9. DEFERRED REVENUES
Deferred revenues consisted of the following:
Deferred cloud services and license support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed in advance with corresponding revenues generally being recognized ratably over the contractual periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud license and on-premise license revenues typically resulted from customer payments that related to undelivered products and services or specified enhancements.
In connection with our acquisitions, we have estimated the fair values of the cloud services and license support performance obligations assumed from our acquired companies. We generally have estimated the fair values of these obligations assumed using a cost build-up approach. The cost build-up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume these acquired obligations. These aforementioned fair value adjustments recorded for obligations assumed from our acquisitions reduced the cloud services and license support deferred revenues balances that we recorded as liabilities from these acquisitions and also reduced the resulting revenues that we recognized or will recognize over the terms of the acquired obligations during the post-combination periods.

                                                                  |        | May 31,
----------------------------------------------------------------- | ------ | -------
(in millions)                                                     | 2019   | 2018
Cloud services and license support                                | $7,340 | $7,265
Hardware                                                          | 635    | 645
Services                                                          | 360    | 404
Cloud license and on-premise license                              | 39     | 27
Deferred revenues, current                                        | 8,374  | 8,341
Deferred revenues, non-current (in other non-current liabilities) | 669    | 625
Total deferred revenues                                           | $9,043 | $8,966

. DEFERRED REVENUES
 cloud services license support hardware represent customer payments for cloud contracts revenues recognized over contractual periods. services revenues include prepayments recognized as performed. cloud license on-premise license revenues from payments undelivered products services enhancements.
 estimated fair values of cloud services license support obligations from acquired companies. cost build-up approach. value normal profit margin. approximates party obligations. fair value adjustments reduced cloud services license support deferred revenues revenues recognized over obligations post-combination.
 May 31,
 millions) 2019 2018
 Cloud services license support $7,340 $7,265
 Hardware  635 645
 Services 360 404
 Cloud license on-premise license 39  27
 Deferred revenues current 8,374 8,341
 non-current  625
 Total deferred revenues $9,043  $8,966


The activity for unrecognized gross tax benefits is as follows (in millions):
Included in the December 31, 2019 balance of $130.0 million is $97.2 million related to unrecognized tax benefits that, if recognized, would impact the annual effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2019 is $32.8 million of benefit that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
Although the Company cannot predict the timing of resolution with taxing authorities, if any, the Company believes it is reasonably possible that its unrecognized tax benefits will be reduced by $1.5 million in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations. The Company did not recognize any additional tax benefit or expense for interest and penalties during the year ended December 31, 2019.
The Company recognized approximately $0.8 million of tax benefit and $1.5 million of tax expense for interest and penalties during the years ended December 31, 2018 and 2017, respectively. The Company had approximately $5.1 million, $5.1 million, and $5.9 million of accrued interest and penalties at December 31, 2019, 2018, and 2017, respectively. The Company recognizes interest and penalties accrued in relation to unrecognized tax benefits in tax expense.
Tax years prior to 2016 are generally not subject to examination by the IRS except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. The Company is not currently under IRS examination. For state returns, the Company is generally not subject to income tax examinations for years prior to 2015.
The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. With respect to jurisdictions outside the United States, the Company's subsidiaries are generally no longer subject to income tax audits for years prior to 2009. The Company is currently under audit in the following jurisdictions including, but not limited to, Canada, China, the Czech Republic, the Philippines, Singapore and the United Kingdom.

                                                       | 2019   | 2018   | 2017
------------------------------------------------------ | ------ | ------ | ------
Balance at beginning of year                           | $112.2 | $114.8 | $136.7
Acquired balances                                      | 15.5   | —      | —
Additions for tax benefits related to the current year | 9.4    | 7.4    | 23.6
Additions for tax benefits of prior years              | 8.0    | 2.8    | 4.7
Reductions for tax benefits of prior years             | (0.2)  | (1.9)  | (1.6)
Lapse of statute                                       | (8.2)  | (10.9) | (16.3)
Settlements                                            | (6.7)  | —      | (4.9)
Change in rate due to U.S. Tax Reform                  | —      | —      | (27.4)
Balance at end of year                                 | $130.0 | $112.2 | $114.8

activity unrecognized tax benefits
 December 31, 2019 balance $130. 0 million $97. 2 million annual tax rate. $32. 8 million adjustments tax deferred taxes.
 resolution unrecognized tax benefits by $1. 5 million 12 months settlement expiration statute of limitations. additional tax benefit expense interest penalties December 31, 2019.
 recognized $0. 8 million tax benefit $1. 5 million tax expense for interest penalties December 31, 2018 2017. $5. 1 million $5. 1 million $5. 9 million accrued interest penalties December 31, 2019. recognizes interest penalties unrecognized tax benefits.
 years prior to 2016 not subject examination. not under IRS examination. not subject income tax examinations prior 2015.
 subject examinations foreign tax jurisdictions. subsidiaries no longer subject tax audits prior 2009. under audit jurisdictions Canada China Czech Republic Philippines Singapore United Kingdom.
 2019 2018 2017
year $112. $114. 8 $136.
 Acquired balances 15. 5
 Additions tax benefits 9. 4 7. 23. 6
 prior years 8. 2. 4.
 Reductions. (1. 9).
 (8. (10. (16.
 (6. 7) (4.
 Change. Tax Reform (27.
 end year $130. $112. $114.


Profitability Measures
Net Income:
Our net income in the fiscal year ended February 28, 2019 was $18.4 million as compared to net income of $16.6 million in the same period last year. The increase is due to a $11.7 million increase in operating income, $3.0 million increase in investment income and $12.0 million decrease in income tax provision. The increase in operating income was primarily attributable to $21.0 million decrease in general and administrative expense due to reduced legal provision and related costs as further discussed in Note 19 and partially offset by $8.0 million of restructuring expense.
Adjusted EBITDA for Telematics Systems in the fiscal year ended February 28, 2019 decreased $8.1 million compared to the same period last year due to lower revenues as described above and the impact of high margin revenue earned on a strategic technology partnership arrangement in fiscal 2018. These factors were coupled with higher operating expenses in Telematics Systems as a result of increased headcount and outsourced professional service fees. Adjusted EBITDA for Software and Subscription Services increased $4.9 million compared to the same period last year due primarily to continued growth in revenues and gross profit from our Italia market and higher gross profit from our fleet management services.
See Note 20 for reconciliation of Adjusted EBITDA by reportable segments and a reconciliation to GAAP-basis net income (loss).

                                 | Fiscal years ended |         |          |
-------------------------------- | ------------------ | ------- | -------- | --------
                                 | February 28,       |         |          |
(In thousands)                   | 2019               | 2018    | $ Change | % Change
                                 | Segment            |         |          |
Telematics Systems               | $40,821            | $48,943 | $(8,122) | (17.0%)
Software & Subscription Services | 13,093             | 8,233   | 4,860    | 59.0%
Corporate Expense                | (5,699)            | (4,794) | (905)    | 19.0%
Total Adjusted EBITDA            | $48,215            | $52,382 | $(4,167) | (8.0%)

Profitability Measures
 Net Income
 fiscal year 2019 $18. 4 million $16. 6 million last year. increase due $11. 7 million operating $3. million investment income $12. million income tax provision. increase attributable $21. million decrease expense reduced legal provision costs offset $8. million restructuring expense.
 Adjusted EBITDA Telematics Systems decreased $8. 1 million lower revenues high margin revenue. higher operating expenses increased headcount outsourced service fees. EBITDA Software Subscription Services increased $4. 9 million growth revenues profit Italia market higher profit fleet management services.
 Note 20 reconciliation Adjusted EBITDA GAAP net income (loss.
 Fiscal years
 Telematics Systems $40,821 $48,943(8,122).
 Software Subscription Services.
 Corporate Expense (5,699) (4,794).
 Adjusted EBITDA $48,215 $52,382 $(4,167.


The impact of product mix within our TS segment on gross margins for the fiscal years ended September 30 was as follows:
The overall TS segment gross margin as a percentage of sales remained the same in fiscal year 2019 when compared to fiscal year 2018. The $0.6 million increase in our TS segment product gross margins resulted from an increase in product revenues in the U.S. division, partially offset by a decrease in the U.K division. The $1.1 million.increase in the TS segment service gross margins primarily resulted from increased service revenues in the U.S. division.

         |         |     | 2018                         |     | Increase |
-------- | ------- | --- | ---------------------------- | --- | -------- | ---
         | GM$     | GM% | GM$                          | GM% | GM$      | GM%
         |         |     | (Dollar amount in thousands) |     |          |
Products | $7,462  | 13% | $6,886                       | 13% | $576     | -%
Services | 6,427   | 56% | 5,376                        | 55% | 1,051    | 1
Total    | $13,889 | 20% | $12,262                      | 20% | 1,627    | -%

impact product mix TS segment gross margins fiscal years September 30
 TS segment gross margin sales same 2019 compared 2018. $0. 6 million increase product gross margins increase product revenues U. S. division offset decrease U. K division. $1. 1 million. increase service gross margins increased service revenues U. S. division.
 Increase
$
 amount thousands
 Products $7,462  13% $6,886
 Services 6,427 56%
 Total $13,889 20% $12,262


Movements in Class A ordinary share capital
Class A shares as of June 30, 2019 and June 30, 2018 does not include 911,367 and 827,871 shares of restricted stock outstanding, respectively, that are subject to forfeiture or repurchase.

