The following tables present the recorded investment by portfolio segment and by class, excluding commercial financing receivables and other miscellaneous financing receivables at December 31, 2019 and 2018. Commercial financing receivables are excluded from the presentation of financing receivables by portfolio segment, as they are short term in nature and the current estimated risk of loss and resulting impact to the company’s financing results are not material.
Write-offs of lease receivables and loan receivables were $16 million and $47 million, respectively, for the year ended December 31, 2019. Provisions for credit losses recorded for lease receivables and loan receivables were a release of $6 million and an addition of $2 million, respectively, for the year ended December 31, 2019.
The average recorded investment of impaired leases and loans for Americas, EMEA and Asia Pacific was $138 million, $49 million and $45 million, respectively, for the year ended December 31, 2019. Both interest income recognized, and interest income recognized on a cash basis on impaired leases and loans were immaterial for the year ended December 31, 2019.

($ in millions)                                            |          |        |              |
---------------------------------------------------------- | -------- | ------ | ------------ | --------
At December 31, 2019:                                      | Americas | EMEA   | Asia Pacific | Total
Recorded investment:                                       |          |        |              |
Lease receivables                                          | $ 3,419  | $1,186 | $  963       | $ 5,567
Loan receivables                                           | 6,726    | 3,901  | 2,395        | 13,022
Ending balance                                             | $10,144  | $5,087 | $3,359       | $18,590
Recorded investment, collectively evaluated for impairment | $10,032  | $5,040 | $3,326       | $18,399
Recorded investment, individually evaluated for impairment | $   112  | $   47 | $   32       | $   191
Allowance for credit losses                                |          |        |              |
Beginning balance at January 1, 2019                       |          |        |              |
Lease receivables                                          | $    53  | $   22 | $   24       | $     99
Loan receivables                                           | 105      | 43     | 32           | 179
Total                                                      | $   158  | $   65 | $   56       | $   279
Write-offs                                                 | (42)     | (3)    | (18)         | (63)
Recoveries                                                 | 1        | 0      | 1            | 2
Provision                                                  | 5        | (7)    | (3)          | (5)
Other*                                                     | (1)      | 0      | (1)          | (2)
Ending balance at December 31, 2019                        | $   120  | $   54 | $   36       | $   210
Lease receivables                                          | $    33  | $   23 | $   16       | $    72
Loan receivables                                           | $    88  | $   31 | $   20       | $   138
Related allowance, collectively evaluated for impairment   | $    25  | $   11 | $    4       | $    39
Related allowance, individually evaluated for impairment   | $    96  | $   43 | $   32       | $   171

tables present investment portfolio class excluding commercial December 31, 2019 2018. Commercial short term risk loss.
 Write-offs lease loan were $16 million $47 million 2019. Provisions credit losses $6 million addition $2 million.
 average investment impaired leases loans Americas EMEA Asia Pacific $138 million $49 million $45 million 2019. interest leases loans immaterial.
 December 31, 2019 Americas EMEA Asia Pacific
 investment
 Lease receivables $ 3,419  $1,186  $ 963 $ 5,567
 Loan receivables  3,901 2,395 13,022
 Ending balance $10,144  $5,087  $3,359 $18,590
 impairment $10,032 $5,040 $3,326 $18,399
 $ 112 $ 47 $ 32  $ 191
 Allowance for credit losses
balance January 1 2019
 Lease $ 53 22 24 99
 Loan 105 43 179
 $ 158 $ 65 $ 56 $ 279
 Write-offs
 Recoveries
 balance December 31, 2019 $ 120 $ 54 $ 36 $ 210
 Lease $ 33 $ 23 $ 16 72
 Loan receivables $ 88 $ 31 $ 20 $ 138
 allowance impairment $ 25 11 4
 $ 96 43 32


NOTE 13. INCOME TAXES
We calculate our provision for federal and state income taxes based on current tax law. U.S. federal tax reform (Tax Act) was enacted on December 22, 2017, and has several key provisions impacting the accounting for and reporting of income taxes. The most significant provision reduced the U.S. corporate statutory tax rate from 35% to 21% beginning on January 1, 2018. We remeasured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. As a result, the gross deferred tax assets and liabilities were adjusted which resulted in an expense for income taxes of $7.1 million which was fully offset by a corresponding change to our valuation allowance in 2017. The Tax Act contains several base broadening provisions that became effective on January 1, 2018, that did not have a material impact on 2018 and 2019 earnings.
Deferred tax asset (liability) is comprised of the following (in thousands):
We have determined it is more likely than not that our deferred tax assets will not be realized. Accordingly, we have provided a valuation allowance for deferred tax assets.

December 31                              |                 |
---------------------------------------- | --------------- | ---------------
                                         | 2019            | 2018
Net operating loss carryforwards         | $7,672          | $4,541
Stock options and warrants               | 420             | 214
Property                                 | 138             | 299
Intangible assets                        | 66              | 94
Capitalized expenses                     | 54              | 86
Other                                    | 210             | 164
Operating right-of-use lease assets      | (667)           |
Operating right-of-use lease liabilities | 794             |
Net deferred tax assets                  | 8,687           | 5,398
Less: Valuation allowance                | (8,687)         | (5,398)
Deferred tax asset (liability)           | $             - | $             -

. INCOME TAXES
 calculate federal state taxes law. federal tax reform Act) enacted December 22, 2017 provisions accounting reporting. reduced. corporate tax rate 35% to 21% January 1, 2018. remeasured deferred tax assets liabilities. deferred tax assets liabilities adjusted expense taxes $7. 1 million offset change valuation allowance 2017. Tax Act broadening provisions effective January 1, 2018 2018 2019 earnings.
 Deferred tax asset
 assets. provided valuation allowance deferred tax assets.
 Net operating loss carryforwards $7,672 $4,541
 Stock options warrants
 Property
 Intangible assets
 Capitalized expenses
 Other
 right-of-use lease assets
 liabilities
 Net deferred tax assets 8,687 5,398
 Valuation allowance
 Deferred tax asset


8. Earnings Per Share
Basic earnings per share is computed in accordance with ASC 260, Earnings per Share, based on weighted average outstanding common shares. Diluted earnings per share is computed based on basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, RSUs, and certain contingently issuable shares for which performance targets have been achieved.
The following table reconciles the weighted average share amounts used to compute both basic and diluted earnings per share (in thousands):
The diluted earnings per share computation excludes 1.8 million, 2.2 million, and 3.9 million options to purchase shares, RSUs, and contingently issuable shares during the years ended December 31, 2019, 2018, and 2017, respectively, as their effect would be antidilutive.
Common stock outstanding as of December 31, 2019 and 2018, was 115,986,352 and 116,123,361, respectively.

