The tax holidays represent a tax exemption period aimed to attract foreign technological investment in certain tax jurisdictions. The effect of the tax benefits, from tax holidays for countries which are profitable, on basic earnings per share was $0.14, $0.15 and $0.13 for the years ended December 31, 2019, 2018, and 2017, respectively. These agreements are present in various countries and include programs that reduce up to and including 100% of taxes in years affected by the agreements.
The Company’s tax holidays expire at various dates through the year ending December 31, 2028. In certain countries, tax holidays can be renewed depending on the Company still meeting certain conditions at the date of expiration of the current tax holidays.
In May 2019, Switzerland voted a tax reform which cancelled all favourable tax regimes and introduced a single tax rate for all companies, which triggered the revaluation of all deferred tax assets and liabilities. Enactment of this law occurred in third quarter of 2019, which resulted in a tax benefit of $20 million. The remeasurement of deferred taxes was reconciled in the fourth quarter of 2019 to include the current year activity, which did not have a material impact on the net remeasurement.

                                                          | Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017
--------------------------------------------------------- | ---------------------------- | ---------------------------- | ----------------------------
Income tax benefit (expense) computed at statutory rate   | (297)                        | (353)                        | (238)
Non-deductible and non-taxable permanent differences, net | 4                            | 45                           | 17
Income (loss) on equity-method investments                | —                            | —                            | —
Valuation allowance adjustments                           | 2                            | 141                          | 92
Effect on deferred taxes of changes in enacted tax rates  | 14                           | (62)                         | (70)
Current year credits                                      | 50                           | 43                           | 40
Other tax and credits                                     | (51)                         | (20)                         | (36)
Benefits from tax holidays                                | 129                          | 135                          | 114
Net impact of changes to uncertain tax positions          | (5)                          | (16)                         | (43)
Earnings of subsidiaries taxed at different rates         | (2)                          | (9)                          | (19)
Income tax benefit (expense)                              | (156)                        | (96)                         | (143)

tax holidays foreign investment. effect tax benefits on earnings per share $0. 14 $0. 15 $0. 13 December 31, 2019 2018 2017. agreements countries 100% taxes.
 tax holidays expire December 31, 2028. renewed conditions.
 May 2019 Switzerland tax reform single tax rate triggered revaluation deferred tax assets liabilities. third quarter 2019 resulted tax benefit $20 million. remeasurement deferred taxes reconciled fourth quarter 2019 current year activity net remeasurement.
 Year ended December 2019 2018 2017
 Income tax benefit statutory rate (297) (353)
 Non-deductible non-taxable differences 4  45 17
 Income (loss) on equity investments
 Valuation allowance adjustments 141
 Effect on deferred taxes changes tax rates 14
 Current year credits
 Other
 Benefits from tax holidays 129 135 114
tax positions (43)
 Earnings subsidiaries rates (9) (19)
 Income tax benefit (156)


The following table includes additional fair value information on financial assets and liabilities as at December 31, 2019 and 2018:
(1) Cash equivalents primarily correspond to deposits at call with banks.
(2) The carrying amount of the senior unsecured convertible bonds as reported above corresponds to the liability component only. For the convertible bonds issued on July 3, 2017 and outstanding as at December 31, 2017, the carrying amount of the senior unsecured convertible bonds corresponds to the liability component only, since, at initial recognition, an amount of $242 million was recorded directly in shareholders’ equity as the value of the equity instrument embedded in the convertible instrument.

                                         | 2019  | 2019            | 2019                 | 2018            | 2018
---------------------------------------- | ----- | --------------- | -------------------- | --------------- | --------------------
                                         | Level | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value
Cash equivalents (1)                     | 1     | 1,691           | 1,691                | 2,138           | 2,138
Long-term debt                           |       |                 |                      |                 |
– Bank loans (including current portion) | 2     | 718             | 718                  | 594             | 594
– Senior unsecured convertible bonds (2) | 1     | 1,354           | 2,103                | 1,316           | 1,501

table includes fair value information financial assets liabilities December 31, 2019 2018:
 Cash equivalents correspond deposits banks.
 carrying amount senior unsecured convertible bonds corresponds liability component. bonds issued July 3, 2017 outstanding December 31, 2017 carrying amount corresponds liability $242 million recorded shareholders’ equity.
 Carrying Amount Estimated Fair Value
 Cash equivalents (1) 1,691 2,138
 Long-term debt
 Bank loans 718 594
 Senior unsecured convertible bonds (2) 1,354 2,103 1,501


As of December 31, 2019, exercisable options had an intrinsic value of less than $0.1 million. The intrinsic value of options exercised was $0.4 million in 2019 and $0.1 million in 2018. The following are the assumptions used in valuing the 2019 and 2018 stock option grants:
In January 2020, we issued options to employees for the purchase of up to 591,004 shares of common stock, at an exercise price of $1.23 per share which vest and become exercisable in four annual installments ending in January 2024. The options have a grant date fair value per share of $1.26.

Year Ended December 31                      |                         |
------------------------------------------- | ----------------------- | -----------------------
                                            | 2019                    | 2018
Assumed volatility                          | 64% - 69%               | 75% - 81%
                                            | (67% weighted average)  | (78% weighted average)
Assumed risk free interest rate             | 1.8% - 2.7%             | 2.2% - 2.8%
                                            | (2.4% weighted average) | (2.5% weighted average)
Average expected life of options (in years) | 6.1 - 6.3               | 6.2
                                            | (6.2 weighted average)  | (6.2 weighted average)
Expected dividends                          | -                       | -

December 31, 2019 options less $0. 1 million. $0. 4 million 2019. 1 million 2018. assumptions 2019 2018 option grants
 January 2020 issued options employees 591,004 shares common stock price $1. 23 per share exercisable four installments January 2024. value share $1.
 Ended December 31
 volatility 64% - 69% 75% - 81%
 risk free interest rate 1. 8% - 2. 7%. 2% -. 8%
. 5%
 life options 6. - 6.
.
 dividends


Fair Value Disclosures
Under the fair value standards fair value is based on the exit price and defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement should reflect all the assumptions that market participants would use in pricing an asset or liability. A fair value hierarchy is established in the authoritative guidance outlined in three levels ranking from Level 1 to level 3 with Level 1 being the highest priority.
Level 1: observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly
Level 3: unobservable inputs (e.g., a reporting entity’s or other entity’s own data)
The Company had no assets or liabilities measured at fair value on a recurring (except our pension plan assets, see Note 15) or
non-recurring basis as of September 30, 2019 or September 30, 2018.
To estimate fair value of the financial instruments below quoted market prices are used when available and classified within Level 1. If this data is not available, we use observable market based inputs to estimate fair value, which are classified within Level 2. If the preceding information is unavailable, we use internally generated data to estimate fair value which is classified within Level 3.
Cash and cash equivalents
Carrying amount approximated fair value
Accounts and long term receivable with original maturity over one year
Fair value was estimated by discounting future cash flows based on the current rate with similar terms.
Note payable
Fair value was estimated based on quoted market prices.
Fair value of accounts receivable with an original maturity of one year or less and accounts payable was not materially different from their carrying values at September 30, 2019, and 2018.

                                 | As of September 30, 2019 |                        | As of September 30, 2018 |            |                  |
-------------------------------- | ------------------------ | ---------------------- | ------------------------ | ---------- | ---------------- | ----------------------------
                                 | Carrying amount          | Fair value             | Carrying amount          | Fair value | Fair Value Level | References
                                 |                          | (Amounts in thousands) |                          |            |                  |
Assets:                          |                          |                        |                          |            |                  |
Cash and cash equivalents        | $18,099                  | $18,099                | $25,107                  | $25,107    | 1                | Consolidated Balance SSheets
Accounts & long term receivable* | 7,087                    | 7,087                  | -                        | -          | 3                | Note 3
Liabilities:                     |                          |                        |                          |            |                  |
Note payable                     | 1,001                    | 1,001                  | -                        | -          | 2                | Note 11
*Original maturity over one year |                          |                        |                          |            |                  |

Fair Value Disclosures
 fair value standards based on exit price transfer liability transaction market participants measurement date. value measurement assumptions pricing. fair value hierarchy three levels 1 to 3 1 highest priority.
 1: observable inputs quoted prices assets
 2: inputs other
 3: unobservable inputs.
 Company no assets liabilities measured fair value pension plan assets
 non-recurring as September 30, 2019 30, 2018.
 fair value financial instruments below quoted market prices Level 1. observable market based inputs Level 2. internally generated data Level 3.
 Cash equivalents
 Carrying amount fair value
 Accounts long term receivable maturity over one year
 estimated discounting future cash flows current rate terms.
 estimated quoted market prices.
 value accounts receivable maturity one year or less not different from carrying values at September 30, 2019 2018.
-------------------------------- | ------------------------
 Carrying amount Fair value References
 (Amounts in thousands)
 Assets
 Cash equivalents $18,099 $25,107 Consolidated Balance SSheets
 Accounts long term receivable*  7,087 | 3
 Liabilities:
 Note payable  1,001 | Note 11
 *Original maturity over one year


Equity Incentive Plan
Our board of directors administers the plan, determines vesting schedules on plan awards and may accelerate the vesting schedules for award recipients. The stock options granted under the plan have terms of up to 10 years. As of December 31, 2019, awards for the purchase of 4,236,719 shares have been granted and remain outstanding (common stock options, common stock and restricted stock units) and 2,063,281 shares are reserved for future grants under the 2014 Plan.
Share-based compensation expenses related to stock options, stock and restricted stock units issued to employees and directors are included in selling, general and administrative expenses. The following table provides a detail of share-based compensation expense (in thousands).