                                                   | Number of Shares | Amount
-------------------------------------------------- | ---------------- | ---------------------
                                                   |                  | (U.S. $ in thousands)
Details                                            |                  |
Balance as of June 30, 2017                        | 91,979,704       | $9,198
Conversion of Class B ordinary shares              | 5,861,707        | 587
Exercise of share options                          | 1,902,084        | 190
Issuance for settlement of RSUs                    | 5,253,809        | 525
Vesting of share options that were early exercised | 374,496          | 37
Balance as of June 30, 2018                        | 105,371,800      | 10,537
Conversion of Class B ordinary shares              | 5,219,947        | 522
Exercise of share options                          | 1,496,875        | 150
Issuance for settlement of RSUs                    | 4,674,873        | 467
Vesting of share options that were early exercised | 510,071          | 51
Balance as of June 30, 2019                        | 117,273,566      | $11,727

Class A capital
 2019 2018 911,367 827,871 shares restricted stock subject forfeiture repurchase.
.
 Balance June 30 2017 91,979,704 $9,198
 Conversion Class B shares,707
 1,902,084
 settlement 5,253,809
 Vesting,496
 Balance June 30 2018 105,371,800  10,537
 Conversion Class B shares 5,219,947 522
 1,496,875
 settlement RSUs 4,674,873 467
 Vesting 510,071
 Balance June 30 2019 117,273,566 $11,727


14. Fair Value Measures
The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.
• Level 1 - Quoted prices in active markets for identical assets or liabilities. • 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 for the asset or liability supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The disclosure of fair value of certain financial assets and liabilities recorded at cost are as follows:
Cash and cash equivalents, accounts receivable, and accounts payable: The carrying amount approximates fair value due to the short maturity of these instruments.
Long-term debt: The carrying value of the Company’s long-term debt is at its stated value. We have not elected to carry our long-term debt at fair value. Fair values for debt are based on quoted market prices or published forward interest rate curves, which are level 2 inputs. Estimated fair values are management’s estimates, which is a level 3 input; however, when there is no readily available market data, the estimated fair values may not represent the amounts that could be realized in a current transaction, and the fair values could change significantly. The fair value of the Company’s debt is sensitive to changes in the general level of U.S. interest rates. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes. A one percent (1%) decrease in interest rates would increase the net fair value of the Company’s debt by $23,000 at June 1, 2019. The fair value and carrying value of the Company’s long-term debt were as follows (in thousands):

                 | June 1, 2019   |            | June 2, 2018   |
---------------- | -------------- | ---------- | -------------- | ----------
                 | Carrying Value | Fair Value | Carrying Value | Fair Value
Note payable     | $1,283         | $1,309     | $4,750         | $4,732
Long-term leases | 1,054          | 940        | 1,340          | 1,171
                 | $2,337         | $2,249     | $6,090         | $5,903

. Fair Value Measures
 Company financial nonfinancial assets liabilities fair value hierarchy. fair value asset price sold transaction between unrelated parties. fair value transfer new obligor not creditor.
 Level 1 Quoted prices markets identical assets. Level 2 Inputs other. Level 3 Unobservable inputs market activity significant fair value.
 disclosure fair value financial assets liabilities
 Cash equivalents accounts receivable payable carrying amount approximates fair value short maturity.
 Long-term debt value stated value. not fair value. Fair values based on quoted market prices forward interest rate curves level 2 inputs. Estimated fair values estimates level 3 no market data estimated may not represent current transaction change. debt sensitive to U. S. interest rates. use interest rate derivative instruments manage exposure interest rate changes. one percent (1%) decrease interest rates net fair value debt by $23,000 at June 1, 2019.fair carrying long-term debt
 June 1, 2019 June 2, 2018
 Note payable $1,283 $1,309 $4,750
 Long-term leases 1,054 1,171
 $2,337 $2,249 $6,090 $5,903


C) DIVIDENDS
For the year ended August 31, 2019, quarterly eligible dividends of $0.525 per share, for a total of $2.10 per share or $103.7 million, were paid to the holders of multiple and subordinate voting shares, compared to quarterly eligible dividends of $0.475 per share, for a total of $1.90 per share or $93.7 million for the year ended August 31, 2018.
At its October 30, 2019 meeting, the Board of Directors of Cogeco Communications declared a quarterly eligible dividend of $0.58 per share for multiple voting and subordinate voting shares, payable on November 27, 2019 to shareholders of record on November 13, 2019.

Years ended August 31,                 | 2019    | 2018
-------------------------------------- | ------- | ------
(In thousands of Canadian dollars)     | $       | $
Dividends on multiple voting shares    | 32,951  | 29,813
Dividends on subordinate voting shares | 70,757  | 63,886
                                       | 103,708 | 93,699

DIVIDENDS
 August 31, 2019 quarterly dividends $0. 525 share $2. 10 $103. 7 million paid multiple voting shares $0. 475 share $1. 90 $93. 7 million 2018.
 October 30, 2019 Board Cogeco Communications dividend $0. 58 share payable November 27, shareholders November 13,.
 August
 Dividends multiple voting shares 32,951 29,813
 subordinate voting 70,757 63,886
 93


Deferred Revenue
The opening balances of current and long-term deferred revenue were $30,694 and $1,352, respectively, as of January 1, 2018.
Expressed in US $000's except share and per share amounts

                  | Years ended       |
----------------- | ----------------- | -----------------
                  | December 31, 2019 | December 31, 2018
                  | $                 | $
Current portion   | 56,691            | 39,180
Long term portion | 5,969             | 1,881
                  | 62,660            | 41,061

Deferred
 balances long-term $30,694 $1,352 January 1, 2018.
 Expressed US $000
 December 31, 2019 2018
 Current 56,691 39,180
 Long 5,969
 62,660 41,061


(D.6) Non-Current Assets by Region
The table below shows non-current assets excluding financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts.
Non-Current Assets by Region
For a breakdown of our employee headcount by region, see Note (B.1) , and for a breakdown of revenue by region, see Note (A.1) .

€ millions       | 2019   | 2018
---------------- | ------ | ------
Germany          | 4,486  | 4,184
Rest of EMEA     | 5,386  | 4,742
EMEA             | 9,872  | 8,926
United States    | 29,744 | 22,133
Rest of Americas | 411    | 258
Americas         | 30,154 | 22,391
APJ              | 1,276  | 922
SAP Group        | 41,302 | 32,239

. Non-Current Assets Region
 table shows non-current assets excluding financial deferred tax post-employment benefit rights insurance contracts.
 employee headcount Note. revenue.
 Germany 4,486 4,184
 EMEA 5,386 4,742
 United States 29,744 22,133
 Americas 411
 30,154 22,391
 1,276
 SAP Group 41,302 32,239


The Group has non-current borrowing facilities denominated in Australian Dollars (“AUD”) and New Zealand Dollars (“NZD”). All facilities are interest only facilities with any drawn balances payable at maturity. Drawn amounts and facility limits are as follows:
The major terms of these agreements are as follows: • Maturity dates on the facilities range from 23 July 2020 to 23 December 2026 (2018: 23 July 2019 to 23 December 2026). • The interest rate applied is the bank bill rate plus a margin depending on the gearing ratio. • Security has been granted over the Group's freehold investment properties.
The Group has a bank overdraft facility with a limit of $3m that was undrawn at 30 June 2019 and 30 June 2018. During the year ended 30 June 2019, the Group converted an existing AUD facility of $25m into an NZD facility of $25.75m, refinanced part of the existing debt facilities, and increased its club banking facilities by AUD $100m and NZD $50m (year ended 30 June 2018 facilities increased by $150m AUD and $25m NZD).
The Group have complied with the financial covenants of their borrowing facilities during the 2019 and 2018 reporting periods (see note 16). The fair value of borrowings approximates carrying value. Details of the exposure to risk arising from current and non-current borrowings are set out in note 15.

                                 | 2019    | 2018
-------------------------------- | ------- | -------
                                 | $'000   | $'000
Bank finance facilities (AUD)    |         |
Drawn amount                     | 663,800 | 520,300
Facility limit                   | 680,000 | 605,000
Bank finance facilities (NZD)    |         |
Drawn amount                     | 192,250 | 87,500
Facility limit                   | 196,750 | 121,000
AUD equivalent of NZD facilities |         |
Drawn amount                     | 184,038 | 80,048
Facility limit                   | 188,346 | 110,696

Group has non-current borrowing facilities Australian New Zealand Dollars. interest only balances payable at maturity. amounts limits
 Maturity dates 23 July 2020 to 23 December 2026. interest rate bank bill rate plus margin gearing ratio. Security granted over Group freehold investment properties.
 bank overdraft facility limit $3m undrawn 30 June 2019 June 2018. converted AUD facility $25m into $25. 75m refinanced debt increased club banking facilities AUD $100m NZD $50m 2018 increased $150m AUD $25m NZD.
 complied with financial covenants borrowing 2019 2018. fair value borrowings approximates carrying value. exposure risk borrowings note 15.
 663,800 520,300
 605,000
 (NZD
 192,250 87,500
,750
 184,038 80,048
 188,346 110


S. Selected Quarterly Financial Data (unaudited)
Quarterly financial data for fiscal 2020 and 2019 were as follows (tables in millions, except per share amounts):
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control (refer to Note B).