                                                                       |         | Years Ended December 31, |
---------------------------------------------------------------------- | ------- | ------------------------ | -------
                                                                       | 2019    | 2018                     | 2017
Weighted average shares outstanding:                                   |         |                          |
Basic weighted average shares outstanding                              | 116,175 | 116,057                  | 118,059
Add: Dilutive effect of stock options, RSUs, and contingently issuable |         |                          |
shares                                                                 | 2,396   | 1,575                    | 1,385
Diluted weighted average shares outstanding                            | 118,571 | 117,632                  | 119,444

. Earnings Per Share
 computed ASC 260 weighted average shares. Diluted earnings adjusted dilutive effect stock options RSUs contingently issuable shares.
 table reconciles share amounts diluted earnings
 excludes. 8 million 2. 2 million 3. 9 million options purchase RSUs contingently issuable shares December 31, 2019 2018 2017.
 Common stock outstanding December 31, 2019 2018 115,986,352 116,123,361.
 Years
 2017
 Weighted average shares
 116,175 116,057
 Dilutive effect stock options RSUs contingently issuable
 Diluted 118,571 117,632 119,444


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in millions, unless otherwise disclosed)
8. ACCRUED EXPENSES
Accrued expenses consisted of the following:

                                       | As of             |
-------------------------------------- | ----------------- | -----------------
                                       | December 31, 2019 | December 31, 2018
Accrued property and real estate taxes | $198.1            | $169.7
Accrued pass-through costs             | 74.2              | 71.2
Amounts payable to tenants             | 77.9              | 93.5
Accrued rent                           | 75.6              | 61.4
Payroll and related withholdings       | 102.4             | 90.4
Accrued construction costs             | 27.8              | 41.5
Accrued income tax payable             | 55.2              | 57.9
Other accrued expenses                 | 347.0             | 362.7
Accrued expenses                       | $958.2            | $948.3

AMERICAN TOWER CORPORATION SUBSIDIARIES FINANCIAL STATEMENTS amounts millions
. EXPENSES
 December 31, 2019
 property real estate taxes $198. $169.
 pass-through costs 74. 71.
 tenants 77. 93.
 rent 75. 61.
 withholdings 102. 90.
 construction costs 27. 41.
 income tax 55. 57.
 expenses. 362.
 $958. $948.


The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets and deferred tax liabilities are as follows (amounts in millions):
In assessing whether it is more likely than not that deferred tax assets will be realized, the Company considers all available evidence, both positive and negative, including its recent cumulative earnings experience and expectations of future available taxable income of the appropriate character by taxing jurisdiction, tax attribute carryback and carryforward periods available to them for tax reporting purposes, and prudent and feasible tax planning strategies.

                                                 | March 31, |
------------------------------------------------ | --------- | --------
                                                 | 2019      | 2018
Deferred tax assets:                             |           |
Deferred income on shipments to distributors     | $—        | $39.1
Inventory valuation                              | 45.0      | 10.7
Net operating loss carryforward                  | 94.3      | 101.1
Capital loss carryforward                        | 9.6       | 10.6
Share-based compensation                         | 42.4      | 31.4
Income tax credits                               | 376.5     | 178.4
Property, plant and equipment                    | 23.6      | 25.7
Accrued expenses and other                       | 91.4      | 91.2
Intangible assets                                | 1,608.1   | —
Other                                            | 12.6      | —
Gross deferred tax assets                        | 2,303.5   | 488.2
Valuation allowances                             | (332.1)   | (204.5)
Deferred tax assets, net of valuation allowances | 1,971.4   | 283.7
Deferred tax liabilities:                        |           |
Convertible debt                                 | (279.3)   | (304.4)
Intangible assets                                | (721.0)   | (66.6)
Other                                            | —         | (18.3)
Deferred tax liabilities                         | (1,000.3) | (389.3)
Net deferred tax asset (liability)               | $971.1    | $(105.6)
Reported as:                                     |           |
Non-current deferred tax assets                  | $1,677.2  | $100.2
Non-current deferred tax liability               | (706.1)   | (205.8)
Net deferred tax asset (liability)               | $971.1    | $(105.6)

tax effects differences Company deferred tax assets liabilities
 assets Company considers evidence recent earnings future taxable income carryback carryforward periods planning strategies.
 Deferred tax assets
 income shipments distributors $39.
 Inventory valuation 45. 10.
 Net operating loss carryforward 94. 101.
 Capital loss 9.
 Share-based compensation 42. 31.
 Income tax credits 376. 178.
 Property equipment 23. 25.
 Accrued expenses 91.
 Intangible assets 1,608.
.
 deferred tax assets 2,303. 488.
 Valuation allowances (332.
 Deferred tax assets 1,971. 283.
 Deferred tax liabilities
 Convertible debt (279. (304.
 Intangible assets (721. (66.
.
 tax liabilities (1,000. (389.
 Net deferred tax asset $971.(105.
Reported
-current deferred tax $1,677. $100.
 liability (706.
 deferred tax asset $971.(105.


(1) Include cost of equipment sold, content and programming costs, payments to other carriers, franchise fees and network costs.
(2) Include advertising and marketing expenses, selling costs, billing expenses, bad debts and collection expenses.
(3) Include office building expenses, professional service fees, Canadian Radio-television and Telecommunications Commission (“CRTC”) fees, losses and gains on disposals and write-offs of property, plant and equipment and other administrative expenses.
9. OPERATING EXPENSES

Years ended August 31,                              | 2019      | 2018
--------------------------------------------------- | --------- | ------------------
(In thousands of Canadian dollars)                  | $         | $
                                                    |           | (restated, Note 3)
Salaries, employee benefits and outsourced services | 345,041   | 317,118
Service delivery costs(1)                           | 661,214   | 615,267
Customer related costs(2)                           | 83,401    | 68,744
Other external purchases(3)                         | 114,324   | 120,496
                                                    | 1,203,980 | 1,121,625

equipment content programming franchise network costs.
 advertising marketing selling billing debts collection.
 office building service fees Radio Commission fees losses gains disposals write property administrative expenses.
. OPERATING EXPENSES
 August 2019
 dollars
 Salaries benefits outsourced services,041 317,118
 Service 661,214 615,267
 Customer 83,401 68,744
 114,324 120,496
 1,203,980 1,121,625


