) | $ 115,618 | $ 123,281
Company's performance                                                 |             |           |
Net revenues (amounts in millions)                                    | $ 9,556     | $ 9,664   | $ 8,347
Operating income (amounts in millions)                                | $ 1,203     | $ 1,400   | $ 1,005
Average remuneration of all global indirect employees (FTE basis) (3) |             |           |
Employees                                                             | $ 97,300    | $ 100,600 | $ 93,500

euro US dollar exchange rate December 31, 2019 €1 = $1. 1213.
 Since May 23, 2019. Manzi member Supervisory Board.
 indirect employees products.
 service agreements Board. extend loans overdrafts. guaranteed debts leases.
 Directors' remuneration
 Average remuneration Supervisory Board $105 $ 115,618 $ 123,281
 Net revenues $ 9,556,347
 Operating income $ 1,203 $ 1,400 1,005
 Average remuneration global indirect employees
 $ 97,300 $ 100,600 93,500


The following table provides information for fiscal year 2019 compensation for all of our current and former non-employee directors:
1) Non-employee directors receive an annual retainer fee of $50,000 plus an additional annual fee of $15,000 (Compensation Committee and Nominating and Governance Committee) or $20,000 (Audit Committee) for membership on each committee. The chair of each committee receives an additional annual fee of $15,000 (Nominating and Governance Committee) or $25,000 (Audit Committee and Compensation Committee). The Lead Independent Director/Independent Chairman receives an annual fee of $100,000 (reduced to $75,000 for 2020).
(2) Includes payments for fractional share(s) from stock awards granted to each non-employee director.
(3) Amounts shown in this column reflect the aggregate full grant date fair value calculated in accordance with Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) Topic 718 for awards granted during FY19.
(4) Each non-employee director, other than Ms. Barsamian and Messrs. Feld, Fuller, Hill and Miller, was granted 12,320 RSUs on May 17, 2018, with a per-share fair value of $22.32 and an aggregate grant date fair value of $274,982.40. Each such director’s fees were paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above. No non-employee director had any outstanding stock awards as of March 29, 2019.
(5) Ms. Barsamian and Mr. Hill were appointed to our Board on January 7, 2019 and received a pro-rated portion of non-employee director fees from the date of such director’s appointment on January 7, 2019 through the end of FY19. Ms. Barsamian and Mr. Hill were each granted 2,717 RSUs on February 5, 2019, with a per-share fair value of $22.80 and an aggregate grant date fair value of $61,947.60. The balance of each such director’s fees was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.
(6) In lieu of cash, Ms. Barsamian elected to receive 100% of the pro-rated portion of her annual retainer fee of $50,000 in the form of our common stock. Accordingly, pursuant to the terms of the 2000 Director Equity Incentive Plan, Ms. Barsamian was granted 494 shares at a per share fair value of $22.80 and an aggregate grant date fair value of $11,263. The balance of Ms. Barsamian’s fee was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.
(7) Messrs. Feld and Fuller were appointed to our Board on September 16, 2018 and each received pro-rated portions of such director’s non-employee director fees from the date of his appointment on September 16, 2018 through the end of FY19. Messrs. Feld and Fuller were granted 6,764 RSUs on December 7, 2018, with a per-share fair value of $21.78 and an aggregate grant date fair value of $147,320. The balance of each such director’s fees was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.
(8) In lieu of cash, Mr. Feld elected to receive 100% of the pro-rated portion of his annual retainer fee of $50,000 in the form of our common stock. Accordingly, pursuant to the terms of the 2000 Director Equity Incentive Plan, Mr. Feld was granted 1,229 shares at a per share fair value of $21.78 and an aggregate grant date fair value of $26,767. The balance of Mr. Feld’s fee was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.
(9) In lieu of cash, Messrs. Hao and Humphrey each received 100% of his respective annual retainer fee of $50,000 in the form of our common stock. Accordingly, pursuant to the terms of the 2000 Director Equity Incentive Plan, each was granted 2,240 shares at a per share fair value of $22.32 and an aggregate grant date fair value of $49,997. The balance of each such director’s fee was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.
(10) Ms. Laybourne and Mr. Miller served on the Board through December 3, 2018, the date of the Company’s 2019 Annual Meeting of Stockholders.
(11) Mr. Miller’s non-employee director fees were prorated through December 3, 2018, the date of the Company’s 2019 Annual Meeting of Stockholders. Mr. Miller was granted 5,584 RSUs on May 17, 2018, with a per-share fair value of $22.32 and an aggregate grant date fair value of $124,635. The balance in director’s fees was paid in cash as reported in the ‘‘Fees Earned or Paid in Cash’’ column in the table above.

                           | Fiscal 2019 Director Compensation      |                        |
-------------------------- | -------------------------------------- | ---------------------- | ---------
Name                       | Fees earned or paid in cash ($) (1)(2) | Stock Awards ($)(3)(4) | Total ($)
Susan P. Barsamian(5)      | 3,383                                  | 73,210(6)              | 76,593
Frank E. Dangeard          | 85,018                                 | 274,982                | 360,000
Peter A. Feld(7)           | 16,071                                 | 174,108(8)             | 190,179
Dale L. Fuller(7)          | 34,821                                 | 147,321                | 182,142
Kenneth Y. Hao             | 21                                     | 324,979(9)             | 325,000
Richard S. Hill(5)         | 15,772                                 | 61,948                 | 77,720
David W. Humphrey          | 21                                     | 324,979(9)             | 325,000
Geraldine B. Laybourne(10) | 80,018                                 | 274,982                | 355,000
David L. Mahoney           | 105,024                                | 274,976                | 380,000
Robert S. Miller(10)(11)   | 120,639                                | 124,635                | 245,274
Anita M. Sands             | 70,018                                 | 274,982                | 345,000
Daniel H. Schulman         | 195,018                                | 274,982                | 470,000
V. Paul Unruh              | 95,018                                 | 274,982                | 370,000
Suzanne M. Vautrinot       | 70,018                                 | 274,982                | 345,000