Year Ended December 31                                                                 |                  |
-------------------------------------------------------------------------------------- | ---------------- | ----------------
                                                                                | 2019             | 2018
Common stock, vested at issuance and nonvested at issuance                             | $721             | $555
Stock options                                                                          | 354              | 132
Restricted stock units                                                                 | 225              | 103
Compensation expense related to common stock awards issued under equity incentive plan | $          1,300 | $            790

Equity Incentive Plan
 board administers determines vesting schedules. stock options 10 years. December 31, 2019 awards 4,236,719 shares granted 2,063,281 shares reserved future grants 2014 Plan.
 Share-based compensation expenses selling administrative expenses. compensation expense.
 December 31
 2019 2018
 Common stock vested $721 $555
 Stock options 354
 Restricted stock units 225
 Compensation expense common stock awards equity incentive plan $ 1,300 $


NOTE 11 – STOCK COMPENSATION
The Company sponsors a stock-based incentive compensation plan known as the 2013 Equity Compensation Plan (the “Plan”), which was established by the Board of Directors of the Company in June 2013. A total of 500,000 shares were initially reserved for issuance under the Plan. The Plan was amended several times since then to eventually increase the authorized shares to 2,500,000 as of December 31, 2019. A total of 1,624,221 shares of common stock underlying options were outstanding at December 31, 2019. The Company had 236,614 remaining shares available to grant under the Plan at December 31, 2019.
The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, or restricted stock. The incentive stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company at the date of the grant of the option. Non-qualified options may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Board or Compensation Committee believes have contributed, or will contribute, to the success of the Company. Non-qualified options may be issued at option prices of less than fair market value on the date of grant and may be exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determined by the Compensation Committee of the Board of Directors at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the Plan.
The compensation cost that has been charged against income related to options for the years ended December 31, 2019 and 2018, was $1,687,745 and $1,317,904, respectively. No income tax benefit was recognized in the income statement and no compensation was capitalized in any of the years presented.
The Company had the following option activity during the years ended December 31, 2019 and 2018:
Of the options outstanding at December 31, 2019, 1,143,637 were exercisable with a weighted average contractual life of 1.9 years.

                               | Number of Options | Weighted average exercise price | Weighted average remaining contractual life (years) | Aggregate intrinsic value $
------------------------------ | ----------------- | ------------------------------- | --------------------------------------------------- | ---------------------------
Outstanding, January 1, 2018   | 1,368,772         | $3.12                           |                                                     |
Granted – 2018                 | 401,099           | $9.27                           |                                                     |
Exercised – 2018               | (165,169)         | $3.16                           |                                                     |
Expired – 2018                 | (50,002)          | $5.48                           |                                                     |
Outstanding, December 31, 2018 | 1,554,700         | $4.63                           | 3.0                                                 |
Granted – 2019                 | 410,134           | $12.28                          |                                                     |
Exercised – 2019               | (251,063)         | $3.73                           |                                                     |
Expired – 2019                 | (89,550)          | $12.55                          |                                                     |
Outstanding, December 31, 2019 | 1,624,221         | $6.27                           | 2.6                                                 | $7,925,643
Exercisable, December 31, 2019 | 1,143,637         | $4.39                           | 1.9                                                 | $7,197,053

11 COMPENSATION
 Company sponsors stock compensation 2013 Equity Compensation Plan established June 2013. 500,000 shares reserved issuance. amended shares to 2,500,000 December 31, 2019. 1,624,221 shares common stock options outstanding December 31, 2019. 236,614 remaining shares grant.
 allows incentive stock options non-qualified stock options stock appreciation rights restricted stock. options exercisable ten years option price per share not less fair market value. limited full-time employees. Non-qualified options employees independent agents consultants attorneys. issued less fair market value exercisable ten years. option vesting schedule determined Compensation Committee. provides accelerated vesting of unvested options change control.
 compensation cost charged against income options years December 31, 2019 2018 $1,687,745 $1,317,904. No income tax benefit recognized no compensation capitalized.
 option activity December 31, 2019
 options December 31, 2019 1,143,637 exercisable average contractual life 1. 9 years.
 Options exercise price contractual life value
 January 1 2018 1,368,772 $3. 12
 Granted 401,099 $9. 27
 (165,169 $3. 16
 Expired $5. 48
 1,554,700 $4. 63.
 410,134 $12. 28
 (251,063) $3. 73
 Expired (89,550 $12. 55
 Outstanding December 1,624,221 $6. 27. $7,925,643
 1,143,637 $4. 39. $7,197,053


Note: The scope of use of resources data is appended to include 12 new office buildings which were put into operation in 2019.
Total energy consumption is calculated based on the data of purchased electricity and fuel with reference to the coefficients in the National Standards of the PRC “General Principles for Calculation of the Comprehensive Energy Consumption (GB/T 2589-2008)”.
The Group’s water supply resources are from the municipal water supply.
Recycled water consumption is the reclaimed domestic water treated by the wastewater treatment system equipped at Tencent Tower A and Tower B in Chengdu.
Data of diesel consumption reported above only covers the data centres whose diesel fees are directly borne by the Group.
Average PUE (Power Usage Efficiency) is the annual average data of PUE of the Group’s data centres. PUE, an indicator of the power efficiency of a data centre, is the ratio of total facility energy over IT equipment energy.
Data of running water consumption reported above only covers those data centres wholly used by the Group where operators could provide such data.
Data of packaging materials is not applicable to the Group

2.1 Office Buildings                                           |                                |
-------------------------------------------------------------- | ------------------------------ | ----------
Indicators                                                     | For the year ended 31 December |
                                                               | 2019                           | 2018
Total energy consumption (MWh)                                 | 205,092.26                     | 167,488.48
Direct energy consumption (MWh)                                | 19,144.17                      | 12,852.04
Including: Gasoline (MWh)                                      | 805.77                         | 780.24
Diesel (MWh)                                                   | 41.33                          | 42.10
Natural gas (MWh)                                              | 18,297.07                      | 12,029.70
Indirect energy consumption (MWh)                              | 185,948.09                     | 154,636.44
Including: Purchased electricity (MWh)                         | 185,948.09                     | 154,636.44
Total energy consumption per employee (MWh per employee)       | 3.44                           | 3.28
Total energy consumption per floor area (MWh per square metre) | 0.12                           | 0.14
Running water consumption (tonnes)                             | 1,283,749.73                   | 973,413.06
Running water consumption per employee (tonnes per employee)   | 21.52                          | 19.07
Recycled water consumption (tonnes)                            | 4,076                          | 5,461

resources 12 new office buildings 2019.
 energy consumption calculated purchased electricity fuel National Standards PRC Principles Energy Consumption/T 2589-2008.
 water supply resources municipal water supply.
 Recycled water consumption domestic water wastewater Tencent Tower A Tower B Chengdu.
 diesel consumption covers centres fees borne Group.
 Average PUE Usage Efficiency centres. total facility energy IT equipment energy.
 running water consumption covers data centres Group.
 packaging materials not applicable
. Office Buildings
 31 December
 Total energy consumption (MWh 205,092. 167,488.
 Direct consumption 19,144. 12,852.
 Gasoline 805.
 Diesel 41.
 Natural gas 18,297. 12,029.
 Indirect energy consumption 185,948. 154,636.
 Purchased electricity.
 energy consumption per employee 3.
energy consumption floor. 12.
 water consumption 1,283,749. 973,413.
 21. 52 19.
 Recycled water consumption 4,076 5


Adjusted Gross Margin. Adjusted gross margin represents gross profit plus amortization of acquired intangibles and stock-based compensation. Adjusted gross margin is a measure used by management to understand and evaluate our core operating performance and trends and to generate future operating plans. The exclusion of stock-based compensation expense and amortization of acquired intangibles facilitates comparisons of our operating performance on a period-to-period basis.
In the near term, we expect these expenses to continue to negatively impact our gross profit. Adjusted gross margin is not a measure calculated in accordance with GAAP. We believe that adjusted gross margin provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Nevertheless, our use of adjusted gross margin has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. You should consider adjusted gross margin alongside our other GAAP-based financial performance measures, gross profit and our other GAAP financial results. The following table presents a reconciliation of adjusted gross margin to gross profit, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):