Other gains, net. We recorded net other gains totalling RMB19,689 million for the year ended 31 December 2019, which primarily comprised of non-IFRS adjustment items such as fair value gains arising from increased valuations for certain investee companies in verticals such as FinTech services, social media and education, as well as net deemed disposal gains arising from the capital activities of certain investee companies in verticals including transportation services and online games.
Selling and marketing expenses. Selling and marketing expenses decreased by 12% to RMB21,396 million for the year ended 31 December 2019 on a year-on-year basis. The decrease was mainly due to the reduction of advertising and promotion expenses as a result of improved operational efficiencies. As a percentage of revenues, selling and marketing expenses decreased to 6% for the year ended 31 December 2019 from 8% for the year ended 31 December 2018.
General and administrative expenses. General and administrative expenses increased by 29% to RMB53,446 million for the year ended 31 December 2019 on a year-on-year basis. The increase was primarily driven by greater R&D expenses and staff costs. As a percentage of revenues, general and administrative expenses increased to 14% for the year ended 31 December 2019 from 13% for the year ended 31 December 2018.
Finance costs, net. Net finance costs increased by 63% to RMB7,613 million for the year ended 31 December 2019 on a year-on-year basis. The increase primarily reflected greater interest expenses resulting from higher amounts of indebtedness.
Share of (loss)/profit of associates and joint ventures. We recorded share of losses of associates and joint ventures of RMB1,681 million for the year ended 31 December 2019, compared to share of profit of RMB1,487 million for the year ended 31 December 2018. The change was mainly due to non-cash charges booked by certain associates.
Income tax expense. Income tax expense decreased by 7% to RMB13,512 million for the year ended 31 December 2019 on a year-on-year basis. The decrease mainly reflected the entitlements of preferential tax treatments and benefits.
Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company increased by 19% to RMB93,310 million for the year ended 31 December 2019 on a year-on-year basis. Non-IFRS profit attributable to equity holders of the Company increased by 22% to RMB94,351 million for the year ended 31 December 2019.

                                                              | Year ended 31 December |
------------------------------------------------------------- | ---------------------- | ---------
                                                              | 2019                   | 2018
                                                              | (RMB in millions)      |
Revenues                                                      | 377,289                | 312,694
Cost of revenues                                              | (209,756)              | (170,574)
Gross profit                                                  | 167,533                | 142,120
Interest income                                               | 6,314                  | 4,569
Other gains, net                                              | 19,689                 | 16,714
Selling and marketing expenses                                | (21,396)               | (24,233)
General and administrative expenses                           | (53,446)               | (41,522)
Operating profit                                              | 118,694                | 97,648
Finance costs, net                                            | (7,613)                | (4,669)
Share of (loss)/profit of associates and joint ventures       | (1,681)                | 1,487
Profit before income tax                                      | 109,400                | 94,466
Income tax expense                                            | (13,512)               | (14,482)
Profit for the year                                           | 95,888                 | 79,984
Attributable to:                                              |                        |
Equity holders of the Company                                 | 93,310                 | 78,719
Non-controlling interests                                     | 2,578                  | 1,265
                                                              | 95,888                 | 79,984
Non-IFRS profit attributable to equity holders of the Company | 94,351                 | 77,469

gains. recorded RMB19,689 million year 31 December 2019 non-IFRS adjustment items fair value gains increased valuations FinTech social media education disposal gains capital activities transportation online games.
 Selling marketing expenses. decreased 12% to RMB21,396 million 2019. due reduction advertising promotion expenses improved operational efficiencies. expenses decreased 6% 2019 from 8% 2018.
 General administrative expenses. increased 29% to RMB53,446 million. increase driven by greater R&D expenses staff costs. increased 14% from 13% 2018.
 Finance costs. increased 63% to RMB7,613 million. increase reflected greater interest expenses higher indebtedness.
/profit associates joint ventures. losses RMB1,681 million 2019 RMB1,487 million 2018. due to non-cash charges.
 Income tax expense. decreased 7% to RMB13,512 million. decrease reflected preferential tax treatments benefits.
 Profit equity holders.Profit equity holders increased 19% RMB93,310 million. Non-IFRS profit 22% RMB94,351 million.
 Revenues 377,289 312,694
 (209,756 (170,574)
 Gross profit 167,533 142,120
 Interest income 6,314
 gains 19,689 16,714
 Selling marketing expenses (21,396) (24,233
 expenses (53,446) (41,522)
 Operating profit 118,694 97,648
 Finance costs (7,613) (4,669)
 (1,681
 Profit tax 109,400 94,466
 Profit 95,888 79,984
 Equity holders 93,310 78,719
 Non-controlling interests
 Non-IFRS profit 94,351 77,469


Non-Management Director Compensation in Fiscal 2019
The non-management directors received the following compensation during fiscal 2019:
(1) This column represents the fair value of the stock award on the grant date determined in accordance with the provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based vesting conditions. For additional information regarding assumptions made in calculating the amount reflected in this column, please refer to Note 10 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal 2019.
(2) Dividend equivalent payments on unvested restricted stock.

Name                | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) | All Other Compensation ($) (2) | Total ($)
------------------- | ------------------------------- | -------------------- | ----------------- | ------------------------------ | ---------
Robert D. Rosenthal | 95,000                          | 40,000               | -                 | 25,900                         | 160,900
Chad M. Lindbloom   | 95,00                           | 40,000               | -                 | 13,800                         | 148,800
Paul S. Pearlman    | 65,000                          | 40,000               | -                 | 850                            | 105,850
Lawrence Reinhold   | 65,000                          | 40,000               | -                 | 850                            | 105,850

Non-Management Director Compensation 2019
 non-management directors received compensation 2019
 column represents fair value stock award grant date ASC 718. amounts exclude forfeitures service vesting. Note 10 financial statements Annual Report Form 10-K 2019.
 Dividend payments unvested restricted stock.
 Fees Earned Stock Awards Option Awards Other Compensation Total
 Robert D. Rosenthal 95,000 40,000 25,900 160
 Chad M. Lindbloom 95,00 40,000 13,800 148
 Paul S. Pearlman 65,000 40,000 105,850
 Lawrence Reinhold 65,000


6. Earnings per Share
Under ASC 260, Earnings per Share, the two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under that method, basic and diluted earnings per share data are presented for each class of common stock.
In applying the two-class method, we determined that undistributed earnings should be allocated equally on a per share basis between Class A and Class B common stock. Under our Certificate of Incorporation, the holders of the common stock are entitled to participate ratably, on a share-for-share basis as if all shares of common stock were of a single class, in such dividends, as may be declared by the Board of Directors. During the years ended December 31, 2019, 2018 and 2017, we declared and paid quarterly dividends, in the amount of $0.27, $0.25 and $0.21 per share on both classes of common stock.
Basic earnings per share has been computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during each period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period in which the shares were outstanding. Diluted earnings per share have been computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during each period.
The net income available to common stockholders and weighted average number of common shares outstanding used to compute basic and diluted earnings per share for each class of common stock are as follows (in thousands, except per share amounts):
For the years ended December 31, 2019, 2018 and 2017, options to purchase 288,133 shares, 293,898 shares and 265,866 shares, respectively, were outstanding but not included in the computation of diluted earnings per share because the options' effect would have been anti-dilutive. For the years ended December 31, 2019, 2018 and 2017, there were 338,748 shares, 420,524 shares and 463,800 shares, respectively, issued from the exercise of stock options.