Fiscal 2020                                                                                | Q1 2020 (1) | Q2 2020 (1) | Q3 2020 (1) | Q4 2020
---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ----------- | -------
Total revenue                                                                                | $2,450      | $2,632      | $2,656      | $3,073
Net income attributable to VMware, Inc.                                                                                | 380         | 5,303       | 407         | 321
common stockholders, basic for Classes A and B Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B | $0.91       | $12.72      | $0.98       | $0.77
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B                                              | $0.89       | $12.47      | $0.96       | $0.76

. Selected Quarterly Financial Data
 2020 2019 millions share
 Adjusted recast prior information Pivotal acquisition transaction entities common control.
 Fiscal 2020 Q1 Q2 Q3 Q4
 Total revenue $2,450 $2,632  $2,656  $3,073
 Net income VMware Inc. 380  5,303  407  321
 common stockholders Classes B income share. $0. 91 $12. 72. 98. 77
 VMware. Classes B $0. 89 $12. 47. 96.


The breakout of product and service revenues was as follows:
Our product revenues increased $158.1 million, or 9%, in 2019 from 2018 primarily due to higher sales in Semiconductor Test of testers for 5G infrastructure and image sensors, higher sales in Storage Test of 3.5” hard disk drive testers, and higher demand in Industrial Automation, partially offset by a decrease in sales in Semiconductor Test automotive and analog test segments. Service revenues increased $36.1 million or 10%.
In 2019 and 2018, no single direct customer accounted for more than 10% of our consolidated revenues. In 2019 and 2018, our five largest direct customers in aggregate accounted for 27% and 27% of our consolidated revenues, respectively.
We estimate consolidated revenues driven by Huawei Technologies Co. Ltd. (“Huawei”), combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 11% and 4% of our consolidated revenues in 2019 and 2018, respectively. We estimate consolidated revenues driven by another OEM customer, combining direct sales to that customer with sales to the customer’s OSATs, accounted for approximately 10% and 13% of our consolidated revenues in 2019 and 2018, respectively.

                  | 2019     | 2018          | 2018-2019 Dollar Change
----------------- | -------- | ------------- | -----------------------
                  |          | (in millions) |
Products revenues | $1,887.7 | $1,729.6      | $158.1
Services revenues | 407.3    | 371.2         | 36.1
                  | $2,295.0 | $2,100.8      | $194.2

product service revenues
 product revenues increased $158. 1 million 2019 2018 due higher sales Semiconductor Test 5G Storage Test 3. 5” hard disk testers Industrial Automation offset decrease Semiconductor Test automotive analog test segments. Service revenues increased $36. 1 million 10%.
 2019 2018 no direct customer more 10% consolidated revenues. five largest customers 27% 27% revenues.
 revenues Huawei Technologies Co. 11% 4% revenues. another OEM customer 10% 13%.
 2018 2018-2019 Dollar Change
 millions
 Products revenues $1,887. 7 $1,729. 6 $158.
 Services revenues 407.
 $2,295. $2,100. $194.


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
The provision for income taxes from continuing operations is summarized as follows:
The Company’s effective tax rates differ from the U.S. federal statutory rate of 21% for the years ended December 31, 2019 and December 31, 2018, primarily due to the benefit of tax credits and earnings in foreign jurisdictions which are subject to lower tax rates, offset by additional GILTI tax in the US and withholding taxes.

                                 |          | Years Ended December 31, |
-------------------------------- | -------- | ------------------------ | --------
                                 | 2019     | 2018                     | 2017
Current:                         |          |                          |
Federal                          | $(9,627) | $1,423                   | $26,550
State                            | 882      | 12                       | 601
Foreign                          | 18,429   | 13,772                   | 9,621
Total current provision          | $9,684   | $15,207                  | $36,772
Deferred:                        |          |                          |
Federal                          | $ 3,822  | $  4,021                 | $ 28,297
State                            | (178)    | 2,363                    | (1,000)
Foreign                          | (2,629)  | 3,636                    | (1,979)
Total deferred provision         | 1,015    | 10,020                   | 25,318
Total provision for income taxes | $10,699  | $25,227                  | $62,090

ADVANCED ENERGY INDUSTRIES. FINANCIAL STATEMENTS share
 provision income taxes operations
 tax rates differ. federal rate 21% 2019 2018 due tax credits earnings foreign jurisdictions GILTI tax withholding taxes.
 Years Ended
 2018
 Current
 Federal(9,627) $1,423 $26,550
 State
 Foreign 18,429 13,772
 provision $9,684 $15,207 $36,772
 Deferred
 Federal 3,822 4,021 28,297
 State
 Foreign 3,636
 deferred provision 1,015 10,020 25,318
 income taxes $10,699 $25,227 $62,090


Other (Income) Expenses
nm - not meaningful
Interest income. Interest income decreased $64,000 during fiscal 2018 as compared to fiscal 2017.
Interest expense. Interest expense consists of costs associated with capital leases and loans on corporate-owned life insurance policies.
Other (income) expense, net. Other (income) expense, net consists mainly of the impact of foreign currency due to movement of European and Asian currencies against the US dollar.

                                  | Year ended March 31, |        | (Unfavorable) favorable |
--------------------------------- | -------------------- | ------ | ----------------------- | -------
(Dollars in thousands)            | 2018                 | 2017   | $                       | %
Other (income) expenses           |                      |        |                         |
Interest (income)                 | $(98)                | $(162) | $(64)                   | (39.5)%
Interest expense                  | 10                   | 15     | 5                       | 33.3%
Other (income) expense, net       | (391)                | 224    | 615                     | nm
Total other (income) expense, net | $(479)               | $77    | $556                    | nm

(Income Expenses
 Interest income. decreased $64,000 2018 2017.
 Interest expense. costs capital leases loans corporate life insurance policies.
 expense. impact foreign currency European Asian currencies against US dollar.
 ended March 31,
 thousands 2018 2017
 expenses
 Interest (income $(98) $(162) $(64).
 Interest expense.
 (income expense net (391) 224 615
 Total expense $(479) $77 $556


Note 15—Segments and Geographic Information
We operate in two reportable segments consisting of the Probe Cards Segment and the Systems Segment. Our chief operating decision maker ("CODM") is our Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. The following table summarizes the operating results by reportable segment (dollars in thousands):
Operating results provide useful information to our management for assessment of our performance and results of operations. Certain components of our operating results are utilized to determine executive compensation along with other measures.
Corporate and Other includes unallocated expenses relating to amortization of intangible assets, share-based compensation expense, acquisition-related costs, including charges related to inventory stepped up to fair value, and other costs, which are not used in evaluating the results of, or in allocating resources to, our reportable segments. Acquisition-related costs include transaction costs and any costs directly related to the acquisition and integration of acquired businesses.

             |             |         | Fiscal 2019         |
------------ | ----------- | ------- | ------------------- | --------
             | Probe Cards | Systems | Corporate and Other | Total
Revenues     | $491,363    | $98,101 | $—                  | $589,464
Gross profit | $211,382    | $50,927 | $(24,813)           | $237,496
Gross margin | 43.0 %      | 51.9 %  | — %                 | 40.3 %
             |             |         | Fiscal 2018         |
             | Probe Cards | Systems | Corporate and Other | Total
Revenues     | $434,269    | $95,406 | $—                  | $529,675
Gross profit | $187,320    | $47,074 | $(24,055)           | $210,339
Gross margin | 43.1 %      | 49.3 %  | — %                 | 39.7 %
             |             |         | Fiscal 2017         |
             | Probe Cards | Systems | Corporate and Other | Total
Revenues     | $454,794    | $93,647 | $—                  | $548,441
Gross profit | $195,903    | $46,647 | $(26,953)           | $215,597
Gross margin | 43.1 %      | 49.8%   | — %                 | 39.3 %

Note 15—Segments Geographic Information
 operate segments Probe Cards Systems. chief Chief Executive Officer reviews results performance. table summarizes operating results segment
 results information performance. executive compensation measures.
 includes unallocated expenses amortization assets share-based compensation acquisition-related costs other costs not evaluating allocating resources. Acquisition-related costs transaction costs acquisition integration businesses.
 Fiscal 2019
 Cards Systems
 Revenues $491,363 $98,101 $589,464
 Gross profit $211,382  $50,927 $237,496
 Gross margin 43. 0 % 51. 9 % 40. 3 %
 Fiscal 2018
 Revenues $434,269  $95,406 $529,675
 Gross profit $187,320  $47,074 $(24,055 $210,339
 margin 43. 1 % 49. 3 % 39. 7 %
 Fiscal 2017
Revenues $454,794 $93,647,441
 profit $195,903 $46,647 $215,597
 margin. 49. 3


The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):
The Company considered both positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, historic book profit/loss, prior taxable income/loss, and results of future operations, and determined that a valuation allowance was not required for a significant portion of its deferred tax assets. A valuation allowance of $31.4 million and $28.5 million remained as of July 31, 2019 and 2018, respectively.
The increase of $2.9 million in the valuation allowance in the current fiscal year relates primarily to net operating losses and income tax credits incurred in certain tax jurisdictions for which no tax benefit was recognized.