table fiscal year 2019 compensation current former non directors
 Non-employee directors receive annual retainer fee $50,000 additional fee $15,000 $20,000 Committee. chair fee $15,000 $25,000. Lead Independent Director Chairman annual fee $100,000 (reduced $75,000 2020.
 Includes payments share stock awards.
 Amounts reflect aggregate grant date fair value 718 FY19.
 non-employee director. granted 12,320 RSUs May 17, 2018 per-share fair value $22. 32 grant date fair value $274,982. fees paid cash. No outstanding stock awards March 29, 2019.
. Barsamian. Hill appointed Board January 7, 2019 received-rated non director fees FY19. granted 2,717 RSUs February 5, 2019 per-share fair value $22. 80 aggregate grant date fair value $61,947.director’s fees paid cash ‘‘Fees Earned or Paid in column table.
 Ms. Barsamian 100% pro-rated annual retainer fee $50,000 common stock. granted 494 shares per share fair value $22. 80 grant date fair value $11,263. balance. fee paid cash Earned.
 Messrs. Feld Fuller appointed Board September 16, 2018 received pro-rated non-employee fees end FY19. granted 6,764 RSUs December 7, 2018 per-share fair value $21. 78 grant date fair value $147,320. balance fees paid cash.
 Mr. Feld 100% pro-rated annual retainer fee $50,000 common stock. granted 1,229 shares per share fair value $21. 78 aggregate grant date fair value $26,767. balance. fee paid cash ‘‘Fees Earned.
 Messrs. Hao and Humphrey received 100% annual retainer fee $50,000 common stock.2000 Director Equity Incentive Plan granted 2,240 shares value $22. 32 aggregate $49,997. fee paid cash.
. Laybourne. Miller Board December 3 2018 2019 Annual Meeting.
. non-employee director fees December 3 2018 Meeting. granted 5,584 RSUs May 17, 2018 per-share value $22. 32 $124,635. paid cash.
 2019 Director Compensation
 Fees earned paid Stock Awards Total
 Susan. Barsamian(5) 3,383 73 76,593
 Frank. Dangeard 85,018 274,982 360,000
 Peter. Feld 16,071 174,108 190,179
 Dale. Fuller 34,821 147,321 182,142
 Kenneth. Hao 324 325,000
 Richard. 15,772 61,948 77,720
 David. Humphrey 324 325,000
 Geraldine. 80,018 274,982 355,000
.Mahoney 105,024 274,976 380,000
. 245,274
. Sands 70 274,982 345,000
. Schulman 195 470,000
. Unruh 95
 Suzanne. Vautrinot


Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market information
Our common stock is currently available for trading in the over-the-counter market and is quoted on the OTCQB under the symbol “PTIX.” There has been very limited market for our common stock and trading volume has been negligible. There is no guarantee that an active trading market will develop in our common stock
Trades in our common stock may be subject to Rule 15g-9 of the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule
to persons other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.
The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that
security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its
salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations,
and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of our common stock. As a result of these rules, investors may find it difficult to sell their shares.
Our common stock was quoted on the OTC Pink under the symbol “ATRN” prior to July 27, 2016 and then under the symbol “PTIX” between July 27, 2016 and
October 16, 2016. Commencing on October 17, 2016, our common stock is quoted in the OTCQB under the symbol “PTIX”. The following table sets forth, for the periods
indicated and as reported on the OTC Markets, the high and low bid prices for our common stock. Such quotations reflect inter-dealer prices, without retail mark-up, markdown
or commission and may not necessarily represent actual transactions.
(1) The high and low bid prices for this quarter were reported by the OTCQB marketplace. There was negligible trading volume during this period.

                   | High  | Low
------------------ | ----- | -----
2018(1)            |       |
First Quarter (1)  | $2.20 | $1.76
Second Quarter (1) | $1.76 | $1.76
Third Quarter (1)  | $2.50 | $1.25
Fourth Quarter (1) | $2.00 | $1.99
2019(1)            |       |
First Quarter (1)  | $2.30 | $2.00
Second Quarter (1) | $2.00 | $1.50
Third Quarter (1)  | $1.50 | $1.40
Fourth Quarter (1) | $3.80 | $1.40

Item 5. Market Registrant’s Common Equity Related Stockholder Matters Issuer Purchases Equity Securities.
 Market information
 common stock available trading over-the-counter market quoted OTCQB symbol “PTIX. limited market stock trading volume negligible. no guarantee active trading market
 Trades subject to Rule 15g-9 Exchange Act requirements broker/dealers securities
 customers accredited investors./dealers special suitability determination
 receive purchaser’s written agreement before sale.
 SEC rules regulate broker/dealer practices transactions “penny stocks. Penny stocks equity securities
 price less than $5. 00 current price volume information
 provided. penny stock rules require broker/dealer transaction
 deliver standardized risk disclosure document information penny stocks risks
. provide current bid offer quotations stock compensation
 salesperson monthly account statements market value penny stock. bid offer quotations
 compensation information given before transaction. disclosure requirements trading activity secondary market shares common stock.rules investors difficult sell shares.
 common stock quoted OTC “ATRN” July 27, 2016 “PTIX” between July
 October 16. Commencing October 17, 2016, quoted OTCQB “PTIX”. table
 high low bid prices stock. reflect inter prices without retail mark-up markdown
 commission may not represent actual transactions.
 OTCQB marketplace. negligible trading volume period.
 First Quarter $2. $1.
 Second Quarter.
 Third Quarter $2. $1.
 Fourth Quarter $2. $1
 First Quarter $2. $2.
 Second Quarter. $1.
 Third Quarter $1.
 Fourth Quarter $3. $1


Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows.
Sales by Geographic Region (in millions):

                     |          | Years Ended September 30, |
-------------------- | -------- | ------------------------- | --------
                     | 2019     | 2018                      | 2017
United States        | $  956.6 | $  627.8                  | $  522.8
United Kingdom       | 218.2    | 240.7                     | 219.4
Australia            | 163.5    | 166.7                     | 175.6
Far East/Middle East | 74.0     | 86.4                      | 112.7
Other                | 84.2     | 81.3                      | 77.2
Total sales          | $1,496.5 | $1,202.9                  | $1,107.7

Sales disaggregate sales contracts type deliverable revenue recognition method timing revenue cash flows.
 Sales Geographic Region
 Ended September 30
 United States $ 956. $ 627. $ 522.
 United Kingdom 218. 240. 219.
 Australia 163. 166. 175.
 East East 74. 86. 112.
 84. 81. 77.
 Total sales $1,496. $1,202. $1,107.


(1) For the three-month period ended August 31, 2019, the average foreign exchange rate used for translation was 1.3222 USD/CDN. (2) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy. For further details, please consult the "Accounting policies" section. (3) Fiscal 2019 actuals are translated at the average foreign exchange rate of the comparable period of fiscal 2018 which was 1.3100 USD/CDN.
REVENUE Fiscal 2019 fourth-quarter revenue increased by 7.0% (6.0% in constant currency). In local currency, revenue amounted to US$199.5 million compared to US$188.1 million for the same period of fiscal 2018. The increase resulted mainly from: • rate increases; • activation of bulk properties in Florida during the fourth quarter of fiscal 2019; • continued growth in Internet service customers; and • the FiberLight acquisition completed in the first quarter of fiscal 2019; partly offset by • a decrease in video service customers.
OPERATING EXPENSES Fiscal 2019 fourth-quarter operating expenses increased by 8.6% (7.6% in constant currency) mainly as a result of: • programming rate increases; • the FiberLight acquisition completed in the first quarter of fiscal 2019; • higher compensation expenses due to higher headcount to support growth; and • higher marketing initiatives to drive primary service units growth.
ADJUSTED EBITDA Fiscal 2019 fourth-quarter adjusted EBITDA increased by 5.1% (4.1% in constant currency). In local currency, adjusted EBITDA amounted to US$87.4 million compared to US$83.9 million for the same period of fiscal 2018. The increase was mainly due to organic growth combined with the impact of the FiberLight acquisition.
ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT Fiscal 2019 fourth-quarter acquisitions of property, plant and equipment decreased by 9.5% (10.5% in constant currency) mainly due to: • lower purchases of customer premise equipment due to the timing of certain initiatives; and • lower capital expenditures due to the timing of certain initiatives; partly offset by • additional capital expenditures related to the expansion in Florida.

Three months ended August 31,                 | 2019(1) | 2018(2) | Change | Change in constant currency(3) | Foreign exchange impact(3)
--------------------------------------------- | ------- | ------- | ------ | ------------------------------ | --------------------------
(in thousands of dollars, except percentages) | $       | $       | %      | %                              | $
Revenue                                       | 263,738 | 246,443 | 7.0    | 6.0                            | 2,427
Operating expenses                            | 148,215 | 136,506 | 8.6    | 7.6                            | 1,370
Adjusted EBITDA                               | 115,523 | 109,937 | 5.1    | 4.1                            | 1,057
Adjusted EBITDA margin                        | 43.8%   | 44.6%   |        |                                |
Acquisitions of property, plant and equipment | 65,967  | 72,914  | (9.5)  | (10.5)                         | 704
Capital intensity                             | 25.0%   | 29.6%   |        |                                |

three-month period August 31, 2019 average foreign exchange rate translation 1. 3222 USD/CDN. Fiscal 2018 restated IFRS 15 change accounting policy. consult "Accounting policies. Fiscal 2019 translated average exchange rate 1. 3100 USD/CDN.
 REVENUE 2019 fourth-quarter revenue increased 7. 0% (6. 0%. US$199. 5 million US$188. 1 million 2018. increase rate increases activation bulk properties Florida Internet service customers FiberLight acquisition offset decrease video service customers.
 OPERATING EXPENSES increased 8. 6%. programming rate increases FiberLight acquisition higher compensation expenses marketing initiatives.
 ADJUSTED EBITDA increased 5. 1% (4. 1%. US$87. 4 million US$83. 9 million 2018. organic growth FiberLight acquisition.
 ACQUISITIONS PROPERTY PLANT EQUIPMENT decreased 9. 5%. 5% lower purchases equipment lower capital expenditures offset additional capital expenditures expansion Florida.
months August 31, 2018(2) Foreign exchange
 thousands dollars
 Revenue 263,738 246,443 7.
 Operating expenses 148,215 136,506 8.
 EBITDA 115,523 109,937 5. 4. 1,057
 margin 43. 8% 44. 6%
 Acquisitions property equipment 65,967 72,914 (9. (10. 704
 Capital intensity 25. 0% 29. 6%