                                                                                |          | Year Ended December 31, |
-------------------------------------------------------------------------------------------------------------------- | -------- | ----------------------- | --------
                                                                                | 2019     | 2018                    | 2017
Distributed earnings                                                                                | $43,207  | $39,627                 | $32,709
Undistributed earnings                                                                                | 70,683   | 42,470                  | 81,432
Net income                                                                                | $113,890 | $82,097                 | $114,141
Class A common stock:                                                                                |          |                         |
Basic net income available to common stockholders                                                                    | $76,294  | $54,715                 | $75,413
Basic weighted average common shares outstanding                                                                     | 26,763   | 26,354                  | 25,685
Basic earnings per share                                                                                | $2.85    | $2.08                   | $2.94
Diluted net income available to common stockholders                                                                  | $76,555  | $54,937                 | $75,698
Effect of potential exercise of stock options                                                                        | 279      | 324                     | 288
Diluted weighted average common shares outstanding                                                                   | 27,042   | 26,678                  | 25,973
Diluted earnings per share                                                                                | $2.83    | $2.06                   | $2.91
Class B common stock:                                                                                |          |                         |
Basic net income available to common stockholders                                                                    | $37,596  | $27,382                 | $38,728
Basic weighted average common shares outstanding                                                                     | 13,188   | 13,189                  | 13,190
Basic earnings per share                                                                                | $2.85    | $2.08                   | $2.94
Diluted net income available to common stockholders                                                                  | $37,335  | $27,160                 | $38,443
Diluted weighted average common shares outstanding                                                                   | 13,188   | 13,189                  | 13,190
Diluted earnings per share                                                                                | $2.83    | $2.06                   | $2.91
For the years ended December 31, 2019, 2018 and 2017, options to purchase 288,133 shares, 293,898 shares and 265,866 |          |                         |

. Earnings per Share
 ASC 260 two-class method allocation formula determines earnings each class common stock dividends participation rights undistributed earnings. basic diluted earnings per share presented each class.
 undistributed earnings allocated equally between Class A Class B common stock. Certificate Incorporation holders participate dividends declared Board Directors. years December 31, 2019 2018 2017 declared paid quarterly dividends $0. 27, $0. 25 $0. 21 per share both classes.
 Basic earnings per share computed net income by weighted average number shares. Shares issued reacquired weighted. Diluted earnings per share computed potentially dilutive shares.
 net income weighted average number shares basic diluted earnings per
 years December 31, 2019 2018 2017 options to purchase,133 293,898 265,866 outstanding not included diluted earnings per anti-dilutive.years 2019 2018 2017 338,748 420,524 463,800 issued stock options.
 Ended
 Distributed earnings $43,207 $39,627 $32,709
 Undistributed earnings 70,683 42,470 81,432
 Net income $113,890 $82,097 $114,141
 Class A common stock
 net income $76,294 $54,715 $75,413
 weighted average common shares 26,763 26,354 25,685
 earnings share $2.
 income $76,555 $54,937 $75,698
 stock options 279
 weighted average common shares 27,042 26,678 25,973
.
 Class B common stock
 net income $37,596 $27,382 $38,728
 weighted average common shares 13,188 13,189
.
 net income $37,335 $27,160 $38,443
 average shares 13,188
.
years 31, 2017 purchase 288,133 293,898 265,866


Stock-Based Compensation Expense and Valuations of Stock Awards
We estimated the fair values of our restricted stock-based awards that are solely subject to service-based vesting requirements based upon their market values as of the grant dates, discounted for the present values of expected dividends.
The fair values of our PSUs were also measured based upon their market values as of their respective grant dates, discounted for the present values of expected dividends. The vesting conditions and related terms of our PSUs were communicated to each participating employee as of their respective grant dates and included attainment metrics that were defined, fixed and based upon consistent U.S. GAAP metrics or internal metrics that are defined, fixed and consistently determined, and that require the employee to render service. Therefore, these awards met the performance-based award classification criteria as defined within ASC 718.
We estimated the fair values of our stock options that were solely subject to service-based vesting requirements using the Black-Scholes-Merton option-pricing model, which was developed for use in estimating the fair values of stock options. Option valuation models, including the Black-Scholes-Merton option-pricing model, require the input of assumptions, including stock price volatility. Changes in the input assumptions can affect the fair value estimates and ultimately how much we recognize as stock-based compensation expense. The fair values of our stock options were estimated at the grant dates or at the acquisition dates for options assumed in a business combination. The weighted-average input assumptions used and resulting fair values of our service-based stock options were as follows for fiscal 2019, 2018 and 2017.
The expected life input is based on historical exercise patterns and post-vesting termination behavior, the risk-free interest rate input is based on U.S. Treasury instruments, the annualized dividend yield input is based on the per share dividend declared by the Board, and the volatility input is calculated based on the implied volatility of our publicly traded options.
We estimated the fair values of the PSOs granted during fiscal 2018 at approximately $10 per share using a Monte Carlo simulation approach as of the grant date with the following assumptions: risk-free interest rate of 2.14%, expected term of seven years, expected volatility of 22.44% and dividend yield of 1.49%.

                                      | Year Ended May 31, |       |
------------------------------------- | ------------------ | ----- | -----
                                      | 2019               | 2018  | 2017
Expected life (in years)              | 4.6                | 4.7   | 4.8
risk-free interest rate               | 2.7%               | 2.0%  | 1.0%
Volatility                            | 24%                | 22%   | 23%
Dividend yield                        | 1.7%               | 1.5%  | 1.5%
Weighted-average fair value per share | $10.77             | $9.34 | $8.18

Stock-Based Compensation Expense Valuations Stock Awards
 estimated values restricted stock-based awards service-based vesting market values grant dates discounted expected dividends.
 values PSUs measured market values grant discounted dividends. vesting conditions terms communicated employee included attainment metrics defined U. GAAP. awards met performance-based award classification criteria ASC 718.
 estimated values stock options service-based vesting Black-Scholes-Merton option-pricing model. require assumptions stock price volatility. Changes affect fair value estimates stock-based compensation expense. fair values options estimated grant dates dates business. weighted-average input assumptions fair values options 2019 2018 2017.
 expected life input historical exercise patterns post-vesting termination behavior risk-free interest rate U. S. Treasury instruments annualized dividend yield per share dividend volatility implied volatility publicly traded options.
estimated values PSOs 2018 $10 per share Monte Carlo simulation risk-free interest 2. 14% term seven years volatility. 44% dividend yield. 49%.
 Ended May 31,
 Expected life 4. 6.
-free interest rate. 7%.
 Volatility 24% 22%
 Dividend yield. 7%. 5%.
-average value share $10. 77 $9. 34.