                                     | As of July 31, |
------------------------------------ | -------------- | -------
                                     | 2019           | 2018
Accruals and reserves                | $7,870         | $12,129
Stock-based compensation             | 6,353          | 7,658
Deferred revenue                     | 2,316          | 4,023
Property and equipment               | —              | 1,268
Net operating loss carryforwards     | 55,881         | 56,668
Tax credits                          | 74,819         | 60,450
Total deferred tax assets            | 147,239        | 142,196
Less valuation allowance             | 31,421         | 28,541
Net deferred tax assets              | 115,818        | 113,655
Less deferred tax liabilities:       |                |
Intangible assets                    | 7,413          | 11,461
Convertible debt                     | 10,274         | 11,567
Property and equipment               | 1,435          | —
Unremitted foreign earnings          | 302            | 258
Capitalized commissions              | 6,086          | —
Total deferred tax liabilities       | 25,510         | 23,286
Deferred tax assets, net             | 90,308         | 90,369
Less foreign deferred revenue        | —              | 69
Less foreign capitalized commissions | 906            | —
Total net deferred tax assets        | 89,402         | 90,300

tax effects differences deferred tax assets liabilities
 Company valuation allowance required deferred tax assets. allowance $31. 4 million $28. 5 million remained July 31, 2019 2018.
 increase $2. 9 million operating losses tax credits jurisdictions.
 Accruals reserves $7,870 $12,129
 Stock-based compensation 6,353,658
 Deferred revenue 2,316
 Property
 loss 55,881 56,668
 Tax credits 74,819
 deferred tax assets 147,239
 Less valuation allowance 31,421
 deferred tax assets 115,818 113,655
 Less liabilities
 Intangible assets 7,413 11,461
 Convertible debt 10,274,567
 Property equipment 1,435
 Unremitted foreign earnings
 Capitalized commissions
 deferred tax liabilities 25,510 23,286
 90,308
 Less foreign deferred revenue
commissions 906
 tax 89,402 90,300


Product warranty liabilities:
Equipment and software systems sales include a standard product warranty. The following tables summarize the activity related to product warranty liabilities and their balances as reported in our consolidated balance sheets (in millions):

                                  | Year Ended     |
--------------------------------- | -------------- | --------------
                                  | April 26, 2019 | April 27, 2018
Balance at beginning of period    | $ 40           | $ 50
Expense accrued during the period | 22             | 16
Warranty costs incurred           | (22)           | (26)
Balance at end of period          | $ 40           | $ 40
Total warranty liabilities        | $ 40           | $  40

warranty liabilities
 Equipment warranty. tables summarize activity liabilities balances balance sheets
 April 26, 2019 April 27, 2018
 Balance $ 40 $ 50
 Expense accrued
 Warranty costs incurred
 end period $ 40
 Total warranty liabilities $


For a particular tax-paying component of the Company and within a particular tax jurisdiction, all current deferred tax liabilities and assets are offset and presented as a single amount, similarly to non-current deferred tax liabilities and assets. The Company does not offset deferred tax liabilities and assets attributable to different tax-paying components or to different tax jurisdictions.
The net deferred tax assets are recorded in legal entities which have been historically profitable and are expected to be profitable in the next coming years.

                                                        | December 31, 2019 | December 31, 2018
------------------------------------------------------- | ----------------- | -----------------
Tax loss carryforwards and investment credits           | 612               | 603
Less unrecognized tax benefit                           | (21)              | (20)
Tax loss carry forwards net of unrecognized tax benefit | 591               | 583
Inventory valuation                                     | 28                | 28
Impairment and restructuring charges                    | 6                 | 14
Fixed asset depreciation in arrears                     | 39                | 35
Increased depreciation incentives                       | 213               | 211
Capitalized development costs                           | 118               | 108
Receivables for government funding                      | 14                | 11
Tax credits granted on past capital investments         | 1,151             | 1,155
Pension service costs                                   | 81                | 65
Stock awards                                            | 6                 | 7
Operating lease liabilities                             | 40                | —
Commercial accruals                                     | 15                | 12
Other temporary differences                             | 22                | 26
Total deferred tax assets                               | 2,324             | 2,255
Valuation allowances                                    | (1,534)           | (1,548)
Deferred tax assets, net                                | 790               | 707
Accelerated fixed asset depreciation                    | (20)              | (16)
Acquired intangible assets                              | (16)              | (13)
Advances of government funding                          | (31)              | (12)
Operating lease right-of-use assets                     | (40)              | —
Other temporary differences                             | (7)               | (7)
Deferred tax liabilities                                | (114)             | (48)
Net deferred income tax asset                           | 676               | 659

tax-paying current deferred tax liabilities offset. offset components jurisdictions.
 net deferred tax assets recorded entities profitable expected.
 2018
 Tax loss carryforwards investment credits 612 603
 Less unrecognized tax benefit
 loss 591
 Inventory valuation 28
 Impairment restructuring charges
 Fixed asset depreciation arrears
 Increased depreciation incentives 213
 Capitalized development costs 118
 Receivables government funding
 Tax credits past capital investments 1,151
 Pension service costs
 Stock awards
 Operating lease liabilities
 Commercial accruals
 temporary differences
 deferred tax assets 2,324 2,255
 Valuation allowances (1,534)
 790 707
 Accelerated fixed asset depreciation
 Acquired intangible assets
 government funding
 Operating lease right-of-use assets
 temporary differences
 Deferred tax liabilities (114)
deferred 676 659


Sales and Marketing
Sales and marketing expenses in 2019 decreased by $7.6 million, or 32%, as compared to 2018. This decrease was primarily due to a reduction in the global sales support and marketing headcount, including reductions that were part of our restructuring activities during 2019 (refer to Note 4 of the accompanying consolidated financial statements), contributing to net decreases of $4.8 million in personnel-related costs, and $1.0 million in allocated facilities and information technology costs as compared to 2018. Restructuring costs in 2019 decreased $0.4 million, as there were additional restructuring activities in 2018, including a headcount reduction of approximately 13% of our workforce and the closure of certain leased facilities. The remaining decrease during 2019 was primarily the result of lower marketing costs of $0.6 million, as we eliminated or shifted the timing of certain of our marketing activities.

                         | Years Ended December 31, |         | Change   |
------------------------ | ------------------------ | ------- | -------- | -----
                         | 2019                     | 2018    | $        | %
                         | (dollars in thousands)   |         |          |
Sales and marketing      | $15,836                  | $23,425 | $(7,589) | (32)%
Percent of revenues, net | 32%                      | 40%     |          |

Sales Marketing
 expenses 2019 decreased $7. 6 million 32%, compared 2018. due reduction global sales marketing headcount restructuring activities Note decreases $4. 8 million personnel $1. 0 million facilities information technology costs. Restructuring costs decreased $0. 4 million headcount reduction 13% closure leased facilities. remaining decrease lower marketing costs $0. 6 million timing activities.
 Years Ended December 31,
 2019 2018 %
 Sales marketing $15,836 $23,425 $(7,589) (32)%
 revenues 32% 40%


13. INCOME TAXES
The Company files income tax returns in the U.S. federal jurisdiction and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015.
Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, the Company provides valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Included in the balances at December 31, 2019 and 2018, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the periods ended December 31, 2019 and 2018, the Company did not recognize interest and penalties.
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the year ended December 31, 2019 and 2018 due to the following:

                                          | 2019     | 2018
----------------------------------------- | -------- | --------
Net taxable (loss) at effective tax rates | $(2,508) | $(1,567)
Stock compensation expense                | 119      | 358
Amortization of debt discount             | 94       | 10
Impairment of goodwill                    | -        | 519
Other                                     | (223)    | (153)
Valuation allowance                       | 2,518    | 833
Income tax expense                        | $-       | $-

. INCOME TAXES
 Company files returns U. S. federal California. no subject to. federal non. tax examinations before 2015.
 Deferred income taxes provided temporary differences between assets liabilities tax. provides valuation allowances against deferred tax assets realization uncertain. balances December 31, 2019 2018 no tax positions ultimate deductibility certain uncertainty timing. disallowance shorter deductibility period affect annual tax rate payment cash.
 interest unrecognized tax benefits penalties operating expenses. December 31, 2019 2018 interest penalties.
 income tax provision differs from. federal income tax rate income December 31, 2019 2018
 Net taxable (loss) rates $(2,508)  $(1,567)
 Stock compensation expense 119
 Amortization debt discount
 Impairment goodwill
 Valuation allowance 2,518 833
 Income tax expense $


Combined Incentive Plan Information
RSU share activity under the 2004 Plan is set forth below:
The total intrinsic value of RSUs which vested during the years ended March 31, 2019, 2018 and 2017 was $229.3 million, $146.0 million and $166.1 million, respectively. The aggregate intrinsic value of RSUs outstanding at March 31, 2019 was $522.0 million, calculated based on the closing price of the Company's common stock of $82.96 per share on March 29, 2019. At March 31, 2019, the weighted average remaining expense recognition period was 1.91 years.

                                   | Number of Shares | Weighted Average Grant Date Fair Value
---------------------------------- | ---------------- | --------------------------------------
Nonvested shares at March 31, 2016 | 6,307,742        | $36.76
Granted                            | 1,635,655        | 51.46
Assumed upon acquisition           | 2,059,524        | 46.57
Forfeited                          | (722,212)        | 43.58
Vested                             | (2,861,253)      | 38.60
Nonvested shares at March 31, 2017 | 6,419,456        | 42.06
Granted                            | 1,267,536        | 77.26
Forfeited                          | (279,051)        | 49.65
Vested                             | (1,735,501)      | 38.00
Nonvested shares at March 31, 2018 | 5,672,440        | 50.79
Granted                            | 1,951,408        | 77.83
Assumed upon acquisition           | 1,805,680        | 91.70
Forfeited                          | (408,242)        | 73.36
Vested                             | (2,729,324)      | 61.51
Nonvested shares at March 31, 2019 | 6,291,962        | $64.81

Incentive Plan
 RSU 2004
 value RSUs 2018 2017 $229. million $146. $166. million. value March 31, 2019 $522. million closing price common stock $82. per share March 29, 2019. average expense 1. 91 years.
 Average
 Nonvested shares March 31, 2016 6,307,742 $36. 76
 1,635,655 51.
 2,059,524.
 Forfeited.
 (2,861,253).
 shares March 31, 2017,456.
 1,267,536 77.
 Forfeited.
,735,501).
 March 31, 2018 5,672,440.
 1,951,408.
 1,805,680.
 Forfeited.
,729,324).
 shares March 31, 2019 6,291,962 $64.