Allowance for Doubtful Accounts
The Company bases its allowance for doubtful accounts on its historical collection experience and a review in each period of the status of the then outstanding accounts receivable.
A reconciliation of the beginning and ending amount of allowance for doubtful accounts is as follows (in thousands):
The Company recognized bad debt expense of $0.5 million, $0.8 million, and $1.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

                             | 2019    | 2018    | 2017
---------------------------- | ------- | ------- | -------
Beginning balance, January 1 | $2,429  | $7,478  | $3,532
Additions and adjustments    | 1,074   | 1,691   | 7,680
Write-offs                   | (2,128) | (6,740) | (3,734)
Ending balance, December 31  | $1,375  | $2,429  | $7,478

Allowance Doubtful Accounts
 historical.
 reconciliation
 recognized bad debt $0. 5 million. 8 million $1. 4 million 2019 2017.
 Beginning balance January 1 $2,429 $7,478 $3,532
 Additions adjustments 1,074 1,691 7,680
 Write-offs (2,128 (6,740) (3,734
 Ending balance December 31 $1,375 $2,429 $7,478


The reconciliation of the United Kingdom statutory tax rate to the Company’s effective tax rate included in the accompanying consolidated statements of operations is as follows:
Although the Company’s parent entity is organized under Jersey law, our affairs are, and are intended to be, managed and controlled ongoing in the United Kingdom. Therefore, the Company is resident in the United Kingdom for tax purposes. The Company’s parent entity is domiciled in the United Kingdom and its earnings are subject to 19%, 19% and 20% statutory tax rate for the years ended March 31, 2019, 2018 and 2017, respectively.
The Company’s effective tax rate differs from the statutory rate each year primarily due to windfall tax benefits on equity award exercises, the valuation allowance maintained against the Company’s net deferred tax assets, the jurisdictional earnings mix, tax credits, withholding taxes, and other permanent differences primarily related to non-deductible expenses.

                                  |         | Year ended March 31,  |
--------------------------------- | ------- | --------------------- | -------
                                  | 2019    | 2018                  | 2017
Tax at statutory rate             | 19.0%   | 19.0%                 | 20.0%
U.S. state taxes, net of federal  | 31.1    | 14.1                  | (1.0)
Foreign rate differential         | 26.3    | 36.8                  | (39.3)
Meals and entertainment           | (11.4)  | (3.1)                 | (7.4)
Branch income / loss              | (0.6)   | 0.4                   | 0.9
Share-based compensation          | 172.3   | 105.3                 | (4.0)
Foreign exchange                  | —       | —                     | (24.8)
Non-deductible interest expense   | —       | —                     | (3.3)
Tax credits                       | 7.7     | 8.1                   | 15.6
Unremitted earnings               | (3.8)   | (1.2)                 | —
Change in valuation allowance     | (249.9) | (110.7)               | 124.7
Deferred tax true-ups             | (3.5)   | 8.4                   | (12.4)
Tax reserves                      | (4.9)   | (21.5)                | (117.7)
Provision to return               | (0.1)   | 0.4                   | (0.7)
Withholding taxes                 | (2.6)   | (3.5)                 | —
Other foreign taxes               | —       | —                     | (6.7)
Non-deductible expenses           | (5.2)   | (2.4)                 | (10.6)
Deferred tax rate change          | (6.3)   | (77.8)                | (1.3)
Acquisition related costs         | (7.6)   | —                     | —
Other                             | (0.5)   | (0.2)                 | —
Effective Tax Rate                | (40.0)% | (27.9)%               | (68.0)%

reconciliation United Kingdom tax rate Company’s effective tax rate statements operations
 parent entity organized Jersey law affairs managed controlled United Kingdom. Company resident United Kingdom tax purposes. parent entity domiciled United Kingdom earnings subject 19% 19% 20% statutory tax rate years ended March 31, 2019 2018 2017.
 effective tax rate differs due to windfall tax benefits equity award valuation allowance deferred tax assets jurisdictional earnings mix tax credits withholding taxes differences non-deductible expenses.
 Year ended March 31,
 2017
 Tax statutory rate 19. 20.
. state taxes 31. 14.
 Foreign rate differential 26. 36.
.
 Branch income loss.
 Share-based compensation 172. 105.
.
 Non-deductible interest expense.
 Tax credits 7. 15.
 Unremitted earnings.
 Change valuation allowance.
 Deferred tax true-ups.
 Tax reserves. 9) (21. 5). 7)
 Provision return. 4.
 Withholding taxes. 5)
 foreign taxes.
 Non-deductible expenses. 4).
 Deferred tax rate change. 3). 8).
 Acquisition costs. 6)
. 5). 2)
 Tax Rate (40. (27.


Note 9 - Software Development Costs
Capitalized software development costs as of December 31, 2019 and 2018 consisted of the following (in thousands):
The weighted average remaining amortization period for the Company’s software development costs is 1.61 years.
Amortization expense for capitalized software development costs was $1.025 million and $1.2 million for each of the years ended December 31, 2019 and 2018.

                                       | As of December 31, |
-------------------------------------- | ------------------ | -------
                                       | 2019               | 2018
Capitalized software development costs | $6,029             | $5,102
Accumulated amortization               | (4,485)            | (3,412)
Software development costs, net        | 1,544              | $1,690

Note 9 Software Development Costs
 December 31, 2019 2018
 average amortization period 1. 61 years.
 Amortization expense $1. 025 million $1. 2 million December 31, 2019 2018.
 costs $6,029 $5,102
 Accumulated amortization (4,485)
 $1,690


The GBS profit margin increased 0.9 points to 27.7 percent and pre-tax income of $1,666 million increased 2.2 percent year to year. The pre-tax margin of 9.9 percent increased slightly year to year. The year-to-year improvements in margins and pre-tax income were driven by the continued mix shift to higher-value offerings, the yield from delivery productivity improvements and a currency benefit from leveraging the global delivery resource model. We continued to invest in our services offerings and skills necessary to assist our clients on their cloud journey.
* Recast to reflect segment changes.