27 Financial risk management (continued)
Credit risk
Credit risk is the risk of financial loss if a tenant or counterparty fails to meet an obligation under a contract. Credit risk arises primarily from trade receivables but also from other financial assets with counterparties including loans to joint ventures, cash deposits and derivative financial instruments.
– trade receivables
Credit risk associated with trade receivables is actively managed; tenants are typically invoiced quarterly in advance and are managed individually by asset managers, who continuously monitor and work with tenants, aiming wherever possible to identify and address risks prior to default.
Prospective tenants are assessed via a review process, including obtaining credit ratings and reviewing financial information, which is conducted internally. As a result deposits or guarantees may be obtained. The amount of deposits held as collateral at 31 December 2019 is £3.5 million (2018: £3.5 million).
When applying a loss allowance for expected credit losses, judgement is exercised as to the collectability of trade receivables and to determine if it is appropriate to impair these assets. When considering expected credit losses, management has taken into account days past due, credit status of the counterparty and historical evidence of collection.
The ageing analysis of trade receivables is as follows:

£m                  | 2019 | 2018
------------------- | ---- | ----
Up to three months  | 29.9 | 32.1
Three to six months | 10.0 | 3.7
Trade receivables   | 39.9 | 35.8

Financial risk management
 Credit risk
 financial loss if obligation contract. from trade receivables financial assets loans cash deposits derivative financial instruments.
 managed invoiced quarterly managed by risks default.
 tenants assessed review process credit ratings financial information. deposits guarantees obtained. deposits held collateral at 31 December 2019 £3. 5 million (2018 £3. 5 million.
 loss allowance credit losses judgement collectability trade receivables impair assets. losses days past due credit status historical evidence collection.
 ageing analysis trade receivables
 2019 2018
 Up to three months.
 Three to six months.
 Trade receivables.


Non-GAAP (Core) Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our “core” financial measures should not be construed as an inference by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.
Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, other than temporary impairment on securities, restructuring of securities loss, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation. Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, other than temporary impairment on securities, restructuring of securities loss, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation. Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, other than temporary impairment on securities, restructuring of securities loss, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation.
We determine the tax effect of the items excluded from “core” earnings and “core” diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where we do not expect to realize a tax benefit (due to existing tax incentives or a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or 0% tax rate is applied.
We are reporting “core” operating income, “core” earnings and “core” return on invested capital to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our “core” manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating “core” operating income and “core” earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring and related charges, we may make associated cash payments in the future. In addition, although, for purposes of calculating “core” operating income and “core” earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders’ ownership interest. We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures.
Included in the tables below are a reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Consolidated Financial Statements:
Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures
(1) Charges during fiscal years 2019 and 2018 relate to inventory and other assets charges for certain distressed customers in the networking and consumer wearables sectors. Charges during fiscal year 2017 relate to inventory and other assets charges for the disengagement with an energy customer.
(2) Charges, net of insurance proceeds of $2.9 million and $24.9 million, for the fiscal years ended August 31, 2019 and 2018, respectively, relate to business interruption and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.
(3) Charges related to our strategic collaboration with Johnson & Johnson Medical Devices Companies (“JJMD”).
(4) Relates to a restructuring of securities loss on available for sale securities during fiscal year 2019. See Note 16 – “Fair Value Measurements” to the Consolidated Financial Statements for further discussion.
(5) The fiscal year ended August 31, 2019 includes a $13.3 million income tax benefit for the effects of the Tax Act recorded during the three months ended November 30, 2018. The fiscal year ended August 31, 2018 includes a $142.3 million provisional estimate to account for the effects of the Tax Act.

                                                                                |          | Fiscal Year Ended August 31, |
------------------------------------------------------------------------------------------------------------------ | -------- | ---------------------------- | --------
(in thousands, except for per share data)                                                                          | 2019     | 2018                         | 2017
Operating income (U.S. GAAP)                                                                                | $701,356 | $542,153                     | $410,230
Amortization of intangibles                                                                                | 31,923   | 38,490                       | 35,524
Stock-based compensation expense and related charges                                                               | 61,346   | 98,511                       | 48,544
Restructuring and related charges                                                                                | 25,914   | 36,902                       | 160,395
Distressed customer charges(1)                                                                                | 6,235    | 32,710                       | 10,198
Business interruption and impairment charges, net(2)                                                               | (2,860)  | 11,299                       | —
Acquisition and integration charges(3)                                                                             | 52,697   | 8,082                        | —
Loss on disposal of subsidiaries                                                                                | —        | —                            | 2,112
Adjustments to operating income                                                                                | 175,255  | 225,994                      | 256,773
Core operating income(Non-GAAP)                                                                                | $876,611 | $768,147                     | $667,003
Net income attributable to Jabil Inc.(U.S.GAAP)                                                                    | $287,111 | $86,330                      | $129,090
Adjustments to operating income                                                                                | 175,255  | 225,994                      | 256,773
Other than temporary impairment on securities                                                                      | —        | —                            | 11,539
Restructuring of securities loss(4)                                                                                | 29,632   | —                            | —
Adjustment for taxes(5)                                                                                | (18,633) | 146,206                      | (4,726)
Core earnings(Non-GAAP)                                                                                | $473,365 | $458,530                     | $392,676
Diluted earnings per share(U.S.GAAP)                                                                               | $1.81    | $0.49                        | $0.69
Diluted core earnings per share(Non-GAAP)                                                                          | $2.98    | $2.62                        | $2.11
Diluted weighted average shares outstanding used in the calculation of earnings per share (U.S. GAAP and Non-GAAP) | 158,647  | 175,044                      | 185,838