                                     |          | Year Ended December 31, |
------------------------------------ | -------- | ----------------------- | -------
                                     | 2019     | 2018                    | 2017
Gross profit                         | $137,347 | $100,284                | $72,849
Amortization of acquired intangibles | 2,114    | 1,268                   | 1,614
Stock-based compensation             | 1,966    | 2,306                   | 578
Adjusted gross margin                | $141,427 | $103,858                | $75,041

Adjusted Gross Margin. represents profit amortization acquired intangibles stock-based compensation. operating performance future plans. exclusion of stock-based compensation amortization intangibles facilitates comparisons.
 expenses negatively impact gross profit. not calculated GAAP. provides information investors results.
 limitations not substitute for financial results GAAP. consider alongside GAAP financial performance measures gross profit results. table reconciliation adjusted gross margin to gross profit
 2019 2018 2017
 Gross profit $137,347  $100,284  $72,849
 Amortization of acquired intangibles 2,114  1,268 1,614
 Stock-based compensation 1,966 2,306  578
 Adjusted gross margin $141,427  $103,858  $75,041


8. OTHER NON-CURRENT ASSETS
* relates to certain office lease contracts. Optional periods are not included in the calculation.

All figures in USD ‘000          | 2019  | 2018
-------------------------------- | ----- | ----
Fixture, Furniture and Equipment | 65    | 128
Right of Use Asset*              | 1,412 | -
Other                            | 57    | 83
Total as of December 31,         | 1,534 | 211

. NON-CURRENT ASSETS
 office lease contracts. periods.
 figures USD 2019
 Fixture Furniture Equipment 65 128
 Right Use Asset 1,412
 57
 December 31, 1,534


Insurance Segment
(1) The Insurance segment revenues are inclusive of realized and unrealized gains and net investment income for the year ended December 31, 2019 and 2018. Such adjustments are related to transactions between entities under common control which are eliminated or are reclassified in consolidation.
Life, accident and health earned premiums, net: Life, accident and health earned premiums, net from our Insurance segment for the year ended December 31, 2019 increased $22.4 million to $116.8 million from $94.4 million for the year ended December 31, 2018. The increase was primarily due to the premiums generated from the acquisition of KIC in 2018.
Net investment income: Net investment income from our Insurance segment for the year ended December 31, 2019 increased $95.8 million to $212.9 million from $117.1 million for the year ended December 31, 2018. The increase was primarily due to the income generated from the assets acquired in the KIC acquisition, higher average invested assets as a result of the reinvestment of premiums and investment income received, and to a lesser extent, rotation into higher-yielding investments.
Net realized and unrealized gains on investments: Net realized and unrealized gains on investments from our Insurance segment for the year ended December 31, 2019 decreased $3.7 million to $1.9 million from $5.6 million for the year ended December 31, 2018. The decrease was driven by smaller realized gains on bonds and common stocks, higher impairments, and losses on fair value changes on interest only bonds in 2019. The decrease was offset by overall improvement in fair value changes in equity securities and realized gains on mortgage loans in 2019.

                                                      |        | Years Ended December 31, |
----------------------------------------------------- | ------ | ------------------------ | ---------------------
                                                      | 2019   | 2018                     | Increase / (Decrease)
Life, accident and health earned premiums, net        | $116.8 | $94.4                    | $22.4
Net investment income                                 | 212.9  | 117.1                    | 95.8
Net realized and unrealized gains on investments      | 1.9    | 5.6                      | (3.7)
Net revenue                                           | 331.6  | 217.1                    | 114.5
Policy benefits, changes in reserves, and commissions | 234.4  | 197.3                    | 37.1
Selling, general and administrative                   | 35.7   | 30.4                     | 5.3
Depreciation and amortization                         | (23.1) | (12.4)                   | (10.7)
Other operating expense                               | 47.3   | —                        | 47.3
Income from operations (1)                            | $37.3  | $1.8                     | $35.5

Insurance Segment
 revenues unrealized gains net investment income December 2019 2018. adjustments related to transactions entities consolidation.
 Life, accident health earned premiums increased $22. 4 million to $116. 8 million from $94. 4 million 2018. due to premiums KIC 2018.
 Net investment income increased $95. 8 million to $212. 9 million from $117. 1 million. due to assets KIC acquisition higher invested assets reinvestment premiums rotation higher-yielding investments.
 realized unrealized gains investments decreased $3. 7 million to $1. 9 million from $5. 6 million 2018. decrease driven by smaller gains bonds common stocks higher impairments losses fair value changes interest bonds. offset improvement value equity securities gains mortgage loans.
 Life, accident health earned premiums $116.
 Net investment income 212.
 realized unrealized gains investments.
revenue 331. 217. 114.
 Policy benefits commissions 234. 197. 37.
 Selling 35. 30. 5.
 Depreciation amortization (23. (10.
 expense 47.
 Income operations $37. $35.


19. ACCRUED EXPENSES
Vessel operating and drydocking expense related accruals are composed of vessel operating expenses such as crew wages, vessel supplies, routine repairs, maintenance, drydocking, lubricating oils and insurances.
Administrative expenses related accruals are comprised of general overhead including personnel costs, legal and professional fees, costs associated with project development, property costs and other general expenses.
The movement in interest expense is due to repayments of VIE entities' accrued interest expenses during the year.

(in thousands of $)                      | 2019     | 2018
---------------------------------------- | -------- | ---------
Vessel operating and drydocking expenses | (24,457) | (24,041)
Administrative expenses                  | (11,713) | (11,042)
Interest expense                         | (44,150) | (97,688)
Current tax payable                      | (720)    | (463)
                                         | (81,040) | (133,234)

. ACCRUED EXPENSES
 Vessel operating drydocking crew wages supplies repairs maintenance drydocking oils insurances.
 Administrative expenses personnel property.
 interest repayments VIE.
 Vessel operating drydocking expenses (24,457) (24,041)
 Administrative expenses (11,713),042)
 Interest (44,150) (97,688)
 Current tax payable (720)
 (81,040),234)


The following tables summarize the activity related to deferred revenue and financed unearned services revenue (in millions):
During the years ended April 26, 2019 and April 27, 2018, we recognized $1,722 million and $1,806 million, respectively, that was included in the deferred revenue and financed unearned services revenue balance at the beginning of the respective periods.
As of April 26, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $3,668 million, which is equivalent to our deferred revenue and unearned services revenue balance. Because customer orders are typically placed on an as-needed basis, and cancellable without penalty prior to shipment, orders in backlog may not be a meaningful indicator of future revenue and have not been included in this amount. We expect to recognize as revenue approximately 50% of our deferred revenue and financed unearned services revenue balance in the next 12 months, approximately 25% in the next 13 to 24 months, and the remainder thereafter.

                                     | Year Ended     |
------------------------------------ | -------------- | --------------
                                     | April 26, 2019 | April 27, 2018
Balance at beginning of period       | $  3,363       | $ 3,213
Additions                            | 2,763          | 2,566
Revenue recognized during the period | (2,458 )       | (2,416 )
Balance at end of period             | $  3,668       | $ 3,363

tables summarize activity deferred financed unearned services
 years April 26, 2019 April 27, 2018 recognized $1,722 million $1,806 million deferred.
 April 26, 2019 transaction price obligations $3,668 million equivalent deferred revenue unearned services balance. orders as-needed cancellable backlog future revenue. expect recognize 50% deferred next 12 months 25% 13 to 24 months remainder thereafter.
 Year Ended
 April 26, 2019 April 27, 2018
 Balance $ 3,363 $ 3,213
 Additions 2,763 2,566
 Revenue recognized (2
 Balance end period $ 3,668 $ 3,363


Fair values of financial assets and financial liabilities
Fair values of financial assets and liabilities at 31st December 2019 are not materially different from book values due to their size or the fact that they were at short-term rates of interest. Fair values have been assessed as follows:
• Derivatives Forward exchange contracts are marked to market by discounting the future contracted cash flows using readily available market data
• Interest-bearing loans and borrowings Fair value is calculated based on discounted expected future principal and interest cash flows.
• Lease liabilities The fair value is estimated as the present value of future cash flows, discounted at the incremental borrowing rate for the related geographical location unless the rate implicit in the lease is readily determinable.
• Trade and other receivables/payables For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
The following table compares amounts and fair values of the Group’s financial assets and liabilities:
There are no other assets or liabilities measured at fair value on a recurring or non-recurring basis for which fair value is disclosed.
Derivative financial instruments are measured at fair value. Fair value of derivative financial instruments are calculated based on discounted cash flow analysis using appropriate market information for the duration of the instruments.