($ in millions)                 |        |        |
------------------------------- | ------ | ------ | ---------------------------------
For the year ended December 31: | 2019   | 2018*  | Yr.-to-Yr. Percent/ Margin Change
Global Business Services        |        |        |
External gross profit           | $4,606 | $4,448 | 3.5%
External gross profit margin    | 27.7%  | 26.8%  | 0.9 pts.
Pre-tax income                  | $1,666 | $1,629 | 2.2%
Pre-tax margin                  | 9.9%   | 9.6%   | 0.2 pts.

GBS profit margin increased. 27. 7 percent pre-tax income $1,666 million increased. pre-tax margin. percent. improvements driven higher-value offerings delivery productivity benefit global delivery resource model. services skills clients cloud journey.
 segment changes.
 year December 31 2019 2018. Percent Margin Change
 Services
 gross profit $4,606 $4,448 3. 5%
 margin 27. 7% 26. 8%.
 Pre-tax income $1,666 $1,629. 2%
 margin. 9%. 6%.


Performance Share Units
The following table illustrates the number and WASP on date of award, and movements in, performance share units (“PSUs”) granted under the 2015 LTIP:
PSUs vest on one vesting date following a three year vesting period which will comprise three financial years. The awards are divided into three equal parts which will each be subject to a separate annual performance condition linked to the financial performance of the Group.

                                     | Year-ended 31 March 2019 |         | Year-ended 31 March 2018 |
------------------------------------ | ------------------------ | ------- | ------------------------ | -------
                                     | Number                   | WASP    | Number                   | WASP
Performance share units              | 000’s                    | £ pence | 000’s                    | £ pence
Outstanding at the start of the year | 7,546                    | 269.65  | 6,024                    | 219.41
Awarded                              | 1,721                    | 506.74  | 1,719                    | 440.50
Forfeited                            | (2,234)                  | 414.51  | (197)                    | 223.96
Released                             | (2,949)                  | 262.64  | –                        | –
Outstanding at the end of the year   | 4,084                    | 295.41  | 7,546                    | 269.65

Performance Share Units
 table illustrates WASP award units 2015 LTIP
 vest date three year period. awards divided three parts separate annual performance condition financial performance Group.
 Year-ended 31 March 2019 31 March 2018
 Performance share units
 Outstanding 7,546 269. 65 6,024 219. 41
 Awarded 1,721 506. 74 440.
 Forfeited (2,234) 414. 51 223.
 Released (2,949 262. 64
 end year 4,084 295. 41 7,546 269.


Consolidated Revenues
Consolidated revenues increased $1.0 billion, or 0.8%, during 2019 compared to 2018, primarily due to an increase in revenues at our Consumer segment, partially offset by decreases in revenues at our Business segment and Corporate and other.
Revenues for our segments are discussed separately below under the heading “Segment Results of Operations.”
Corporate and other revenues decreased $124 million, or 1.2%, during 2019 compared to 2018, primarily due to a decrease of $232 million in revenues within Verizon Media.

                         |          |          | (dollars in millions) Increase/(Decrease) |
------------------------ | -------- | -------- | ----------------------------------------- | -----
Years Ended December 31, | 2019     | 2018     | 2019 vs. 2018                             |
Consumer                 | $ 91,056 | $ 89,762 | $ 1,294                                   | 1.4%
Business                 | 31,443   | 31,534   | (91)                                      | (0.3)
Corporate and other      | 9,812    | 9,936    | (124)                                     | (1.2)
Eliminations             | (443)    | (369)    | (74)                                      | 20.1
Consolidated Revenues    | $131,868 | $130,863 | $ 1,005                                   | 0.8

Consolidated Revenues
 increased $1. billion. 8% 2019 due increase Consumer offset decreases Business Corporate.
 “Segment Results Operations.
 Corporate revenues decreased $124 million. 2% 2019 due decrease $232 million Verizon Media.
 Increase
 Years Ended December 31, 2019.
 Consumer $ 91,056 $ 89,762 $ 1,294. 4%
 Business 31,443 31,534.
 Corporate other 9,812.
 Eliminations (443) (369).
 Consolidated Revenues $131,868 $130,863 $ 1,005.