Non-GAAP (Core Financial Measures
 financial condition include non-GAAP financial measures reconciliation. standard meaning may vary. not substitute for financial performance U. S. GAAP. measures not inference future results unaffected excluded.
 Management believes non-GAAP measures evaluating past future performance manufacturing operations excluding amortization intangibles stock-based compensation expense restructuring distressed customer charges integration charges loss on disposal subsidiaries settlement receivables impairment notes receivable goodwill impairment business interruption impairment securities restructuring loss income from discontinued operations gain (loss) sale discontinued operations other expenses tax deferred tax valuation allowance charges. management uses non-GAAP financial measures operating decisions assess business performance employee performance incentive compensation.Management believes non-GAAP financial measures evaluating past future performance manufacturing operations excluding amortization stock-based compensation restructuring distressed customer charges acquisition integration charges loss disposal subsidiaries settlement receivables impairment goodwill impairment business interruption impairment charges restructuring loss income (loss discontinued operations gain sale other expenses net tax deferred tax valuation allowance charges. uses measures operating decisions assess business performance employee performance incentive compensation. past future performance manufacturing operations amortization stock compensation restructuring distressed customer charges integration charges loss disposal settlement impairment notes goodwill impairment business interruption impairment charges restructuring securities loss income (loss discontinued operations gain sale other expenses net tax deferred tax valuation allowance charges. uses operating decisions assess business performance employee performance incentive compensation.
determine tax effect items excluded from earnings diluted earnings per share statutory tax treatment tax rate jurisdiction pre-tax items incurred realization tax benefit expected. jurisdictions tax benefit tax incentives operating losses deferred tax reduced or 0% tax rate applied.
 reporting “core” operating income earnings return on invested capital method assessing operating income earnings. portion items excluded balance sheet assets written off without recovery cash. restructuring charges make cash payments future. exclude stock-based compensation expense non stock outstanding shares stock dilution stockholders’ ownership interest. consider evaluating utility non-GAAP financial measures.
 tables reconciliation of non-GAAP financial measures to comparable U. S. GAAP measures Consolidated Financial Statements
 Reconciliation U. GAAP Financial Results to Non-GAAP Measures
 Charges fiscal years 2019 2018 relate inventory assets charges for distressed customers networking consumer wearables sectors.Charges 2017 inventory disengagement energy customer.
 insurance $2. 9 million $24. 9 million years 2019 2018 business interruption asset impairment Hurricane Maria Cayey Puerto Rico.
 Johnson & Johnson Medical Devices.
 restructuring securities loss 2019. Note 16 Value Consolidated Financial Statements.
 fiscal year August 2019 $13. 3 million income tax benefit Act November 30 2018. August 2018 $142. 3 million estimate Tax Act.
 Fiscal Year August
 Operating income. $701,356 $542,153 $410,230
 Amortization intangibles 31,923
 Stock-based compensation 61,346
 Restructuring charges 25,914 36,902
 Distressed customer 6,235 32,710
 Business interruption impairment charges 11,299
 Acquisition integration 52,697 8,082
 Loss disposal subsidiaries
 Adjustments operating income 175,255 225,994 256,773
operating income-GAAP $876,611 $768,147 $667,003
 income Jabil. $287,111 $86,330 $129,090
 Adjustments operating income 175,255 225,994 256,773
 temporary impairment securities 11,539
 Restructuring securities 29,632
 Adjustment (18,633 146,206
 earnings-GAAP $473,365 $458,530 $392,676
 earnings share. $1.
 earnings share-GAAP.
 shares. 158,647 175,044 185,838


23. Trade and other payables
Notes
1. In 2018, government grants of $0.4 million and $0.9 million were included within payments received on account and accruals, respectively. These have been reclassified to government grants.
2. In 2018, government grants of $1.0 million were included within other payables. These have been reclassified to government grants.
Trade payables are non-interest bearing and are normally settled on 30 to 60-day terms. Other payables are non-interest bearing.
The Directors consider that the carrying amount of trade payables approximates their fair value.

                                      |      | 2019      | 2018
------------------------------------- | ---- | --------- | ---------
Note                                  | Note | $ million | $ million
Current                               |      |           |
Trade payables                        |      | 24.6      | 12.9
Payments received on account1         |      | 2.3       | 1.0
Other taxes and social security costs |      | 4.6       | 3.7
Other payables                        |      | 1.5       | 1.0
Accruals1                             |      | 49.3      | 43.2
Government grants1                    | 24   | 1.8       | 1.3
                                      |      | 84.1      | 63.1
Non-current                           |      |           |
Other payables2                       |      | 0.8       | 4.4
Government grants2                    | 24   | 0.2       | 1.0
                                      |      | 1.0       | 5.4
                                      |      | 85.1      | 68.5

. Trade payables
. 2018 government grants $0. 4 million $0. 9 million included payments account accruals. reclassified government grants.
. 2018 government grants $1. million payables. reclassified.
 payables non settled 30 to 60-day terms.
 Directors carrying amount approximates fair value.
 2018
 $ million
 Trade payables 24. 12. 9
 Payments account1 2.
 taxes social security costs 4. 3.
 payables.
 Accruals1 49. 43.
 Government grants1.
 84. 63.
 Non-current
 payables2. 4.
 Government grants2.
.
 85. 68.


Financing Cash Flow Activities
Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Net cash provided by financing activities – continuing operations increased during the year ended December 31, 2019 primarily due to inflows resulting from (i) the issuance of the 0.875% Convertible Senior Notes, (ii) lower credit facility payments, partially offset with less credit facility borrowings and (iii) a decrease in the repurchase of common stock. These were partially offset by the purchase of the remaining minority interest in Pulse8 during 2019.
Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017
We used cash in financing activities – continuing operations during the year ended December 31, 2018 compared with cash inflows from financing activities – continuing operations during the year ended December 31, 2017, which was primarily driven by higher repayments of borrowings outstanding under our senior secured credit facility and higher common stock repurchases. We used a portion of the proceeds from the sale of our investment in Netsmart to repay balances outstanding under our senior secured credit facilities at the end of 2018. We borrowed funds in 2018 to purchase Practice Fusion and Health Grid and to acquire the remaining outstanding minority interest in which we initially acquired a controlling interest in April 2015.
Net cash provided by financing activities – discontinued operations increased during the year ended December 31, 2018 compared with the prior year primarily due to higher borrowings by Netsmart used to finance business acquisitions.