                                             | 2019 Fair value | 2019 Carrying value | 2018 Carrying value | 2018 Fair value
-------------------------------------------- | --------------- | ------------------- | ------------------- | ---------------
                                             | £m              | £m                  | £m                  | £m
Financial assets:                            |                 |                     |                     |
Cash and cash equivalents                    | 168.5           | 168.5               | 187.1               | 187.1
Trade, other receivables and contract assets | 263.4           | 263.4               | 264.9               | 264.9
Total financial assets                       | 431.9           | 431.9               | 452.0               | 452.0

Fair values financial assets liabilities
 at 31st December 2019 different book values due size short-term rates interest. assessed
 Derivatives contracts future cash flows
 Interest-bearing loans borrowings calculated discounted future principal interest cash flows.
 Lease liabilities estimated as present future cash flows discounted at incremental borrowing rate unless.
 Trade other receivables/payables less than one year notional amount fair value.
 table compares amounts fair values Group’s financial assets liabilities
 no other assets liabilities measured at fair value.
 Derivative financial instruments measured at fair value. calculated discounted cash flow analysis market information.
 Financial assets
 Cash equivalents 168. 5. 5 187. 1.
 Trade receivables contract assets 263. 4. 264. 9.
 Total financial assets 431. 9. 9 452.


24. EARNINGS PER SHARE
The following table set forth the computation for basic and diluted net income (loss) per share of common stock (in thousands, except per share data):
As of September 27, 2019, we had warrants outstanding which were reported as a liability on the consolidated balance sheet. During fiscal years 2019 and 2018, we recorded gains of $0.8 million and $27.6 million, respectively, associated with adjusting the fair value of the warrants, in the Consolidated Statements of Operations primarily as a result of declines in our stock price.
When calculating earnings per share we are required to adjust for the dilutive effect of outstanding common stock equivalents, including adjustment to the numerator for the dilutive effect of contracts that must be settled in common stock. During the fiscal year ended September 27, 2019, we excluded the effects of the warrant gain and the 214,303 of potential shares of common stock issuable upon exercise of warrants as the inclusion would be anti-dilutive.
During the fiscal year ended September 28, 2018, we adjusted the numerator to exclude the warrant gain $27.6 million, and we also adjusted the denominator for the dilutive effect of the incremental warrant shares of 569,667 under the treasury stock method. For the fiscal years 2018, the table above excludes the effects of 375,940 shares of potential shares of common stock issuable upon exercise of stock options, restricted stock and restricted stock units as the inclusion would be anti-dilutive.
The table excludes the effects of 386,552 and 1,877,401 shares for fiscal years 2019 and 2017, respectively, of potential shares of common stock issuable upon exercise of stock options, restricted stock, restricted stock units and warrants as the inclusion would be anti-dilutive.

                                                   |            | Fiscal Years |
-------------------------------------------------- | ---------- | ------------ | ----------
                                                   | 2019       | 2018         | 2017
Numerator:                                         |            |              |
Loss from continuing operations                    | $(383,798) | $(133,762)   | $(150,416)
Loss from discontinued operations                  | —          | (6,215)      | (19,077)
Net loss                                           | (383,798)  | (139,977)    | (169,493)
Warrant liability gain                             | —          | (27,646)     | —
Net loss attributable to common stockholders       | $(383,798) | $(167,623)   | $(169,493)
Denominator:                                       |            |              |
Weighted average common shares outstanding-basic   | 65,686     | 64,741       | 60,704
Dilutive effect of warrants                        | —          | 570          | —
Weighted average common shares outstanding-diluted | 65,686     | 65,311       | 60,704
Common stock earnings per share-basic:             |            |              |
Continuing operations                              | $(5.84)    | $(2.07)      | $(2.48)
Discontinued operations                            | —          | (0.10)       | (0.31)
Net common stock earnings per share-basic          | $(5.84)    | $(2.16)      | $(2.79)
Common stock earnings per share-diluted:           |            |              |
Continuing operations                              | $(5.84)    | $(2.47)      | $(2.48)
Discontinued operations                            | —          | (0.10)       | (0.31)
Net common stock earnings per share-diluted        | $(5.84)    | $(2.57)      | $(2.79)

. EARNINGS PER SHARE
 table basic diluted net income per share common stock
 September 27, 2019 warrants outstanding liability balance sheet. years 2019 2018 recorded gains $0. 8 million $27. 6 million adjusting fair value warrants declines stock price.
 earnings per share dilutive effect common stock equivalents contracts settled common stock. year 2019 excluded warrant gain 214,303 potential shares common stock anti-dilutive.
 year September 2018 adjusted exclude warrant gain $27. 6 million dilutive effect incremental warrant shares,667 stock. table excludes 375,940 shares common stock options anti-dilutive.
 excludes effects 386,552 1,877,401 shares fiscal years 2019 2017 potential stock options stock units warrants anti-dilutive.
 Fiscal Years
 2018 2017
 Loss from operations $(383,798) $(133,762)  $(150,416)
Loss discontinued operations (6,215) (19,077)
 Net loss (383,798 (139,977 (169,493)
 Warrant liability gain (27,646)
 loss common stockholders(383,798(167,623),493)
 average common shares 65,686 64,741 60,704
 Dilutive effect warrants
 65,686 65,311,704
 Common stock earnings share
 operations. 84.
 Discontinued operations.
 common stock earnings share. 84.
 earnings share-diluted
 operations. 84.
 Discontinued operations.
 common stock earnings share-diluted. 84.


NOTE 9 – FINANCIAL ITEMS
¹⁾ Interest for financial assets and liabilities not at fair value through profit and loss.

USDm                                                                           | 2019  | 2018  | 2017
------------------------------------------------------------------------------ | ----- | ----- | -----
Financial income                                                               |       |       |
Interest income from cash and cash equivalents, including restricted cash ¹⁾   | 2.5   | 2.7   | 1.6
Exchange rate adjustments, including gain from forward exchange rate contracts | 0.3   | 0.6   | 2.7
Total                                                                          | 2.8   | 3.3   | 4.3
Financial expenses                                                             |       |       |
Interest expenses on mortgage and bank debt ¹⁾                                 | 39.3  | 35.7  | 33.3
Exchange rate adjustments, including loss from forward exchange rate contracts | 0.2   | 0.1   | 3.2
Commitment fee                                                                 | 1.9   | 2.6   | 2.4
Other financial expenses                                                       | 0.5   | 0.9   | 1.7
Total                                                                          | 41.9  | 39.3  | 40.6
Total financial items                                                          | -39.1 | -36.0 | -36.3

NOTE 9 FINANCIAL ITEMS
 Interest financial assets liabilities value profit loss.
 2019 2018 2017
 Financial income
 Interest income cash equivalents restricted cash. 7.
 Exchange rate adjustments gain forward exchange rate contracts.
. 8.
 Financial expenses
 Interest expenses mortgage bank debt.
 Exchange rate adjustments loss forward exchange rate contracts.
 Commitment fee. 6.
 financial expenses. 5. 9. 7
 41. 9 39. 40. 6
 financial items.


A summary of additions and deductions related to the allowance for doubtful accounts for the years ended March 31, 2019, 2018 and 2017 follows (amounts in millions):
(1) Deductions represent uncollectible accounts written off, net of recoveries.

                                 | Balance at Beginning of Year | Additions Charged to Costs and Expenses | Deductions (1) | Balance at End of Year
-------------------------------- | ---------------------------- | --------------------------------------- | -------------- | ----------------------
Allowance for doubtful accounts: |                              |                                         |                |
Fiscal 2019                      | $2.2                         | $—                                      | $(0.2)         | $2.0
Fiscal 2018                      | $2.1                         | $0.2                                    | $(0.1)         | $2.2
Fiscal 2017                      | $2.5                         | $0.2                                    | $(0.6)         | $2.1

summary additions deductions allowance doubtful accounts years March 31, 2019 2018 2017 (amounts
 Deductions uncollectible accounts written recoveries.
 Balance Beginning Year Additions Costs Expenses Deductions Balance End Year
 Allowance doubtful accounts
 Fiscal 2019 $2.
 Fiscal 2018 $2.
 Fiscal 2017 $2.