Costs and Expenses
Cost of Revenues
The following tables detail the components of cost of revenues in dollars (amounts in millions) and as a percentage of associated net revenues:
Cost of Revenues—Product Sales:
The decrease in product costs for 2019, as compared to 2018, was due to the decrease in product sales, primarily associated with the Destiny franchise (reflecting our sale of the publishing rights for Destiny to Bungie in December 2018).
The decrease in software royalties, amortization, and intellectual property licenses related to product sales for 2019, as compared to 2018, was primarily due to a decrease of $133 million in software amortization and royalties from Activision, primarily due to the Destiny franchise. The decrease was partially offset by:
higher software amortization and royalties for 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; software amortization and royalties from Sekiro: Shadows Die Twice, which was released in March 2019; and higher software amortization and royalties for Call of Duty: Modern Warfare, which was released in October 2019, as compared to Call of Duty: Black Ops 4.
Cost of Revenues—Subscription, Licensing, and Other Revenues:
The decrease in game operations and distribution costs for 2019, as compared to 2018, was primarily due to a decrease of $50 million in service provider fees such as digital storefront fees (e.g., fees retained by Apple and Google for our sales on their platforms), payment processor fees, and server bandwidth fees.
The decrease in software royalties, amortization, and intellectual property licenses related to subscription, licensing, and other revenues for 2019, as compared to 2018, was primarily due to:
a decrease of $122 million in amortization of internally-developed franchise intangible assets acquired as part of our acquisition of King; a decrease of $36 million in software amortization and royalties from Activision, driven by the Destiny franchise, partially offset by software royalties on Call of Duty: Mobile, which was released in October 2019; and  lower amortization of capitalized film costs due to the release of the third season of the animated TV series, Skylanders™ Academy, in September 2018, with no comparable release in 2019.

                                                                 | Year Ended December 31, 2019 | % of associated net revenues | Year Ended December 31, 2018 | % of associated net revenues | Increase (Decrease)
---------------------------------------------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | -------------------
Cost of revenues—product sales:                                  |                              |                              |                              |                              |
Product costs                                                    | $656                         | 33%                          | $719                         | 32%                          | $(63)
Software royalties, amortization, intellectual property licenses | 240                          | 12                           | 371                          | 16                           | (131)
Cost of revenues—subscription, licensing, and other revenues:    |                              |                              |                              |                              |
Game operations and distribution costs                           | 965                          | 21                           | 1,028                        | 20                           | (63)
Software royalties, amortization, intellectual property licenses | 233                          | 5                            | 399                          | 8                            | (166)
Total cost of revenues                                           | $2,094                       | 32%                          | $2,517                       | 34%                          | $(423)

Costs Expenses
 Revenues
 tables detail cost revenues dollars millions percentage net revenues
 Cost Revenues—Product Sales
 decrease product costs 2019 due to sales Destiny franchise sale publishing rights Bungie.
 decrease software royalties amortization intellectual property licenses due $133 million software amortization royalties Activision Destiny franchise. offset by
 higher amortization royalties Call of Duty: Black Ops 4 Sekiro: Shadows Die Twice March 2019 Call of Duty: Modern Warfare.
 Cost Revenues—Subscription Licensing Other Revenues
 decrease game operations distribution costs 2019 due to decrease $50 million service provider fees digital storefront fees. payment processor server bandwidth fees.
 decrease software royalties amortization intellectual property licenses subscription 2019 due to
decrease $122 million franchise assets King $36 million software amortization royalties Activision Destiny offset royalties Call of Duty: Mobile October 2019 lower amortization film costs third season Academy September 2018 no comparable release 2019.
 Ended December 31, 2019 Increase
 Cost sales
 Product costs $656  33% $719  32% $(63)
 Software royalties amortization intellectual property licenses 240 371
 licensing revenues
 Game operations distribution costs 965 21 1,028
 Software royalties amortization licenses 233
 cost $2,094  32% $2,517  34% $(423)


Other assets
Other assets consisted of the following at December 31, 2019 and 2018 (in thousands):
(1)    See Note 10. "Leases" to our consolidated financial statements for discussion of our lease arrangements.
(1)    (2)    In April 2009, we entered into a credit facility agreement with a solar power project entity of one of our customers for an available amount of €17.5 million to provide financing for a PV solar power system. The credit facility bears interest at 8.0% per annum, payable quarterly, with the full amount due in December 2026. As of December 31, 2019 and 2018, the balance outstanding on the credit facility was €7.0 million ($7.8 million and $8.0 million, respectively).
(3)    In June 2015, 8point3 Energy Partners LP (the “Partnership”), a limited partnership formed by First Solar and SunPower Corporation (collectively the “Sponsors”), completed its initial public offering (the “IPO”). As part of the IPO, the Sponsors contributed interests in various projects to OpCo in exchange for voting and economic interests in the entity, and the Partnership acquired an economic interest in OpCo using proceeds from the IPO.
In June 2018, we completed the sale of our interests in the Partnership and its subsidiaries to CD Clean Energy and Infrastructure V JV, LLC, an equity fund managed by Capital Dynamics, Inc. and certain other co-investors and other parties, and received net proceeds of $240.0 million after the payment of fees, expenses, and other amounts. We accounted for our interests in OpCo, a subsidiary of the Partnership, under the equity method of accounting as we were able to exercise significant influence over the Partnership due to our representation on the board of directors of its general partner and certain of our associates serving as officers of its general partner. During the year ended December 31, 2018, we recognized equity in earnings, net of tax, of $39.7 million from our investment in OpCo, including a gain of $40.3 million, net of tax, for the sale of our interests in the Partnership and its subsidiaries. During the year ended December 31, 2018, we received distributions from OpCo of $12.4 million.
In connection with the IPO, we also entered into an agreement with a subsidiary of the Partnership to lease back one of our originally contributed projects, Maryland Solar, until December 31, 2019. Under the terms of the agreement, we made fixed rent payments to the Partnership’s subsidiary and were entitled to all of the energy generated by the project. Due to certain continuing involvement with the project, we accounted for the leaseback agreement as a financing transaction until the sale of our interests in the Partnership and its subsidiaries in June 2018. Following the sale of such interests, the Maryland Solar project qualified for sale-leaseback accounting, and we recognized net revenue of $32.0 million from the sale of the project.
(4)    See Note 9. “Derivative Financial Instruments” to our consolidated financial statements for discussion of our derivative instruments.

                                | 2019     | 2018
------------------------------- | -------- | -------
Operating lease assets (1)      | $145,711 | $—
Indirect tax receivables .      | 9,446    | 22,487
Notes receivable (2)            | 8,194    | 8,017
Income taxes receivable .       | 4,106    | 4,444
Equity method investments (3) . | 2,812    | 3,186
Derivative instruments (4) .    | 139      | —
Deferred rent .                 | —        | 27,249
Other .                         | 79,446   | 33,495
Other assets                    | $249,854 | $98,878

assets
 December 31, 2019 2018
 See Note 10. "Leases financial statements arrangements.
 April 2009, credit facility agreement solar power project entity €17. 5 million financing power system. interest 8. 0% per annum payable quarterly full due December 2026. December 31, 2019 2018 balance €7. 0 million ($7. 8 million $8. 0 million.
 June 2015, 8point3 Energy Partners LP First Solar SunPower Corporation initial public offering. Sponsors contributed interests OpCo voting economic interests Partnership acquired economic interest OpCo proceeds.
 June 2018 interests Partnership CD Clean Energy Infrastructure V JV Capital. received net proceeds $240. 0 million fees. accounted interests OpCo equity method accounting influence board. December 31, 2018 recognized equity earnings net tax $39. 7 million investment OpCo gain $40. 3 million sale. 31, 2018 received distributions from OpCo $12. 4 million.
agreement subsidiary lease Maryland Solar until December 31, 2019. fixed rent entitled energy. accounted leaseback until sale interests June 2018. Maryland Solar qualified sale-leaseback accounting recognized net revenue $32. 0 million sale.
 Note 9. “Derivative Financial Instruments”.
 Operating lease assets $145,711
 Indirect tax receivables. 9,446 22,487
 Notes receivable 8,194 8,017
 Income taxes receivable. 4,106 4,444
 Equity investments. 2,812 3,186
 Derivative instruments. 139
 Deferred rent. 27,249
. 79,446 33,495
 assets $249,854 $98,878


Contract Costs
As discussed in Note 1, Topic 606 requires the recognition of an asset for incremental costs to obtain a customer contract, which is then amortized to expense over the respective period of expected benefit. We recognize an asset for incremental commission costs paid to internal and external sales personnel and agents in conjunction with obtaining customer contracts. We only defer these costs when we have determined the commissions are incremental costs that would not have been incurred absent the customer contract and are expected to be recoverable. Costs to obtain a contract are amortized and recorded ratably as commission expense over the period representing the transfer of goods or services to which the assets relate. Costs to obtain wireless contracts are amortized over both of our Consumer and Business customers’ estimated device upgrade cycles, as such costs are typically incurred each time a customer upgrades. Costs to obtain wireline contracts are amortized as expense over the estimated customer relationship period for our Consumer customers. Incremental costs to obtain wireline contracts for our Business customers are insignificant. Costs to obtain contracts are recorded in Selling, general and administrative expense.
We also defer costs incurred to fulfill contracts that: (1) relate directly to the contract; (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract; and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed as we satisfy our performance obligations and recorded to Cost of services. These costs principally relate to direct costs that enhance our wireline business resources, such as costs incurred to install circuits.
We determine the amortization periods for our costs incurred to obtain or fulfill a customer contract at a portfolio level due to the similarities within these customer contract portfolios.
Other costs, such as general costs or costs related to past performance obligations, are expensed as incurred.
Collectively, costs to obtain a contract and costs to fulfill a contract are referred to as deferred contract costs, and amortized over a 2 to 5-year period. Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively.
The balances of deferred contract costs included in our consolidated balance sheets were as follows:
For the years ended December 31, 2019 and 2018, we recognized expense of $2.7 billion and $2.0 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our consolidated statements of income.
We assess our deferred contract costs for impairment on a quarterly basis. We recognize an impairment charge to the extent the carrying amount of a deferred cost exceeds the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost, less the expected costs related directly to providing those goods and services that have not yet been recognized as expenses. There have been no impairment charges recognized for the years ended December 31, 2019 and 2018.