Discussion of Cash Flows
During 2019, the $4.8 million of net cash provided by operating activities consisted of our net income of $5.3 million, and included non-cash charges for depreciation and amortization of $2.5 million, and stock-based compensation of $1.5 million, offset by a tax benefit from a partial release of the valuation allowances of $3.3 million and a net cash outflow of $1.8 million from changes in working capital. The changes in working capital were principally driven by an increase in accounts receivable of $2.2 million, an increase in inventory of $0.7 million, an increase in contract assets of $0.4 million, and an increase in other assets of $0.2 million, all partially offset by decreases in accounts payable and accrued expenses of $0.6 million and contract liabilities of $1.2 million,
In 2018, the $3.3 million of net cash used in operating activities consisted of our net income of $11.0 million and included a gain recognized on the sale of our optoelectronic segment that was sold in July 2018 of $8.6 million in addition to non-cash charges for depreciation and amortization of $1.2 million and stock-based compensation of $0.6 million, offset by a net cash outflow of $7.6 million from changes in working capital. The changes in working capital were principally driven by an increase in inventory of $1.0 million, and increase in accounts receivable of $6.2 million, and increase in contract assets of $0.8 million, and an increase in accounts payable and accrued liabilities of $0.5 million, all partially offset by a $1.8 million decrease in other assets.
Cash used in investing activities in 2019 consisted primarily of the $19.0 million payment for our acquisition of GP, $0.5 million of fixed asset additions and $0.3 million of capitalized intellectual property costs.
Cash provided by investing activities in 2018 consisted primarily of the proceeds from the sale of our optoelectronic segment of $15.8 million, partially offset by the $5.0 million payment for our acquisition of MOI, $0.4 million of fixed asset additions and $0.4 million of capitalized intellectual property rights.
Cash used in financing activities for the year ended December 31, 2019 was $2.4 million, compared to $1.2 million in 2018. During 2019, we repaid $0.6 million on our term loans with SVB and used $2.2 million to repurchase our common stock under our stock repurchase program. These payments were partially offset by $0.4 million received from exercises of stock options and warrants. During 2018, we repaid $1.8 million on our outstanding term loan with SVB and used $0.5 million to repurchase our common stock under our stock repurchase program. These payments were partially offset by $1.1 million received from exercises of stock options and warrants.

                                                     | Years ended December 31, |
---------------------------------------------------- | ------------------------ | ------------
                                                     | 2019                     | 2018
Net cash provided by/(used in) operating activities  | $4,798,201               | $(3,308,826)
Net cash (used in)/provided by investing activities  | (19,814,991)             | 10,037,123
Net cash used in financing activities                | (2,437,560)              | (1,249,564)
Net (decrease)/increase in cash and cash equivalents | $(17,454,350)            | $5,478,733

Cash Flows
 2019 $4. 8 million income $5. 3 million non-cash charges depreciation $2. 5 million stock-based compensation $1. 5 million tax benefit $3. 3 million cash outflow $1. 8 million. accounts receivable $2. 2 million inventory. million contract assets. million. million offset accounts payable accrued expenses. 6 million contract liabilities $1. 2 million
 2018 $3. 3 million income $11. million gain optoelectronic $8. 6 million non-cash charges depreciation $1. 2 million stock-based compensation. million cash outflow $7. 6 million. inventory. million accounts receivable $6. 2 million contract assets. million accounts payable accrued liabilities. 5 million offset $1. 8 million other assets.
 2019 $19. million acquisition GP. 5 million fixed asset additions. 3 million intellectual property costs.
 proceeds sale optoelectronic $15. 8 million $5. million acquisition.million asset additions. 4 million intellectual property rights.
 financing $2. 4 million $1. 2 million 2018. repaid. 6 million loans SVB $2. 2 million common stock. offset. 4 million stock options warrants. 2018 repaid $1. 8 million loan SVB. 5 million common stock. offset $1. 1 million stock options warrants.
 December
 cash $4,798,201 $(3,308,826)
 (19,814,991) 10,037,123
 financing (2,437,560 (1,249,564)
 equivalents $(17,454,350 $5,478,733


NOTE 5 — VESSELS, OTHER PROPERTY AND DEFERRED DRYDOCK
Vessels and other property consist of the following:
On September 30, 2019, the Company took delivery of two 50,000 DWT class product and chemical tankers at Hyundai Mipo Dockyard Co., Ltd. The tankers, named the Overseas Gulf Coast and Overseas Sun Coast, are operating in the international market under the Marshall Islands flag, with both vessels having entered into one-year time charters.
In September 2019, the Company sold one of its ATBs for $1,234, net of broker commissions. As a result of the sale, the Company recognized an immaterial gain, which is included in loss/(gain) on disposal of vessels and other property, including impairments, net on the consolidated statements of operations.
In May and June 2019, the Company sold two of its ATBs for $1,101 and $1,069, respectively, net of broker commissions. As a result of the sales, the Company recognized an immaterial loss, which is included in loss/(gain) on disposal of vessels and other property, including impairments, net on the consolidated statements of operations.
In July 2018 and January 2019, the Company signed binding contracts with Greenbrier Marine (formerly Gunderson Marine LLC) for the construction of two approximately 204,000 BBL, oil and chemical tank barges. The anticipated delivery of the barges to the Company is during the first and second half of 2020, respectively. The Company's remaining commitments under the contracts are $45,849 in 2020.
On December 6, 2018, the Company sold one ATB and one barge for $2,367, net of broker commissions. As a result of the sale, the Company recognized a gain of $877, which is included in loss/(gain) on disposal of vessels and other property, including impairments, net on the consolidated statements of operations.
In June 2018, one of the Company's ATBs was berthed to the dock when a third-party ship transiting the channel hit the Company's ATB causing structural damage to the Company's ATB and damage to the dock. The cost of repairs has been covered by existing insurance policies. The Company has filed a lawsuit against the third-party ship seeking recovery of its costs of repairs as well as its lost earnings from the ATB being off-hire for 46 repair days.
At December 31, 2019, the Company’s owned vessel fleet with a weighted average age of 8.2 years, consisted of six Handysize Product Carriers, two lightering ATBs and two clean ATBs. These vessels are pledged as collateral under the term loan agreements and have an aggregate carrying value of $634,379.