F. Contractual Obligations as at December 31, 2019:
Payment due by period ($ in millions) (unaudited)
(1) The amount identified does not include interest costs associated with the outstanding credit facilities, which are based on LIBOR rates, plus the costs of complying with any applicable regulatory requirements and a margin ranging from 2.75% to 3.25% per annum. The amount does not include interest costs for the 2022 Senior Secured Notes, the 2022 Notes, the 2024 Notes, the NSM Loan, the 2022 Logistics Senior Notes, the Term Loan B Facility and the Navios Logistics Notes Payable. The expected interest payments are: $127.8 million (less than 1 year), $166.6 million (1-3 years), $3.8 million (3-5 years) and nil (more than 5 years). Expected interest payments are based on outstanding principal amounts, currently applicable effective interest rates and margins as of December 31, 2019, timing of scheduled payments and the term of the debt obligations.
(2) Approximately 41% of the time charter payments included above is estimated to relate to operational costs for these vessels.
(3) Navios Logistics has several lease agreements with respect to its operating port terminals and various offices. Following the sale of the management division effected on August 30, 2019 Navios Holdings has no office lease obligations (see also Note 16 included elsewhere in this Annual Report). See also Item 4.B. “Business Overview — Facilities.”
(4) Represent total amount of lease payments on an undiscounted basis.
(5) Represents principal payments of the future remaining obligation for the acquisition of six liquid barges, which bear interest at fixed rate. The amounts in the table exclude expected interest payments of $0.3 million (less than 1 year), $1.8 million (1-3 years), $0.9 million (3-5 years) and 0.1 million (more than 5 years). Expected interest payments are based on the terms of the shipbuilding contract for the construction of these barges.

Contractual Obligations                                                    | Total    | Less than 1 year | 1-3 years | 3-5 years | More than 5 years
-------------------------------------------------------------------------- | -------- | ---------------- | --------- | --------- | -----------------
Long-term debt(1)                                                          | $1,581.8 | $51.7            | $1,461.0  | $69.1     | $—
Operating Lease Obligations (Time Charters) for vessels in operation(2)(4) | 367.4    | 109.6            | 142.7     | 81.6      | 33.5
Operating Lease Obligations (Time Charters) for vessels to be delivered(4) | 63.4     | 5.5              | 13.6      | 12.9      | 31.4
Acquisition of six liquid barges (5)                                       | 12.4     | 0.5              | 4.4       | 5.3       | 2.2
Rent Obligations(3)                                                        | 1.3      | 0.8              | 0.4       | 0.1       | —
Land lease agreements (3)                                                  | 25.8     | 0.6              | 1.1       | 1.1       | 23.0
Total                                                                      | $2,052.1 | $168.7           | $1,623.2  | $170.1    | $90.1

. Contractual Obligations December 31, 2019
 Payment
 interest costs LIBOR rates regulatory requirements margin 2. 75% to 3. 25% per annum. 2022 Senior Secured Notes 2024 Notes NSM Loan Logistics Term Loan B Facility Navios Logistics Notes. expected interest payments $127. 8 million 1 $166. 6 million (1-3 $3. 8 million (3-5 years 5 years. based principal amounts interest rates margins term debt obligations.
 41% charter payments operational costs.
 Navios Logistics lease agreements port terminals offices. sale August 2019 no office lease obligations.
 lease payments.
 principal payments obligation acquisition six barges. exclude interest $0. 3 million 1 $1. 8 million (1-3 $0. 9 million (3-5 years 0. 1 million (more 5 years. based shipbuilding contract.
 Contractual Obligations Less 1 1-3 3-5 More 5 years

 Long-term $1,581. $51. 7 $1,461. $69.
 Operating Lease Obligations vessels 367. 4 109. 6 142. 7 81. 33.
 Operating Lease Obligations vessels 63. 5. 13. 12. 31.
 six liquid barges 12. 2.
 Rent Obligations(3). 8.
 Land lease agreements 25. 8. 6. 23.
 $2,052. $168. $1,623. $170. $90.


Contract Assets and Liabilities
The following table provides information about receivables, contract assets and contract liabilities from our revenue contracts with customers:
Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relate to sales commissions. These costs are deferred and amortized over the expected customer life.
We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is not commensurate with the commission on the initial contract. During the years ended December 31, 2019 and 2018, the Company recognized expense of $6.3 million and $2.9 million, respectively, related to deferred contract acquisition costs.
Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which under the new standard are generally deferred and amortized over the expected customer life as the option to renew without paying an upfront fee provides the customer with a material right. During the years ended December 31, 2019 and 2018, the Company deferred and recognized revenues of $397.5 million and $354.2 million, respectively.
A receivable is recognized in the period the Company provides goods or services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30 to 60 days.

                         | Year Ended December 31, |
------------------------ | ----------------------- | --------
(In thousands)           | 2019                    | 2018
Accounts receivable, net | $120,016                | $133,136
Contract assets          | 18,804                  | 12,128
Contract liabilities     | 50,974                  | 52,966

Contract Assets Liabilities
 table receivables assets liabilities from revenue contracts
 assets include incremental acquisition. sales commissions. deferred amortized over expected customer life.
 renewal contract not initial. December 2019 2018 recognized $6. 3 million $2. 9 million deferred acquisition costs.
 liabilities include deferred revenues advanced payments nonrefundable upfront service activation set fees deferred amortized over customer life option renew without upfront. 2019 2018 deferred recognized revenues $397. 5 million $354. 2 million.
 receivable recognized goods services right consideration unconditional. Payment terms invoiced 30 to 60 days.
 Ended December
 Accounts receivable net $120,016 $133,136
 Contract assets 18,804 12,128
 liabilities 50,974 52,966


The following table provides a breakdown of TCE rates achieved for the years ended December 31, 2019 and 2018 between spot and fixed earnings and the related revenue days.
During 2019, TCE revenues increased by $8,426, or 2.6%, to $335,133 from $326,707 in 2018. The increase primarily resulted from an increase in average daily rates earned by our fleet and decreased spot market exposure. The total number of revenue days decreased from 7,678 days in 2018 to 7,215 days in 2019. The decrease primarily resulted from three fewer vessels in operation during most of 2019 compared to 2018.
Vessel expenses remained stable at $134,618 in 2019 from $134,956 in 2018. Depreciation expense increased by $1,987 to $52,499 in 2019 from $50,512 in 2018. The increase was due to an increase in amortization of drydock costs and an increase in depreciation expense due to the Overseas Gulf Coast and Overseas Sun Coast, our two new vessels, which entered service at the beginning of the fourth quarter of 2019.
Two reflagged U.S. Flag Product Carriers participate in the U.S. Maritime Security Program, which ensures that privatelyowned, military-useful U.S. Flag vessels are available to the U.S. Department of Defense in the event of war or national emergency.
Each of the vessel-owning companies receives an annual subsidy, subject in each case to annual congressional appropriations, which is intended to offset the increased cost incurred by such vessels from operating under the U.S. Flag. Such subsidy was $5,000 for each vessel in 2019 and $5,000 on one vessel and $4,600 on one vessel in 2018.
Under the terms of the program, we expect to receive up to $5,000 annually for each vessel during 2020, and up to $5,200 for each vessel beginning in 2021. We do not receive a subsidy for any days for which either of the two vessels operate under a time charter to a U.S. government agency.
In June 2019, one of our lightering customers, PES, suffered an explosion and fire at its refinery in the Delaware Bay. The PES refinery complex, which consists of two refineries, has been shut down since the fire. Due to the expected reduction in lightering volumes, we redeployed one of our two lightering ATBs to the U.S. Gulf of Mexico for alternative employment.
In July 2019, PES filed a Chapter 11 bankruptcy petition. At December 31, 2019, we had outstanding receivables from PES of approximately $4,300. The ultimate recovery of these receivables is currently unknown. We established a loss provision of $4,300. We are working diligently to maximize our recovery.
In June 2018, one of our ATBs was berthed to the dock when a third-party ship transiting the channel hit our ATB, causing structural damage to the ATB and damage to the dock. The cost of repairs has been covered by existing insurance policies. We have filed a lawsuit against the third-party ship seeking recovery of our costs of repairs as well as our lost earnings from the ATB being off-hire for 46 repair days.

                                              | 2019          |                | 2018          |
--------------------------------------------- | ------------- | -------------- | ------------- | --------------
                                              | Spot Earnings | Fixed Earnings | Spot Earnings | Fixed Earnings
Jones Act Handysize Product Carriers:         |               |                |               |
Average rate                                  | $25,036       | $57,910        | $31,254       | $60,252
Revenue days                                  | 523           | 4,052          | 1,142         | 3,141
Non-Jones Act Handysize Product Carriers:     |               |                |               |
Average rate                                  | $30,671       | $13,912        | $25,925       | $12,097
Revenue days                                  | 482           | 417            | 707           | 3
ATBs:                                         |               |                |               |
Average rate                                  | $19,117       | $21,861        | $15,333       | $22,207
Revenue days                                  | 255           | 773            | 990           | 998
Lightering:                                   |               |                |               |
Average rate                                  | $63,162       | $—             | $66,041       | $—
Revenue days                                  | 713           | —              | 697           | —

table TCE rates 2019 2018 spot fixed earnings revenue days.
 2019 revenues increased $8,426. 6% to $335,133 from $326,707 2018. increase average daily rates decreased spot market exposure. revenue days decreased 7,678 2018 to 7,215 2019. three fewer vessels 2019.
 Vessel expenses stable $134,618 2019 from $134,956 2018. Depreciation expense increased $1,987 to $52,499 2019 from $50,512 2018. increase due amortization drydock costs depreciation expense Overseas Gulf Coast Sun Coast new vessels entered service 2019.
 Two reflagged. Flag Product Carriers participate. Maritime Security Program. vessels.
 annual subsidy increased cost. subsidy $5,000 2019 $5,000 $4,600 2018.
 $5,000 annually 2020 $5,200 2021. subsidy time charter. government agency.
 June 2019 PES suffered explosion fire refinery Delaware Bay.PES refinery complex shut since fire. redeployed ATBs. Gulf of Mexico.
 July 2019 PES filed Chapter 11 bankruptcy petition. December 31, 2019 outstanding receivables $4,300. recovery unknown. established loss provision $4,300. working recovery.
 June 2018 ship damage. repairs covered insurance. filed lawsuit recovery lost earnings off-hire 46 repair days.
 Jones Act Carriers
 Average rate $25,036 $57,910 $31,254 $60,252
 Revenue days 523 4,052 1,142 3,141
 Non-Jones Act Carriers
 Average rate $30,671 $13,912 $25,925 $12,097
 Revenue days 482 417 707 3
 ATBs
 Average rate $19,117 $21,861 $15,333 $22,207
 Revenue days 255 773 990 998
 Lightering
rate $63,162 $66,041
 Revenue days 713