(dollars in millions)      | At December 31, 2019 | At December 31, 2018
-------------------------- | -------------------- | --------------------
Assets                     |                      |
Prepaid expenses and other | $2,578               | $ 2,083
Other assets               | 1,911                | 1,812
Total                      | $ 4,489              | $ 3,895

Contract Costs
 Note 1 Topic 606 requires incremental costs contract amortized over period expected benefit. recognize asset for incremental commission costs sales personnel agents contracts. defer costs when incremental recoverable. Costs contract amortized recorded as commission expense over transfer goods services. wireless contracts amortized over Consumer Business device upgrade cycles. wireline contracts amortized expense over customer relationship period Consumer. costs Business customers insignificant. recorded in Selling general administrative expense.
 defer costs contracts relate contract expected generate resources recovered through revenue. Contract fulfillment costs expensed performance obligations recorded to Cost of services. relate to direct costs wireline business resources.
 determine amortization periods portfolio level similarities.
 Other costs performance obligations expensed as incurred.
 costs obtain deferred contract costs amortized over 2 to 5-year period. Deferred costs classified as current or non-current within Prepaid expenses other assets.
balances deferred contract costs balance sheets
 years December 31, 2019 2018 recognized expense $2. 7 billion $2. 0 billion amortization deferred contract costs Selling administrative expense.
 assess deferred costs impairment quarterly. recognize impairment charge exceeds less. no impairment charges recognized December 31, 2019 2018.
 December 31, 2019 2018
 Assets
 Prepaid expenses other $2,578 $ 2,083
 Other assets 1,911
 Total $ 4,489 $ 3,895


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
NOTE 23. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present unaudited quarterly results for each of the eight quarters in the periods ended December 31, 2019 and 2018, in thousands. We believe that all necessary adjustments have been included in the amounts stated below to present fairly such quarterly information. Due to the volatility of the industries in which our customers operate, the operating results for any quarter are not necessarily indicative of results for any subsequent period.

                                                                          |                   | Quarter Ended      |               |
------------------------------------------------------------------------- | ----------------- | ------------------ | ------------- | --------------
                                                                          | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019
Sales, net                                                                | $  338,268        | $  175,127         | $ 134,810     | $ 140,743
Gross Profit                                                              | $112,295          | $73,491            | $64,126       | $65,740
Restructuring Expense                                                     | $1,418            | $152               | $1,795        | $1,673
Operating income                                                          | $22,202           | $9,390             | $11,005       | $11,791
Income from continuing operations, net of income taxes                    | $  10,479         | $  7,256           | $ 23,373      | $ 15,387
Loss (income) from discontinued operations, net of income taxes           | $  (210)          | $  375             | $ 8,324       | $ (9)
Net Income                                                                | $  10,269         | $  7,631           | $ 31,697      | $ 15,378
Income from continuing operations attributable to noncontrolling interest | $  5              | $  10              | $ 11          | $ 8
Net income attributable to Advanced Energy Industries, Inc.               | $  10,264         | $  7,621           | $ 31,686      | $ 15,370
Earnings (Loss) Per Share:                                                |                   |                    |               |
Continuing Operations:                                                    |                   |                    |               |
Basic earnings per share                                                  | $  0.27           | $  0.19            | $ 0.61        | $ 0.40
Diluted earnings per share                                                | $  0.27           | $  0.19            | $ 0.61        | $ 0.40
Discontinued Operations:                                                  |                   |                    |               |
Basic loss per share                                                      | $  (0.01)         | $  0.01            | $ 0.22        | $ —
Diluted loss per share                                                    | $  (0.01)         | $  0.01            | $ 0.22        | $ —
Net Income:                                                               |                   |                    |               |
Basic earnings per share                                                  | $  0.27           | $  0.20            | $ 0.83        | $ 0.40
Diluted earnings per share                                                | $  0.27           | $  0.20            | $ 0.82        | $ 0.40

ADVANCED ENERGY INDUSTRIES. FINANCIAL STATEMENTS share
. SUPPLEMENTAL QUARTERLY FINANCIAL DATA
 quarterly results eight quarters December 31, 2019 2018. adjustments included. volatility results indicative.
 December 31, September 30 June 30 March 31, 2019
 Sales $ 338,268  $ 175,127 $ 134,810 140,743
 Gross Profit $112,295 $73,491 $64,126
 Restructuring Expense $1,418
 Operating income $22,202 $9,390 $11,005 $11,791
 Income operations taxes $ 10,479 $ 7,256 23,373 15,387
 Loss discontinued operations 8,324
 Net Income $ 10,269 $ 7,631 31,697 15,378
 Income operations noncontrolling interest
 income Advanced Energy Industries. $ 10,264 $ 7,621 31,686 15,370
Earnings (Loss Per Share
 Continuing Operations
 Basic earnings share. 27. 19. 61. 40
 earnings. 27. 19. 61. 40
 Discontinued Operations
 Basic loss per share. 01. 01. 22
 Diluted loss share. 01. 01. 22
 Net Income
 Basic earnings per share. 27. 20. 83. 40
 earnings share. 27. 20 . 82. 40


Operating Income and Operating Margin
Operating income for fiscal 2019 increased $406 million, or 7%, over fiscal 2018.
Operating income and operating margin for each of the operating groups were as follows:
Amounts in table may not total due to rounding.
(1) Effective September 1, 2018, we adopted FASB ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Certain components of pension service costs were reclassified from Operating expenses to Non-operating expenses. Prior period amounts have been revised to conform with the current period presentation.

                                   |                  | Fiscal           |                               |                  |
---------------------------------- | ---------------- | ---------------- | ----------------------------- | ---------------- | -------------------
                                   | 2019             |                  | 2018 (1)                      |                  |
                                   | Operating Income | Operating Margin | Operating Income              | Operating Margin | Increase (Decrease)
                                   |                  |                  | (in millions of U.S. dollars) |                  |
Communications, Media & Technology | $1,555           | 18%              | $1,380                        | 17%              | $175
Financial Services                 | 1,238            | 15               | 1,365                         | 16               | (128)
Health & Public Service            | 739              | 10               | 766                           | 11               | (27)
Products                           | 1,720            | 14               | 1,664                         | 15               | 56
Resources                          | 1,053            | 16               | 724                           | 12               | 330
TOTAL                              | $6,305           | 14.6%            | $5,899                        | 14.4%            | $406

Operating Income Margin
 2019 increased $406 million 7% 2018.
 margin groups
 Amounts rounding.
 September 1 2018 adopted FASB ASU No. 2017-07 Compensation-Retirement Benefits 715) Improving Presentation Net Periodic Pension Cost Postretirement Benefit Cost. pension costs reclassified Operating expenses to Non-operating expenses. Prior amounts revised current presentation.
 Operating Income Margin
 millions U. S. dollars
 Communications Media Technology $1,555 18% $1,380 17% $175
 Financial Services 1,238 1,365
 Health Public Service 739
 Products 1,720
 Resources 1,053
 $6,305. $5,899. $406


Contractual Obligations
The following summarizes our contractual obligations as of December 31, 2019 (in thousands):
Purchase obligations represent an estimate of open purchase orders and contractual obligations in the normal course of business for which we have not received the goods or services as of December 31, 2019. Although open purchase orders are considered enforceable and legally binding, except for our purchase orders with our inventory suppliers, the terms generally allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services. Our purchase orders with our inventory suppliers are non-cancellable. In addition, we have other obligations for goods and services that we enter into in the normal course of business. These obligations, however, are either not enforceable or legally binding, or are subject to change based on our business decisions. The aggregate of these items represents our estimate of purchase obligations.