                                                    | Years Ended December 31, |
--------------------------------------------------- | ------------------------ | ---------
                                                    | 2019                     | 2018
Vessels, at cost                                    | $919,212                 | $845,868
Accumulated depreciation                            | (274,900)                | (248,939)
Vessels, net                                        | 644,312                  | 596,929
Construction in progress                            | 65,697                   | —
Finance lease right-of-use asset, at cost (Note 15) | 28,993                   | —
Accumulated amortization (Note 15)                  | (2,053)                  | —
Finance lease right-of use asset, net (Note 15)     | 26,940                   | —
Other property, at cost                             | 5,552                    | 5,895
Accumulated depreciation and amortization           | (5,289)                  | (5,165)
Other property, net                                 | 263                      | 730
Total vessels and other property                    | $ 737,212                | $ 597,659

NOTE 5 VESSELS PROPERTY DEFERRED DRYDOCK
 Vessels
 September 30, 2019 Company delivery two DWT product chemical tankers Hyundai Mipo Dockyard Co. tankers Overseas Gulf Coast Overseas Sun Coast operating international Marshall Islands flag one-year charters.
 September 2019 sold one for $1,234, broker commissions. recognized immaterial gain included loss/(gain).
 May June 2019 sold two ATBs for $1,101 $1,069 broker commissions. recognized immaterial loss included(gain).
 July 2018 January 2019 signed contracts Greenbrier Marine construction two 204,000 BBL oil chemical tank barges. anticipated delivery first second half 2020. remaining commitments $45,849 2020.
 December 6, 2018 sold one ATB barge for $2,367, broker commissions. recognized gain $877 included loss/(gain) disposal.
 June 2018 third-party ship hit ATB structural damage.repairs covered by insurance. Company filed lawsuit against third-party ship recovery lost earnings off-hire 46 repair days.
 December 31, 2019 vessel fleet 8. 2 years six Handysize Product Carriers two lightering ATBs two clean ATBs. pledged collateral term loan agreements value $634,379.
 cost $919,212 $845,868
 Accumulated depreciation (274,900
 644,312 596,929
 Construction progress 65,697
 lease 28,993
 amortization (2,053)
 26,940
 property
 Accumulated depreciation amortization (5,289
 vessels $ 737,212 $ 597,659


Operating Expense
Sales and Marketing
Sales and marketing expenses increased $122.8 million, or 35.1%, for the year ended December 31, 2019 compared to the same period in 2018, due to an increase of $70.4 million in expenditures on marketing programs to support the growth of our business, such as advertisements on search engines and social media, brand campaigns, event sponsorships and payments to partners. Employee-related costs increased $48.7 million ($14.1 million of which related to stock-based compensation and related payroll taxes) to support the growth of the business including in Shopify Plus and International operations. Computer hardware and software costs increased by $3.7 million, largely due to the growth in sales and marketing headcount
Sales and marketing expenses increased $124.4 million, or 55.1%, for the year ended December 31, 2018 compared to the same period in 2017, primarily due to an increase of $80.7 million in employee-related costs. In addition to employee-related costs, marketing costs increased by $39.7 million and computer hardware and software costs increased by $4.0 million.

                             | Years ended December 31,           |           |           | 2019 vs 2018 | 2018 vs 2017
---------------------------- | ---------------------------------- | --------- | --------- | ------------ | ------------
                             | 2019                               | 2018      | 2017      | % Change     | % Change
                             | (in thousands, except percentages) |           |           |              |
Sales and marketing          | $ 472,841                          | $ 350,069 | $ 225,694 | 35.1 %       | 55.1 %
Percentage of total revenues | 30.0 %                             | 32.6 %    | 33.5 %    |              |

 Sales Marketing
 increased $122. million 35. 1% December 31, 2019 2018 $70. million marketing programs brand campaigns event sponsorships payments partners. Employee-related costs increased $48. million$14. million stock-based compensation payroll taxes Shopify Plus International operations. Computer hardware software increased $3. 7 million sales marketing headcount
 expenses increased $124. million 55. 1% 2018 2017 $80. 7 million employee-related costs. marketing costs increased $39. 7 million computer hardware software $4. million.
 2019 2018
 % Change
 Sales marketing $ 472,841 $ 350,069 $ 225,694 35. 1 % 55. %
 revenues 30. 32. 6 % 33. 5 %


Note 24. Stock-Based Compensation
The Company’s stock-based compensation plans include the 2019 Equity Incentive Plan for employees and certain non-employees, including non-employee directors, and the Deferred Compensation Plan for certain eligible employees. The Company issues common stock and uses treasury stock to satisfy stock option exercises or vesting of stock awards.
The following table summarizes the stock-based compensation expense (primarily in the Americas) and income tax benefits related to the stock-based compensation, both plan and non-plan related (in thousands):
(1) Included in "General and administrative" costs in the accompanying Consolidated Statements of Operations.
(2) Included in "Income taxes" in the accompanying Consolidated Statements of Operations.
There were no capitalized stock-based compensation costs as of December 31, 2019, 2018 and 2017.