Consolidated Results
Net Revenues by Distribution Channel
The following table details our consolidated net revenues by distribution channel (amounts in millions):
(1) Net revenues from “Digital online channels” include revenues from digitally-distributed subscriptions, downloadable content, microtransactions, and products, as well as licensing royalties.
(2) Net revenues from “Other” primarily includes revenues from our Distribution business and the Overwatch League.
Digital Online Channel Net Revenues The decrease in net revenues from digital online channels for 2019, as compared to 2018, was primarily due to: • lower revenues recognized from the Destiny franchise (reflecting our sale of the publishing rights for Destiny to Bungie in December 2018); and • lower revenues recognized from Hearthstone.
Retail Channel Net Revenues The decrease in net revenues from retail channels for 2019, as compared to 2018, was primarily due to: • lower revenues recognized from Call of Duty: Black Ops 4, which was released in October 2018, as compared to Call of Duty: WWII, which was released in November 2017; • lower revenues recognized from the Destiny franchise; and • lower revenues from Crash Bandicoot™ N. Sane Trilogy, which was released on the Xbox One, PC, and Nintendo Switch in June 2018.
The decrease was partially offset by: • revenues recognized from Crash Team Racing Nitro-Fueled, which was released in June 2019; • revenues from Sekiro: Shadows Die Twice, which was released in March 2019; and • higher revenues recognized from Call of Duty: Modern Warfare, which was released in October 2019, as compared to Call of Duty: Black Ops 4.

                                      |        | For the Years Ended December 31, |                      |
------------------------------------- | ------ | -------------------------------- | -------------------- | --------
                                      | 2019   | 2018                             | Increase/ (decrease) | % Change
Net revenues by distribution channel: |        |                                  |                      |
Digital online channels (1)           | $4,932 | $5,786                           | $(854)               | (15)%
Retail channels                       | 909    | 1,107                            | (198)                | (18)
Other (2)                             | 648    | 607                              | 41                   | 7
Total consolidated net revenues       | $6,489 | $7,500                           | $(1,011)             | (13)

Consolidated Results
 Net Revenues by Distribution Channel
 table details revenues by distribution channel
 revenues online include subscriptions downloadable content microtransactions products licensing royalties.
 Distribution business Overwatch League.
 Digital Online Channel Net Revenues decrease 2019 due to lower revenues Destiny franchise Hearthstone.
 Retail Channel Net Revenues decrease due to lower revenues Call of Duty: Black Ops 4 Destiny franchise Crash BandicootTM N. Sane Trilogy Xbox One Nintendo Switch 2018.
 decrease offset by revenues Crash Team Racing Nitro-Fueled June 2019 Sekiro: Shadows Die Twice March 2019 higher revenues Call of Duty: Modern Warfare October 2019.
 December
 2019 2018 Increase (decrease % Change
 Net revenues by distribution channel
 Digital online channels $4,932 $5,786 $(854) (15)%
Retail channels 909 1,107 (198)
 648 607
 revenues $6,489 $7,500(1,011)


Liquidity and Capital Resources
Cash flows from operations provided a source of funds of $1,066 million, $1,058 million and $1,310 million during the years ended December 31, 2019, 2018 and 2017, respectively. This increase was driven primarily by lower employee annual incentive payments, lower retailer investments and lower restructuring payments, partially offset by working capital timing and higher interest and tax payments during the year ended December 31, 2019.
We provide for additional liquidity through several sources, including maintaining an adequate cash balance, access to global funding sources and a committed revolving credit facility. The following table provides a summary of the major sources of liquidity for the years ended December 31, 2019, 2018 and 2017:
Of the $454 million in cash and cash equivalents at December 31, 2019, approximately $383 million was held in jurisdictions outside the U.S. We regularly review the amount of cash and cash equivalents held outside of the U.S. to determine the amounts necessary to fund the current operations of our foreign operations and their growth initiatives and amounts needed to service our U.S. indebtedness and related obligations.

(IN MILLIONS)                             | 2019   | 2018   | 2017
----------------------------------------- | ------ | ------ | ------
Net cash from operating activities        | $1,066 | $1,058 | $1,310
Cash and short-term marketable securities | $454   | $524   | $656
Revolving credit facility                 | $850   | $850   | $575

Liquidity Capital Resources
 Cash flows $1,066 $1,058 million $1,310 million 2019 2018 2017. increase driven lower employee incentive payments retailer investments restructuring payments offset working capital timing higher interest tax payments.
 additional liquidity cash balance global funding revolving credit facility. sources liquidity 2019 2018
 $454 million cash equivalents 2019 $383 million outside. review. foreign growth initiatives U. S. indebtedness obligations.
 MILLIONS 2019 2018 2017
 Net cash $1,066 $1,058 $1,310
 Cash short-term securities $454 $524 $656
 Revolving credit facility $850 $575


Presentation of Derivative Gains (Losses) from Economic Hedges of Forecasted Cash Flows in Segment Results
Derivatives used to manage commodity price risk and foreign currency risk are not designated for hedge accounting treatment. We believe these derivatives provide economic hedges of certain forecasted transactions. As such, these derivatives are generally recognized at fair market value with realized and unrealized gains and losses recognized in general corporate expenses. The gains and losses are subsequently recognized in the operating results of the reporting segments in the period in which the underlying transaction being economically hedged is included in earnings. In the event that management determines a particular derivative entered into as an economic hedge of a forecasted commodity purchase has ceased to function as an economic hedge, we cease recognizing further gains and losses on such derivatives in corporate expense and begin recognizing such gains and losses within segment operating results, immediately.
The following table presents the net derivative gains (losses) from economic hedges of forecasted commodity consumption and the foreign currency risk of certain forecasted transactions associated with continuing operations, under this methodology:
As of May 26, 2019, the cumulative amount of net derivative gains from economic hedges that had been recognized in general corporate expenses and not yet allocated to reporting segments was $1.4 million. This amount reflected net gains of $1.0 million incurred during the fiscal year ended May 26, 2019, as well as net gains of $0.4 million incurred prior to fiscal 2019. Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results gains of $0.9 million in fiscal 2020 and $0.5 million in fiscal 2021 and thereafter.

                                                                       |              | Fiscal Years Ended |
---------------------------------------------------------------------- | ------------ | ------------------ | ------------
($ in millions)                                                        | May 26, 2019 | May 27, 2018       | May 28, 2017
Net derivative gains (losses) incurred                                 | $(3.6)       | $(0.9)             | $0.6
Less: Net derivative gains (losses) allocated to reporting segments    | (1.8)        | (7.1)              | 5.7
Net derivative gains (losses) recognized in general corporate expenses | $(1.8)       | $6.2               | $(5.1)
Net derivative gains (losses) allocated to Grocery & Snacks            | $(2.1)       | $0.2               | $3.4
Net derivative gains (losses) allocated to Refrigerated & Frozen       | (1.1)        | (0.3)              | 0.8
Net derivative gains (losses) allocated to International Foods .       | 2.8          | (6.9)              | 1.6
Net derivative losses allocated to Foodservice .                       | (0.6)        | (0.1)              | —
Net derivative losses allocated to Pinnacle Foods                      | (0.8)        | —                  | —
Net derivative losses allocated to Commercial .                        | —            | —                  | (0.1)
Net derivative gains (losses) included in segment operating profit .   | $(1.8)       | $(7.1)             | $5.7

Derivative Gains (Losses Economic Hedges Forecasted Cash Flows Segment Results
 Derivatives commodity price foreign currency risk not hedge accounting. provide economic hedges forecasted transactions. recognized at fair market value gains losses corporate expenses. gains losses recognized in operating results. derivative recognizing gains losses segment operating results.
 table presents net derivative gains (losses from economic hedges forecasted commodity consumption foreign currency risk transactions
 May 26, 2019 cumulative net derivative gains from economic hedges $1. 4 million. net gains $1. 0 million year 2019 gains $0. 4 million 2019. expect reclassify segment operating results gains $0. 9 million fiscal 2020 $0. 5 million 2021.
 Fiscal Years Ended
 millions May 26, 2019 May 27, 2018 May 28, 2017
 Net derivative gains (losses).
derivative gains reporting segments (1. 8) (7. 1) 5.
 corporate expenses $(1. 8) $6. 2 $(5. 1)
 Grocery Snacks $(2. 1) $0. 2 $3.
 Refrigerated Frozen (1. 1) (0. 3).
 International Foods. 2. 8 (6. 9).
 Foodservice.
 Pinnacle Foods. 8)
 Commercial.
 operating profit. $(1. 8) $(7. 1) $5.