                                                                              |           | Year Ended December 31, |           |                         |
----------------------------------------------------------------------------- | --------- | ----------------------- | --------- | ----------------------- | -----------------------
(In thousands)                                                                | 2019      | 2018                    | 2017      | 2019 $ Change from 2018 | 2018 $ Change from 2017
Proceeds from sale or issuance of common stock                                | $0        | $1,283                  | $1,568    | $(1,283)                | $(285)
Taxes paid related to net share settlement of equity awards                   | (7,286)   | (9,466)                 | (7,269)   | 2,180                   | (2,197)
Proceeds from issuance of 0.875% Convertible Senior Notes                     | 218,000   | 0                       | 0         | 218,000                 | 0
Payments for issuance costs on 0.875% Convertible Senior Notes                | (5,445)   | 0                       | 0         | (5,445)                 | 0
Payments for capped call transaction on 0.875% Convertible Senior Notes       | (17,222)  | 0                       | 0         | (17,222)                | 0
Credit facility payments                                                      | (220,000) | (713,751)               | (138,139) | 493,751                 | (575,612)
Credit facility borrowings, net of issuance costs                             | 279,241   | 430,843                 | 325,001   | (151,602)               | 105,842
Repurchase of common stock                                                    | (111,460) | (138,928)               | (12,077)  | 27,468                  | (126,851)
Payment of acquisition and other financing obligations                        | (14,685)  | (5,198)                 | (1,283)   | (9,487)                 | (3,915)
Purchases of subsidiary shares owned by non-controlling interest              | (53,800)  | (7,198)                 | 0         | (46,602)                | (7,198)
Net cash provided by (used in) financing activities - continuing operations   | 67,343    | (442,415)               | 167,801   | 509,758                 | (610,216)
Net cash provided by (used in) financing activities - discontinued operations | 0         | 149,432                 | 30,784    | (149,432)               | 118,648
Net cash provided (used in) by financing activities                           | $67,343   | $(292,983)              | $198,585  | $360,326                | $(491,568)

Financing Cash Flow Activities
 Year Ended December 31, 2019
 Net cash increased due to issuance 0. 875% Convertible Senior Notes lower credit facility payments less borrowings decrease repurchase common stock. offset by purchase minority interest Pulse8 2019.
 Year Ended December 31, 2018
 used cash financing activities driven higher repayments borrowings higher common stock repurchases. used proceeds from sale investment Netsmart repay balances. borrowed funds 2018 purchase Practice Fusion Health Grid remaining minority interest 2015.
 Net cash financing activities increased December 31, 2018 due to higher borrowings Netsmart business acquisitions.
 Year Ended December
 thousands 2019 2018 2017 Change 2018
 Proceeds sale issuance common stock $1,283 $1,568 $(1,283)
 Taxes net share settlement equity awards (7,286) (9,466) 2,180 (2,197)
. Convertible Senior Notes 218,000
 issuance costs. (5
 capped. (17,222
 payments (220,000 (713,751) (138,139) 493,751 (575,612)
 borrowings issuance costs 279,241 430,843 325,001 (151,602) 105
 Repurchase common stock (111,460) (138,928) (12,077) 27,468
 acquisition financing obligations (14,685) (5,198) (1,283) (9,487
 Purchases subsidiary shares non-controlling (53,800 (7,198)
 67,343 (442,415) 167,801 509,758 (610,216)
 discontinued 149,432 30,784 118,648
 $67,343 $(292,983) $198,585 $360,326(491,568)


5 Staff costs and numbers
The aggregate payroll costs of persons employed by the Group were as follows:

                      | 2019  | 2018
--------------------- | ----- | -----
                      | £m    | £m
Wages and salaries    | 345.6 | 325.9
Social security costs | 71.6  | 58.7
Pension costs         | 21.5  | 19.3
Total payroll costs   | 438.7 | 403.9

Staff costs
 payroll costs
 2018
 £m
 Wages salaries. 325.
 Social security costs 71. 58.
 Pension costs 21. 19.
 payroll costs. 403.


Information as to Teradyne’s revenues by country is as follows:
(1) Revenues attributable to a country are based on location of customer site.
In 2019 and 2018, no single direct customer accounted for more than 10% of Teradyne’s consolidated revenues. In 2017, revenues from Taiwan Semiconductor Manufacturing Company Ltd. accounted for 13% of its consolidated revenues. Taiwan Semiconductor Manufacturing Company Ltd. is a customer of Teradyne’s Semiconductor Test segment. Teradyne estimates 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 its consolidated revenues in 2019 and 2018, respectively. Teradyne estimates consolidated revenues driven by another OEM customer, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for approximately 10%, 13% and 22% of its consolidated revenues in 2019, 2018 and 2017, respectively.

                             | 2019       | 2018           | 2017
---------------------------- | ---------- | -------------- | ----------
                             |            | (in thousands) |
Revenues from customers (1): |            |                |
China                        | $514,327   | $348,942       | $260,451
Taiwan                       | 485,681    | 516,322        | 687,031
United States                | 333,059    | 282,869        | 252,516
Korea                        | 239,504    | 163,224        | 206,819
Europe                       | 219,015    | 223,207        | 163,715
Japan                        | 175,322    | 158,281        | 169,093
Thailand                     | 87,503     | 59,184         | 29,566
Singapore                    | 84,111     | 108,618        | 101,085
Malaysia                     | 58,200     | 122,797        | 124,048
Philippines                  | 54,560     | 77,996         | 105,850
Rest of the World            | 43,683     | 39,362         | 36,432
                             | $2,294,965 | $2,100,802     | $2,136,606

Teradyne’s revenues by country
 based location customer site.
 2019 2018 no customer 10% revenues. 2017 Taiwan Semiconductor Manufacturing Company Ltd. 13% revenues. customer Teradyne’s Semiconductor Test segment. Huawei Technologies Co. 11% 4% revenues 2019 2018. another customer. 10% 13% 22% 2017.
 Revenues from
 China $514,327 $348,942 $260,451
 Taiwan 485,681 516,322,031
 United States 333,059 282,869 252,516
 Korea 239,504 163,224 206,819
 Europe 219,015 223,207 163,715
 Japan 175,322 158,281 169,093
 Thailand 87,503 59,184 29,566
 Singapore 84,111 108,618 101,085
 Malaysia 58,200 122,797 124,048
 Philippines 54,560 77,996 105,850
43,683 39,362 36,432
,294,965,100,802,606


Equity in net earnings of affiliates:
As of December 31, 2019, we held a 32.0% (2018: 32.0%) ownership interest in Golar Partners (including our 2% general partner interest) and 100% of the incentive distribution rights ("IDRs"). The decrease in the share of net earnings in Golar Partners is due to a decrease in underlying performance of Golar Partners and fair value adjustment for the year ended December 31, 2019. The decrease in the share of net earnings in Golar Partners is offset by the movement of the impairment charge of $149.4 million recognized for the year ended December 31, 2018.
The share of net earnings in other affiliates represents our share of equity in Egyptian Company for Gas Services S.A.E ("ECGS") and Avenir LNG Limited ("Avenir"). During the year ended December 31, 2018 we recognized negative goodwill of $3.8 million in equity in net earnings of affiliates to reflect our bargain purchase of Avenir. Refer to note 14 "Investment in Affiliates" of our consolidated financial statements included herein for further details.