                                       |          | Years Ended December 31, |
-------------------------------------- | -------- | ------------------------ | --------
                                       | 2019     | 2018                     | 2017
Stock-based compensation (expense) (1) | $(7,396) | $(7,543)                 | $(7,621)
Income tax benefit (2)                 | 1,775    | 1,810                    | 2,858

. Stock-Based Compensation
 include 2019 Equity Incentive Plan non-employees Deferred Compensation Plan. issues common stock uses treasury stock stock option vesting awards.
 table summarizes stock-based compensation expense Americas income tax benefits
 Included administrative costs Statements Operations.
 taxes.
 no capitalized compensation costs December 31, 2019 2018 2017.
 Stock-based compensation $(7,396) $(7,543) $(7,621)
 Income tax benefit 1,775 1,810 2,858


The Company recognizes the employees and directors’ compensation in the profit or loss during the periods when earned for the years ended December 31, 2017, 2018 and 2019. The Board of Directors estimates the amount by taking into consideration the Articles of Incorporation, government regulations and industry averages.
If the Board of Directors resolves to distribute employee compensation
through stock, the number of stock distributed is calculated based on total employee compensation divided by the closing price of the day before the Board of Directors meeting. If the Board of Directors subsequently modifies the estimates significantly, the Company will recognize the change as an adjustment in the profit or loss in the subsequent period.
The distributions of employees and directors’ compensation for 2017 and 2018 were reported to the stockholders’ meeting on June 12, 2018 and June 12, 2019, respectively, while the distributions of employees and directors’ compensation for 2019 were approved through the Board of Directors meeting on February 26, 2020. The details of distribution are as follows:
The aforementioned employees and directors’ compensation for 2017 and 2018 reported during the stockholders’ meeting were consistent with the resolutions of the Board of Directors meeting held on March 7, 2018 and March 6, 2019, respectively.
Information relevant to the aforementioned employees and directors’ compensation can be obtained from the “Market Observation Post System” on the website of the TWSE.

                               | 2017              | 2018              | 2019
------------------------------ | ----------------- | ----------------- | -----------------
                               | NT$(In Thousands) | NT$(In Thousands) | NT$(In Thousands)
Employees’ compensation – Cash | $1,032,324        | $1,400,835        | $1,132,952
Directors’ compensation        | 11,452            | 7,624             | 10,259

Company recognizes employees directors’ compensation in profit loss years December 31, 2017 2018 2019. Board of Directors estimates Articles of Incorporation government regulations industry averages.
 compensation
 through stock calculated based on total compensation divided by closing price before. If modifies estimates change as adjustment profit loss.
 distributions compensation for 2017 2018 reported June 12, 2018 12 2019 2019 approved February 26, 2020. details distribution
 consistent with resolutions March 7, 2018 March 6, 2019.
 Information from “Market Observation Post System” website TWSE.
 2017 2018 2019
 Employees’ compensation Cash $1,032,324 $1,400,835 $1,132,952
 Directors’ compensation 11,452 7,624 10,259


GreenSky, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (United States Dollars in thousands, except per share data, unless otherwise stated)
Cash and Cash Equivalents
Cash includes non-interest and interest-bearing demand deposit accounts with various financial institutions. Cash equivalents include money market mutual fund accounts, which are invested in government securities. We consider all highly liquid investments that mature three months or less from the date of purchase to be cash equivalents. The carrying amounts of our cash equivalents approximate their fair values due to their short maturities and highly liquid nature. Refer to Note 3 for additional information.
At times, our cash balances may exceed federally insured amounts and potentially subject the Company to a concentration of credit risk. The Company believes that no significant concentration of credit risk exists with respect to these balances based on its assessment of the creditworthiness and financial viability of these financial institutions. Further, our cash equivalents may expose us to credit risk; however, we believe this risk is limited, as the investments are backed by the full faith and credit of the United States government.
Restricted Cash
Restricted cash primarily consists of interest-bearing escrow accounts that are required under the terms of the contracts with our Bank Partners. Restricted cash is typically comprised of three components: (i) amounts we have escrowed with Bank Partners as limited protection to the Bank Partners in the event of excess Bank Partner portfolio credit losses; (ii) additional amounts we maintain for certain Bank Partners based on a contractual percentage of the total interest billed on outstanding deferred interest loans that are within the promotional period less previous finance charge reversal ("FCR") settlements on such outstanding loans; and (iii) certain custodial intransit loan funding and consumer borrower payments that we are restricted from using for our operations. These custodial balances are not considered in our evaluation of restricted cash usage. As it relates to our restricted cash escrowed with Bank Partners, we record a liability for the amount of restricted cash we expect to be payable to our Bank Partners, which is accounted for as a financial guarantee. Refer to Note 14 for additional information.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total included within the Consolidated Statements of Cash Flows as of the dates indicated.

                                                                                |          | December 31, |
-------------------------------------------------------------------------------------- | -------- | ------------ | --------
                                                                                | 2019     | 2018         | 2017
Cash and cash equivalents                                                              | $195,760 | $303,390     | $224,614
Restricted cash                                                                        | 250,081  | 155,109      | 129,224
Cash and cash equivalents and restricted cash in Consolidated Statements of Cash Flows | $445,841 | $458,499     | $353,838

GreenSky, Inc. NOTES FINANCIAL STATEMENTS States Dollars thousands share data
 Cash Equivalents
 Cash includes non-interest interest-bearing demand deposit accounts financial institutions. equivalents money market mutual fund accounts invested government securities. liquid investments three months or less cash equivalents. carrying amounts cash equivalents approximate fair values short maturities liquid nature. Note 3 information.
 cash balances exceed federally insured amounts credit risk. no significant credit risk. cash equivalents expose credit risk limited investments backed by faith credit United States government.
 Restricted Cash
 interest-bearing escrow accounts required contracts Bank Partners. amounts escrowed Bank Partners protection excess credit losses additional amounts Bank Partners interest deferred interest loans custodial intransit loan funding consumer borrower payments. custodial balances not considered evaluation restricted cash usage. Bank Partners record liability payable Bank Partners financial guarantee. Note 14 information.
table equivalents restricted cash Consolidated Balance Sheets Statements Cash Flows.
 December 31,
 2017
 Cash equivalents $195,760 $303,390 $224,614
 Restricted cash 250,081 155,109 129,224
 Statements Flows $445,841 $458,499 $353,838