Sources and Uses of Cash
Our primary source of liquidity from operations was the collection of revenue in advance from our customers, accounts receivable from our customers, and the management of the timing of payments to our vendors and service providers.
Investing activities in 2019 consist of $284.6 million, net of cash acquired, used in the acquisitions of AppRiver and DeliverySlip and $11.7 million for capital expenditures, which include $8.2 million in internal-use software costs, and $3.5 million for computer and networking equipment. These investments in new equipment and cloud hosting infrastructure are to renovate our business processes and product offerings.
Investing activities in 2018 consist of $11.8 million, net of cash acquired, used in the acquisition of Erado and $4.2 million for capital expenditures, which include $2.1 million for computer and networking equipment, $1.5 million in internal-use software costs, and $500 thousand for other activities including the acquisition of other internal use software. These investments in new equipment and cloud hosting infrastructure were to modernize our business processes and product offerings.
Financing activities in 2019 includes proceeds from long term debt of $179.2 million, net of issuance costs of $6.4 million and repayment of $1.4 million, as well as $96.6 million, net of issuance costs, raised through the private purchase of preferred stock, and $415 thousand received from the exercise of stock options. The proceeds from our debt and preferred stock issuances were used to fund our AppRiver acquisition in February 2019 and our DeliverySlip acquisition in May 2019. We also used $3.8 million for contingent consideration payments associated with our acquisitions of Greenview, Erado and DeliverySlip. In addition to these items, we paid $1.7 million to satisfy finance lease liabilities and $1.9 million to repurchase common stock related to the tax impact of vesting restricted awards in 2019.
Financing activities in 2018 relate primarily to $5.4 million used in a $10 million share repurchase program authorized by our Board of Directors on April 24, 2017, and $656 thousand used in the repurchase of common stock related to the tax impact of vesting restricted stock awards, and a $605 thousand earn-out payment associated with our acquisition of Greenview. Financing activities in 2017 include $3.8 million used in the same share repurchase program and $762 thousand used in the repurchase of common stock related to the tax impact of vesting restricted awards offset by the receipt of $4.2 million from the exercise of stock options.

Years Ended December 31,                            |              |             |
--------------------------------------------------- | ------------ | ----------- | -----------
(In thousands)                                      | 2019         | 2018        | 2017
Net cash provided by operations                     | $ 13,951     | $ 16,671    | $ 18,204
Net cash used in investing activities               | $ (296,243 ) | $ (15,952 ) | $ (11,285 )
Net cash provided by (used in) financing activities | $ 268,740    | $ (6,593 )  | $ (367 )

 primary liquidity revenue accounts receivable payments vendors providers.
 Investing activities 2019 $284. 6 million AppRiver DeliverySlip $11. 7 million capital expenditures $8. 2 million internal-use software $3. 5 million networking equipment. business processes product offerings.
 2018 $11. 8 million Erado $4. 2 million capital expenditures $2. 1 million computer networking equipment $1. 5 million internal-use software $500 thousand. business processes product offerings.
 Financing 2019 term debt $179. 2 million costs $6. 4 million repayment $1. 4 million $96. 6 million purchase preferred stock $415 thousand stock options. AppRiver acquisition DeliverySlip acquisition. $3. 8 million contingent consideration payments acquisitions Greenview Erado DeliverySlip. paid $1. 7 million lease liabilities $1. 9 million common stock.
 Financing 2018 $5.4 million $10 million share repurchase April 24 2017 $656 thousand repurchase common stock $605 thousand earn-out acquisition Greenview. Financing 2017 $3. 8 million share repurchase $762 thousand common stock $4. 2 million stock options.
 Years Ended December 31,
 2019 2018 2017
 Net cash operations $ 13,951 16,671 18,204
 investing (296,243 (15,952 (11,285
 financing $ 268,740 (6,593 (367


IMPAIRMENT TESTING
As described in Note 2, Significant accounting policies, goodwill is tested annually for impairment by comparing the carrying value of a CGU or group of CGUs to the recoverable amount, where the recoverable amount is the higher of fair value less costs of disposal or value in use.
VALUE IN USE
The value in use for a CGU or group of CGUs is determined by discounting five-year cash flow projections derived from business plans reviewed by senior management. The projections reflect management’s expectations of revenue, segment profit, capital expenditures, working capital and operating cash flows, based on past experience and future expectations of operating performance.
Cash flows beyond the five-year period are extrapolated using perpetuity growth rates. None of the perpetuity growth rates exceed the long-term historical growth rates for the markets in which we operate.
The discount rates are applied to the cash flow projections and are derived from the weighted average cost of capital for each CGU or group of CGUs.
The following table shows the key assumptions used to estimate the recoverable amounts of the groups of CGUs.
The recoverable amounts determined in a prior year for the Bell Wireless and Bell Wireline groups of CGUs exceed their corresponding current carrying values by a substantial margin and have been carried forward and used in the impairment test for the current year. We believe that any reasonable possible change in the key assumptions on which the estimate of recoverable amounts of the Bell Wireless or Bell Wireline groups of CGUs is based would not cause their carrying amounts to exceed their recoverable amounts.
For the Bell Media group of CGUs, a decrease of (1.1%) in the perpetuity growth rate or an increase of 0.8% in the discount rate would have resulted in its recoverable amount being equal to its carrying value.

               | ASSUMPTIONS USED       |
-------------- | ---------------------- | -------------
GROUPS OF CGUs | PERPETUITY GROWTH RATE | DISCOUNT RATE
Bell Wireless  | 0.8%                   | 9.1%
Bell Wireline  | 1.0%                   | 6.0%
Bell Media     | 1.0%                   | 8.0%

IMPAIRMENT
 goodwill tested annually for impairment carrying value CGU recoverable amount higher less costs disposal use.
 determined discounting five-year cash flow projections business plans management. projections reflect expectations revenue profit capital expenditures working capital operating cash flows.
 Cash flows beyond five extrapolated perpetuity growth rates. exceed long-term historical growth rates markets.
 discount rates applied cash derived from weighted average cost capital.
 table shows assumptions recoverable amounts.
 recoverable amounts Bell Wireless Bell Wireline exceed current carrying values carried impairment test current year. change assumptions cause carrying amounts exceed recoverable amounts.
 Bell Media group decrease. 1%) perpetuity growth rate increase. 8% discount rate recoverable amount equal carrying value.
 ASSUMPTIONS
 PERPETUITY GROWTH RATE DISCOUNT RATE
 Bell Wireless. 8%. 1%
 Bell Wireline. 0%.
Media 1. 8.


The differences between income tax expense (benefit) at the Company’s effective income tax rate and income tax
expense at the statutory federal income tax rate were as follows:
In December 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the “Act”), which among other matters reduced the United States corporate tax rate from 35% to 21% effective January 1, 2018. In fiscal 2018, the Company recorded a $43 million tax benefit primarily related to the remeasurement of certain deferred tax assets and liabilities.
Federal and state income taxes of $36.5 million, $2.1 million, and $3.7 million were paid in fiscal years 2019, 2018, and 2017, respectively. Federal and state income taxes of $418,000, $47.2 million, and $17.6 million were refunded in fiscal years 2019, 2018, and 2017, respectively.
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of June 1, 2019, there were no uncertain tax positions that resulted in any adjustment to the Company’s provision for income taxes.
We are under audit by the IRS for the fiscal years 2013 through 2015. We are subject to income tax in many jurisdictions within the U.S., and certain jurisdictions are under audit by state and local tax authorities. The resolutions of these audits are not expected to be material to our consolidated financial statements. Tax periods for all years beginning with fiscal year 2013 remain open to examination by federal and state taxing jurisdictions to which we are subject.