                            |              | Payments due by period |              |                   |
--------------------------- | ------------ | ---------------------- | ------------ | ----------------- | -------
                            | Up to 1 year | 1 to 3 years           | 3 to 5 years | More than 5 years | Total
Operating lease obligations | 16,164       | 19,812                 | 6,551        | 5,883             | 48,410
Financing obligations       | 2,956        | 5,912                  | —            | —                 | 8,868
Long-term debt              | —            | —                      | 460,000      | —                 | 460,000
Purchase obligations        | 55,755       | 16,220                 | 7,595        | 17,649            | 97,219
Total                       | 74,875       | 41,944                 | 474,146      | 23,532            | 614,497

Contractual Obligations
 obligations December 31, 2019
 Purchase obligations estimate open orders obligations received goods services. orders enforceable binding allow cancel reschedule adjust. inventory suppliers non-cancellable. other obligations goods services. not enforceable change. aggregate estimate purchase obligations.
 Payments due by period
 Up to 1 year 1 to 3 years 3 to 5 years More than 5 years
 Operating lease obligations 16,164 19,812 6,551 5,883 48,410
 Financing obligations 2,956  5,912 8,868
 Long-term debt 460,000
 Purchase obligations 55,755  16,220  7,595 17,649 97,219
 Total 74,875  41,944 474,146 23,532 614,497


Differences between the provision for income taxes on earnings from continuing operations and the amount computed using the U.S. Federal statutory income tax rate are as follows (amounts in thousands):
(1) The statutory income tax rate for the fiscal year ended March 31, 2017 is 35%. The Tax Cuts and Jobs Act enacted on December 22, 2017 reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. Based on the fiscal year of the Company ending on March 31, the statutory income tax rate for the fiscal year ended March 31, 2018 is a blended rate of 31.6% based on the number of days in the fiscal year before January 1, 2018 and the number of days in the fiscal after December 31, 2017. The statutory income tax rate for the fiscal year ended March 31, 2019 is 21%.
(2) The effect of prior year adjustments was offset by a full valuation allowance resulting in no impact on the provision for income taxes.
(3) Fiscal year ended March 31, 2019 difference consist of $1.5 million related to the expansion of the Sec. 162(m) limitation due to tax law changes.
(4) Fiscal year end March 31, 2018 differences due to tax law changes consists of $4.8 million related to foreign earnings and $45.6 million related to tax rate adjustment. $45.6 million related to tax rate adjustment is the gross deferred rate change, which is offset by valuation allowance adjustment, resulting in a net benefit of $0.8 million.
(5) Fiscal year ended March 31, 2018 difference consists mainly of $3.7 million related to the revaluation of state net operating loss carryforwards as a result of the change in the federal tax rate.
(6) The change in foreign operations valuation allowance excludes other comprehensive income and currency translation adjustments of $3.8 million, $(3.4) million, and $0.9 million for fiscal years ended 2019, 2018 and 2017, respectively, which has no impact on the provision for income taxes.
The foreign jurisdictions having the greatest effect on the provision for income taxes are China and Mexico. The statutory tax rates for China and Mexico are 25% and 30%, respectively. The combined provision for income taxes for China
and Mexico for fiscal years ended 2019, 2018 and 2017 is $5.7 million, $3.8 million, and $3.1 million, respectively.

                                                       |           | Fiscal Years Ended March 31, |
------------------------------------------------------ | --------- | ---------------------------- | -------
                                                       | 2019      | 2018                         | 2017
Amount computed using the statutory rate (1)           | $35,791   | $59,162                      | $3,722
Change in U.S. valuation allowance                     | (67,761)  | (66,948)                     | (7,080)
Unremitted earnings of foreign subsidiaries            | —         | —                            | 2,127
Effect of prior year adjustments (2)                   | 2,450     | (1,337)                      | 1,789
IRC section 162(m) limitation (3)                      | 4,553     | —                            | —
Expired foreign tax credits                            | —         | 407                          | 4,766
Taxable foreign source income                          | 3,502     | 22,238                       | 1,835
(Put)/call option valuation impact                     | —         | —                            | (3,745)
Non-taxable gain from bargain purchase                 | —         | (41,292)                     | —
Deduction related to APA settlement                    | (2,309)   | —                            | —
Tax-deductible equity compensation                     | (4,215)   | (5,699)                      | (44)
Other non-deductible expenses                          | (44)      | 220                          | (893)
Differences due to U.S. tax law changes (4)            | —         | 50,420                       | —
State income taxes, net of federal taxes (5)           | (695)     | (3,325)                      | (35)
Change in foreign operations tax exposure reserves     | 132       | 1,059                        | 108
Foreign tax rate differential                          | 6,501     | (400)                        | 587
Change in foreign tax law                              | (1,956)   | 251                          | 144
Change in foreign operations valuation allowance (6)   | (41,133)  | (6,676)                      | 983
Nondeductible expenses related to antitrust litigation | 14,360    | 488                          | —
Other effect of foreign operations                     | 11,364    | 564                          | 30
Provision for income tax expense (benefit)             | $(39,460) | $9,132                       | $4,294

Differences between taxes operations. Federal statutory income tax rate
 statutory tax rate fiscal year March 31, 2017 35%. Tax Cuts and Jobs Act reduced. federal corporate tax rate 35% to 21% effective January 1, 2018. income tax rate blended 31. 6%. year March 2019 21%.
 prior year adjustments offset by full valuation allowance no impact.
 difference $1. 5 million expansion Sec. 162(m) limitation tax law changes.
 2018 differences $4. 8 million foreign earnings $45. 6 million tax rate adjustment. million deferred change offset by valuation allowance adjustment net benefit $0. 8 million.
 2018 difference $3. 7 million revaluation state net operating loss carryforwards federal tax rate.
 change foreign operations valuation allowance excludes adjustments of $3. 8 million $(3. million $0. 9 million for years 2019 2018 2017 no impact.
 jurisdictions China Mexico. statutory tax rates 25% 30%. combined provision taxes
 $5. 7 million, $3.8 million. 1 million.
 Fiscal Years Ended March 31,
 2018 2017
 statutory rate $35,791 $59,162 $3,722
. valuation allowance (67,761
 Unremitted earnings foreign subsidiaries 2,127
 prior year adjustments 2,450
 IRC section 162(m) limitation
 Expired foreign tax credits 4
 Taxable foreign income 3,502 22,238 1,835
 option valuation impact,745
 Non-taxable gain bargain purchase (41,292)
 APA settlement
 Tax-deductible equity compensation (4
 non-deductible expenses
. tax law changes 50,420
 State income taxes federal taxes
 foreign operations tax reserves
 Foreign tax rate differential
 tax law
 foreign operations valuation allowance,133
 Nondeductible expenses antitrust litigation 14,360
 foreign operations 11,364
income tax,460 $9,132 $4,294


The following table summarizes the maturities of our available-for-sale debt investments as of July 27, 2019 (in millions):
Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

                                                   | Amortized Cost | Fair Value
-------------------------------------------------- | -------------- | ----------
Within 1 year                                      | $6,322         | $6,324
After 1 year through 5 years                       | 12,191         | 12,218
After 5 years through 10 years                     | 1,643          | 1,687
After 10 years                                     | 9              | 10
Mortgage-backed securities with no single maturity | 1,425          | 1,421
Total                                              | $21,590        | $21,660

table summarizes maturities debt investments July 27, 2019
 differ borrowers call prepay obligations.
 Amortized Cost
 1 year $6,322
 5 years 12,191
 10 1,643
 10 years
 Mortgage-backed securities no maturity 1,425
 $21,590 $21,660


11. Taxation
The taxation charge for the year is lower than (2018: the same as) the effective rate of corporation tax in the UK of 19% (2018: 19%). The differences are explained below:
Taxation on items taken directly to equity was a credit of £0.6m (2018: £0.1m) relating to tax on share-based payments.
The tax charge for the year is based on the standard rate of UK corporation tax for the period of 19% (2018: 19%). Deferred income taxes have been measured at the tax rate expected to be applicable at the date the deferred income tax assets and liabilities are realised. Management has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 17% being used to measure all deferred tax balances as at 31 March 2019 (2018: 17%).

                                                                                | 2019  | (Restated) 2018
----------------------------------------------------------------------------------------------- | ----- | ---------------
                                                                                | £m    | £m
Profit before taxation                                                                          | 242.2 | 210.7
Tax on profit on ordinary activities at the standard UK corporation tax rate of 19% (2018: 19%) | 46.0  | 40.0
Expenses not deductible for taxation purposes                                                   | 0.3   | 0.8
Income not taxable                                                                              | (1.7) | –
Adjustments in respect of foreign tax rates                                                     | (0.1) | (0.1)
Adjustments in respect of prior years                                                           | –     | (1.1)
Total taxation charge                                                                           | 44.5  | 39.6

. Taxation
 charge year lower same effective rate corporation tax UK 19%. differences explained
 Taxation items equity credit £0. 6m (2018 £0. 1m) tax share-based payments.
 tax charge based standard rate UK corporation tax 19%. Deferred income taxes measured tax rate. Management assessment average deferred income tax rate 17% balances 31 March 2019 17%.
 2018
 £m
 Profit before taxation 242. 2 210. 7
 Tax profit ordinary activities standard UK corporation tax rate 19% 19% 46. 40.
 Expenses not deductible taxation.
 Income not taxable (1.
 Adjustments foreign tax rates.
 prior years.
 Total taxation charge 44. 5 39. 6


10.5. Intangible assets
Impairment testing of goodwill
Goodwill has been allocated to the listed group (NSR). Management have determined that the listed group, which is considered one operating segment (see note 4), is the appropriate CGU against which to allocate these intangible assets owing to the synergies arising from combining the portfolios of the Group.
The recoverable amount of the listed group has been determined based on the fair value less costs of disposal method using the fair value quoted on an active market. As at 1 July 2019, NSR had 773,343,956 stapled securities quoted on the Australian Securities Exchange at $1.745 per security providing a market capitalisation of $1,349.5m.
This amount is in excess of the carrying amount of the Group’s net assets at 30 June 2019 which includes the contract for future issue of equity recognised as contributed equity within the statement of financial position at this date (see note 13). Had the security price decreased by 2.5% the market capitalisation would still have been in excess of the carrying amount.