                                       |              | Fiscal year end |
-------------------------------------- | ------------ | --------------- | ------------
                                       | June 1, 2019 | June 2, 2018    | June 3, 2017
Statutory federal income tax (benefit) | $14,694      | $34,105         | $(39,950)
State income tax (benefit)             | 2,164        | 3,200           | (3,193)
Domestic manufacturers deduction       | —            | (2,545)         | 4,095
Enacted rate change                    | —            | (42,973)        | —
Tax exempt interest income             | (197)        | (101)           | (206)
Other, net                             | (918)        | (545)           | (613)
                                       | $15,743      | $(8,859)        | $(39,867)

differences income tax Company’s effective
 statutory federal rate
 2017 President signed Tax Cuts and Jobs Act 2017 reduced corporate tax rate 35% to 21% January 1, 2018. 2018 Company recorded $43 million tax benefit remeasurement deferred tax assets liabilities.
 Federal state taxes $36. 5 million $2. 1 million $3. 7 million paid 2019 2018 2017. $418,000 $47. 2 million $17. 6 million refunded 2019 2018 2017.
 Company tax benefit uncertain tax position. measures benefits largest benefit 50% likelihood. June 1, 2019 no uncertain tax positions.
 under audit IRS 2013 2015. subject tax jurisdictions. state local authorities. resolutions not material consolidated financial statements. Tax periods 2013 open examination jurisdictions.
 year
 June 1 2019 2 2018 3 2017
 Statutory federal income tax $14,694 $34,105 $(39,950
income tax 2,164 3,200
 Domestic manufacturers deduction 4,095
 Enacted rate change,973
 income (197) (101) (206)
 (918)
 $15,743,859


Research and Development
Research and development expenses increased $124.3 million, or 53.9%, for the year ended December 31, 2019 compared to the same period in 2018, due to an increase of $114.4 million in employee-related costs ($45.1 million of which related to stock-based compensation and related payroll taxes), a $7.4 million increase in computer hardware and software costs, and a $2.5 million increase in professional services fees, all as a result of growth in our research and development employee base and expanded development programs.
Research and development expenses increased $94.7 million, or 69.6%, for the year ended December 31, 2018 compared to the same period in 2017, due to an increase of $89.6 million in employee-related costs, an increase of $3.1 million in computer hardware and software costs, and a $2.0 million increase in professional services fees, all as a result of growth in our research and development employee base and expanded development programs.

                             | Years ended December 31,           |           |           | 2019 vs 2018 | 2018 vs 2017
---------------------------- | ---------------------------------- | --------- | --------- | ------------ | ------------
                             | 2019                               | 2018      | 2017      | % Change     | % Change
                             | (in thousands, except percentages) |           |           |              |
Research and development     | $ 355,015                          | $ 230,674 | $ 135,997 | 53.9 %       | 69.6 %
Percentage of total revenues | 22.5 %                             | 21.5 %    | 20.2 %    |              |

 expenses increased $124. 3 million. 9% December 2019 2018 $114. 4 million employee costs$45. 1 million stock-based compensation payroll $7. 4 million computer hardware software $2. 5 million professional services fees expanded programs.
 expenses increased $94. 7 million. 6% December 31, 2018 2017 $89. 6 million employee costs $3. 1 million computer hardware software $2. million professional services fees.
 2019 2018 2017
 2018 2017 %
 development $ 355,015 $ 230,674 $ 135,997 53. 9 % 69. 6 %
 revenues 22. 5 % 21. 5 % 20. 2 %


Customer Receivables and Contract Balances
The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, 2019 and December 31, 2018:
(1) Gross customer receivables of $2.3 billion and $2.5 billion, net of allowance for doubtful accounts of $94 million and $132 million, at December 31, 2019 and December 31, 2018, respectively.
Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheet. During the years ended December 31, 2019 and December 31, 2018, we recognized $630 million and $295 million, respectively, of revenue that was included in contract liabilities as of January 1, 2019 and January 1, 2018, respectively.

                        | December 31, 2019     | December 31, 2018
----------------------- | --------------------- | -----------------
                        | (Dollars in millions) |
Customer receivables(1) | $2,194                | 2,346
Contract liabilities    | 1,028                 | 860
Contract assets         | 130                   | 140

Receivables Contract Balances
 table balances receivables assets liabilities December 31, 2019 2018:
 Gross receivables $2. 3 billion $2. 5 billion doubtful accounts $94 million $132 million December 31, 2019 2018.
 Contract liabilities goods. defer until obligation. recurring services installation maintenance charges deferred contract term one to five years. deferred revenue consolidated balance sheet. December 31, 2019 2018 recognized $630 million $295 million revenue contract liabilities January 1 2019 2018.
 2019 2018
 Customer $2,194 2,346
 Contract liabilities 1,028
 Contract assets 130


Stock Appreciation Rights Awards
During the second quarter of fiscal 2019, in connection with the completion of the Pinnacle acquisition, we granted 2.3 million cash-settled stock appreciation rights with a fair value estimated at closing date using a Black-Scholes option-pricing model and a grant date price of $36.37 per share to Pinnacle employees in replacement of their unvested stock option awards that were outstanding as of the closing date. Approximately $14.8 million of the fair value of the replacement awards granted to Pinnacle employees was attributable to pre-combination service and was included in the purchase price and established as a liability. As of May 26, 2019, the liability of the replacement stock appreciation rights was $0.9 million, which includes post-combination service expense, the mark-to-market of the liability, and the impact of payouts since acquisition.
The compensation income for our cash-settled stock appreciation rights totaled $13.7 million for fiscal 2019. Included in this amount is income of $14.0 million related to the mark-to-market of the liability established in connection with the Pinnacle acquisition and expense of $0.2 million for accelerated vesting of awards related to Pinnacle integration restructuring activities, net of the impact of marking-to-market these awards based on a lower market price of Conagra common shares. The related tax expense for fiscal 2019 was $3.4 million.
A summary of the stock appreciation rights activity as of May 26, 2019 and changes during the fiscal year then ended is presented below:

                            | Number of Options (in Millions) | Weighted Average Exercise Price | Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in Millions)
--------------------------- | ------------------------------- | ------------------------------- | ------------------------------------------ | ---------------------------------------
Granted                     | 2.3                             | $27.09                          |                                            |
Exercised                   | (0.1)                           | $24.79                          |                                            | $0.1
Expired                     | (1.8)                           | $26.92                          |                                            |
Outstanding at May 26, 2019 | 0.4                             | $28.13                          | 0.16                                       | $0.6
Exercisable at May 26, 2019 | 0.4                             | $28.13                          | 0.16                                       | $0.6

Stock Appreciation Rights Awards
 second quarter 2019 Pinnacle acquisition granted 2. 3 million cash stock appreciation rights estimated closing date Black-Scholes-pricing model $36. 37 per share Pinnacle employees unvested stock option awards. $14. 8 million pre-combination service included purchase price liability. May 26, 2019 liability $0. 9 million post-combination service expense mark-to-market impact payouts acquisition.
 compensation income rights $13. 7 million 2019. $14. 0 million-market liability expense $0. 2 million accelerated vesting Pinnacle restructuring lower market price Conagra common shares. tax expense $3. 4 million.
 summary stock appreciation rights activity May 26, 2019 changes
 Number Options Average Exercise Price Contractual Term Aggregate Intrinsic Value
 Granted. $27.
 Exercised. $24.
 Expired. $26.
 May 26, 2019. 4. 13. 16.
 May 26, 2019. 4. 13. 16.


Realized and unrealized losses of the cross currency swaps are recognized in earnings and reported in foreign exchange (loss) gain in the consolidated statements of loss. The effect of the gains (losses) on cross currency swaps on the consolidated statements of loss is as follows:
The Company is exposed to credit loss to the extent the fair value represents an asset in the event of non-performance by the counterparties to the foreign currency forward contracts, and cross currency and interest rate swap agreements; however, the Company does not anticipate non-performance by any of the counterparties. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transaction. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

                                                                                |          | Year Ended   |
------------------------------------------------------------------------------------- | -------- | ------------ | --------
                                                                                |          | December 31, |
                                                                                | 2019     | 2018         | 2017
                                                                                | $        | $            | $
Realized gains (losses) on maturity and/or partial termination of cross currency swap | —        | (42,271)     | (25,733)
Realized losses                                                                       | (5,062)  | (6,533)      | (18,494)
Unrealized (losses) gains                                                             | (13,239) | 21,240       | 82,668
Total realized and unrealized (losses) gains on cross currency swaps                  | (18,301) | (27,564)     | 38,441

losses cross currency swaps recognized in earnings reported foreign exchange gain consolidated statements loss. effect gains swaps
 Company exposed to credit loss non-performance anticipate non. enters derivative transactions with counterparties rated A- or better Standard & Poor’s A3 Moody’s. interest rate swaps entered with different counterparties reduce concentration risk.
 Year Ended
 December 31,
 2019
 gains (losses) on maturity termination cross currency swap (42,271) (25,733)
 losses (5,062) (6,533) (18,494)
 Unrealized gains (13,239) 82,668
 Total gains cross currency swaps (18,301) (27,564) 38,441