                                   |       | 2019   | 2018
---------------------------------- | ----- | ------ | ------
                                   | Notes | $'000  | $'000
Goodwill                           |       |        |
Opening and closing net book value |       | 43,954 | 43,954
Other intangible assets            |       |        |
Opening net book value             |       | 2,051  | 1,582
Additions                          |       | 1,079  | 864
Amortisation                       | 6     | (584)  | (395)
Closing net book value             |       | 2,546  | 2,051
Total intangible assets            |       | 46,500 | 46,005

. Intangible assets
 goodwill
 allocated listed group). determined operating appropriate CGU allocate intangible assets combining portfolios.
 recoverable amount determined fair value less costs disposal active market. 1 July 2019 NSR 773,343,956 stapled securities Australian Securities Exchange $1. 745 per security market capitalisation $1,349. 5m.
 excess net assets 30 June 2019 contract future issue equity. security price decreased 2. 5% market capitalisation excess carrying amount.
 2019 2018
 Goodwill
 Opening closing net book value 43,954
 Other intangible assets
 2,051 1,582
 Additions 1,079
 Amortisation
 Closing 2,546 2,051
 Total intangible assets 46,500


OTHER FINANCIAL INFORMATION
In addition to our results determined under U.S. generally accepted accounting principles (“GAAP”) discussed above, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. For the fiscal years ended January 31, 2019, 2018, and 2017, our gross profit, gross margin, (loss) income from operations, operating margin, net (loss) income, diluted net (loss) income per share and diluted shares used in per share calculation on a GAAP and non-GAAP basis were as follows (in millions except for gross margin, operating margin, and per share data):
For our internal budgeting and resource allocation process and as a means to provide consistency in period-to-period comparisons, we use non-GAAP measures to supplement our consolidated financial statements presented on a GAAP basis. These non-GAAP measures do not include certain items that may have a material impact upon our reported financial results. We also use non-GAAP measures in making operating decisions because we believe those measures provide meaningful supplemental information regarding our earning potential and performance for management by excluding certain benefits, credits, expenses and charges that may not be indicative of our core business operating results. For the reasons set forth below, we believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. This allows investors and others to better understand and evaluate our operating results and future prospects in the same manner as management, compare financial results across accounting periods and to those of peer companies and to better understand the long-term performance of our core business. We also use some of these measures for purposes of determining company-wide incentive compensation.
There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures included above are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. The presentation of non-GAAP financial information is meant to be considered in addition to, not as a substitute for or in isolation from, the directly comparable financial measures prepared in accordance with GAAP. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

                                                                       |          | Fiscal Year Ended January 31, |
---------------------------------------------------------------------- | -------- | ----------------------------- | --------
                                                                       | 2019     | 2018                          | 2017
                                                                       |          | (Unaudited)                   |
Gross profit                                                           | $2,283.9 | $1,753.2                      | $1,689.1
Non-GAAP gross profit                                                  | $2,317.0 | $1,785.5                      | $1,743.2
Gross margin                                                           | 89%      | 85%                           | 83%
Non-GAAP gross margin                                                  | 90%      | 87%                           | 86%
Loss from operations                                                   | $(25.0)  | $(509.1)                      | $(499.6)
Non-GAAP income (loss) from operations                                 | $316.0   | $(112.0)                      | $(125.5)
Operating margin                                                       | (1)%     | (25)%                         | (25)%
Non-GAAP operating margin                                              | 12%      | (5)%                          | (6)%
Net loss                                                               | $(80.8)  | $(566.9)                      | $(582.1)
Non-GAAP net income (loss)                                             | $223.3   | $(106.3)                      | $(111.0)
Diluted net loss per share                                             | $(0.37)  | $(2.58)                       | $(2.61)
Non-GAAP diluted net income (loss) per share                           | $1.01    | $(0.48)                       | $(0.50)
GAAP diluted weighted average shares used in per share calculation     | 218.9    | 219.5                         | 222.7
Non-GAAP diluted weighted average shares used in per share calculation | 222.0    | 219.5                         | 222.7

FINANCIAL INFORMATION
 results under U. S. accounting principles (“GAAP”) non-GAAP measures useful operating performance. fiscal years 2019 2018 2017 gross profit margin (loss income operations net (loss income diluted net (loss income per share diluted shares calculation GAAP non-GAAP millions except margin per share
 comparisons non-GAAP measures supplement consolidated financial statements. measures include items financial results. use measures operating decisions provide supplemental information earning potential performance excluding benefits credits expenses charges not indicative core business results.-GAAP measures useful investors allow transparency financial operational decision-making institutional investors analyze health business. investors understand operating results future prospects compare financial results across periods peer companies understand long performance core business. use measures company-wide incentive compensation.
 limitations in non-GAAP financial measures not prepared GAAP different from other companies.non-GAAP measures limited value exclude financial results. subject limitations judgments management. compensate analyzing future results providing GAAP measures public disclosures. non-GAAP not comparable measures. urge investors review reconciliation non measures not rely single measure business.
 Fiscal Year Ended January 31,
 Gross profit $2,283. $1,753. $1,689.
 Non-GAAP gross profit $2,317. $1,785. $1,743.
 Gross margin 89%
 Non-GAAP 90% 87%
 Loss from operations $(25. $(509. $(499.
 Non-GAAP income (loss) operations $316. $(112. $(125.
 Operating margin (1)% (25)
 Non-GAAP margin 12% (5)%
 Net loss $(80. $(566. $(582.
 Non-GAAP net income (loss $223. 3 $(106. $(111.
 net loss per share $(0.. 58). 61
 Non-GAAP diluted income share $1. 01. 48. 50)
 GAAP shares 218. 9 219. 5 222.
 Non-GAAP diluted shares 222.


9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
Depreciation and amortization expense related to property and equipment for fiscal years 2019, 2018 and 2017 was $29.7 million, $30.7 million and $27.3 million, respectively. Accumulated depreciation on capital lease assets for fiscal years 2019 and 2018 was $5.3 million and $3.2 million, respectively.
See Note 17 - Impairments and Note 15 - Restructurings for information related to property and equipment impaired during fiscal year 2019.

                                               | September 27,  | September 28,
---------------------------------------------- | -------------- | --------------
                                               | 2019           | 2018
Construction in process                        | 24,848         | 49,661
Machinery and equipment                        | 175,696        | 174,638
Leasehold improvements                         | 12,962         | 14,984
Furniture and fixtures                         | 3,716          | 2,306
Capital lease assets                           | 46,496         | 19,380
Computer equipment and software                | 18,116         | 17,317
           Total property and equipment        | 281,834        | 278,286
Less accumulated depreciation and amortization | (149,187)      | (128,363)
Property and equipment — net                   | $132,647       | $149,923

. PROPERTY PLANT EQUIPMENT
 Depreciation 2017 $29. million $30. 7 million $27. 3 million. depreciation capital lease assets $5. 3 million $3. 2 million.
 Note 17 Impairments 15 Restructurings.
 Construction 24,848 49
 Machinery equipment 175,696,638
 Leasehold improvements 12,962
 Furniture fixtures 3,716
 Capital lease assets 46,496
 Computer equipment software 18,116
 property equipment 281,834,286
 depreciation amortization (149,187,363
 $132,647 $149,923


Telecommunications Segment
Net revenue: Net revenue from our Telecommunications segment for the year ended December 31, 2019 decreased $97.5 million to $696.1 million from $793.6 million for the year ended December 31, 2018. The decrease can be attributed to changes in our customer mix, fluctuations in wholesale voice termination volumes and market pressures, which resulted in a decline in revenue contribution.
Cost of revenue: Cost of revenue from our Telecommunications segment for the year ended December 31, 2019 decreased $94.2 million to $684.9 million from $779.1 million for the year ended December 31, 2018. The decrease was directly correlated to the fluctuations in wholesale voice termination volumes, in addition to a slight reduction in margin mix attributed to market pressures on call termination rates.
Selling, general and administrative: Selling, general and administrative expenses from our Telecommunications segment for the year ended December 31, 2019 decreased $1.2 million to $8.2 million from $9.4 million for the year ended December 31, 2018. The decrease was primarily due to a decrease in compensation expense due to headcount decreases and reductions in bad debt expense.
Other operating expense: $4.5 million of other operating expense for the year ended December 31, 2019 was driven by impairment of goodwill as a result of declining performance at the segment.

                                    |        | Years Ended December 31, |
----------------------------------- | ------ | ------------------------ | ---------------------
                                    | 2019   | 2018                     | Increase / (Decrease)
Net revenue                         | $696.1 | $793.6                   | $(97.5)
Cost of revenue                     | 684.9  | 779.1                    | (94.2)
Selling, general and administrative | 8.2    | 9.4                      | (1.2)
Depreciation and amortization       | 0.3    | 0.3                      | —
Other operating expense             | 4.5    | —                        | 4.5
Income (loss) from operations       | (1.8)  | $4.8                     | $(6.6)

Telecommunications Segment
 Net revenue 2019 decreased $97. 5 million to $696. 1 million from $793. 6 million. attributed changes customer mix wholesale voice termination volumes market pressures revenue.
 decreased $94. 2 million to $684. 9 million from $779. 1 million. fluctuations voice termination volumes reduction margin mix market pressures call termination rates.
 Selling general administrative expenses decreased $1. 2 million to $8. 2 million from $9. 4 million. due compensation expense headcount decreases reductions bad debt expense.
 Other operating expense $4. 5 million driven impairment goodwill declining performance.
 Net revenue $696. 1 $793. 6.
 Cost of revenue 684. 779.
 Selling general administrative 8.
 Depreciation amortization.
 Other operating expense 4.
 Income (loss) from operations. $4.