                                                   |          | December 31, |          |
-------------------------------------------------- | -------- | ------------ | -------- | --------
(in thousands of $)                                | 2019     | 2018         | Change   | % Change
Share in net (loss)/earnings in Golar Partners     | (20,050) | 7,001        | (27,051) | (386)%
Impairment of investment in Golar Partners         | —        | (149,389)    | 149,389  | 100%
Share of net (losses)/earnings in other affiliates | (2,515)  | 3,711        | (6,226)  | (168)%
                                                   | (22,565) | (138,677)    | 116,112  | (84)%

Equity net earnings
 December 31, 2019 held 32. 0%. ownership Golar Partners 2% general partner interest 100% incentive distribution rights. decrease net earnings due performance fair value adjustment. offset impairment charge $149. 4 million 31, 2018.
 net earnings affiliates equity Egyptian Company Gas Services. Avenir LNG. recognized negative goodwill $3. 8 million equity net earnings bargain purchase Avenir. note 14 "Investment Affiliates financial statements details.
 2019 2018
 Share net/earnings Golar Partners (20,050) 7,001 (27,051) (386)%
 Impairment investment (149,389
 other affiliates (2,515) 3,711 (6,226) (168)
 (22,565 (138,677,112 (84)


Liability for Warranty
Liability for Warranty Our products generally include warranties of 90 days to five years for product defects. We accrue for warranty returns at the time revenue is recognized based on our historical return rate and estimate of the cost to repair or replace the defective products. We engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers. The increasing complexity of our products will cause warranty incidences, when they arise, to be more costly. Our estimates regarding future warranty obligations may change due to product failure rates, material usage and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should our actual experience relative to these factors be worse than our estimates, we will be required to record additional warranty expense. Alternatively, if we provide for more reserves than we require, we will reverse a portion of such provisions in future periods. The liability for warranty obligations totaled $8.4 million and $8.6 million as of December 31, 2019 and 2018, respectively. These liabilities are included in accrued expenses in the accompanying Consolidated Balance Sheets. During 2017, we recorded a reduction in warranty expense related to a settlement with a third-party supplier for a defective component, the impact of which is reflected in the following table.
A summary of warranty expense and write-off activity for the years ended December 31, 2019, 2018 and 2017 is as follows:
(In thousands)

Year Ended December 31,                    | 2019    | 2018    | 2017
------------------------------------------ | ------- | ------- | -------
Balance at beginning of period             | $8,623  | $9,724  | $8,548
Plus: Amounts charged to cost and expenses | 4,569   | 7,392   | 6,951
Less: Deductions                           | (4,798) | (8,493) | (5,775)
Balance at end of period                   | $8,394  | $8,623  | $9,724

Liability Warranty
 products include warranties 90 days to five years for defects. accrue warranty returns revenue return rate cost. quality programs. increasing complexity warranty incidences costly. estimates future warranty obligations change failure rates material usage rework costs. accruals unforeseen problems. record additional warranty expense. reserves reverse. liability warranty obligations totaled $8. 4 million $8. 6 million as December 31, 2019 2018. included in accrued expenses Consolidated Balance Sheets. 2017 reduction warranty expense settlement defective component table.
 summary warranty expense write-off activity December 31, 2019 2018 2017
 Balance beginning $8,623 $9,724 $8,548
 Plus Amounts cost expenses 4,569 7,392 6,951
 Deductions (4,798) (8,493) (5,775)
 Balance end period $8,394 $8,623 $9,724


Note 23. Defined Benefit Pension Plan and Postretirement Benefits
Defined Benefit Pension Plans
The Company sponsors non-contributory defined benefit pension plans (the “Pension Plans”) for its covered employees in the Philippines. The Pension Plans provide defined benefits based on years of service and final salary. All permanent employees meeting the minimum service requirement are eligible to participate in the Pension Plans. As of December 31, 2019, the Pension Plans were unfunded. The Company expects to make no cash contributions to its Pension Plans during 2020.
The following table provides a reconciliation of the change in the benefit obligation for the Pension Plans and the net amount recognized, included in “Other long-term liabilities,” in the accompanying Consolidated Balance Sheets (in thousands):

                                       | December 31, |
-------------------------------------- | ------------ | --------
                                       | 2019         | 2018
Balance at the beginning of the period | $3,282       | $3,642
Service cost                           | 405          | 448
Interest cost                          | 254          | 196
Actuarial (gains) losses               | (108)        | (783)
Benefits paid                          | (22)         | (32)
Effect of foreign currency translation | 122          | (189)
Balance at the end of the period       | $3,933       | $3,282
Unfunded status                        | (3,933)      | (3,282)
Net amount recognized                  | $(3,933)     | $(3,282)

23. Defined Benefit Pension Plan Postretirement Benefits
 Company sponsors non-contributory pension plans employees Philippines. provide benefits years service final salary. employees minimum service eligible participate. December 31, 2019 Plans unfunded. expects no cash contributions 2020.
 benefit obligation net amount long liabilities Consolidated Balance Sheets
 December 31,
 2019
 Balance $3,282 $3,642
 Service cost 405
 Interest cost 254
 Actuarial losses (108)
 Benefits paid (22)
 foreign currency translation 122
 end $3,933 $3
 Unfunded status
 Net amount


RESEARCH AND DEVELOPMENT EXPENSES
Total research and development (R&D) expenses, excluding impairment charges, increased by 22% in 2019 compared to the previous year, mainly as a result of higher development activities. As a percentage of sales (excluding the patent litigation & arbitration settlement), R&D expenses decreased to 10% compared to 11% in 2018. Currency changes resulted in a 4% increase in R&D expenses year-over-year.
Total research and development expenses developed as follows:
Impairment of capitalized development expenses related primarily to the development of new technology that is now no longer in-demand from customers.
We continue to invest strongly in R&D. As part of our R&D activities, we are engaged in various development programs with customers and research institutes. These allow us to develop products that meet customer requirements and obtain access to new technology and expertise. The costs relating to prototypes and experimental models, which we may subsequently sell to customers, are charged to the cost of sales.
Our R&D operations in the Netherlands, Belgium, and the United States receive research and development grants and credits from various sources.

Year ended December 31,                           |        |        |
------------------------------------------------- | ------ | ------ | --------
(EUR million)                                     | 2018   | 2019   | % Change
Front-end:                                        |        |        |
Research and development expenses                 | 125.3  | 150.7  | 20%
Capitalization of development expenses            | (49.7) | (60.2) | 21%
Research and development grants and credits       | (0.3)  | –      | –
Amortization of capitalized development  expenses | 12.0   | 15.6   | 30%
                                                  | 87.3   | 106.1  | 22%
Impairment capitalized development expenses       | 1.3    | 4.8    | –
Total                                             | 88.6   | 110.8  | 25%

RESEARCH DEVELOPMENT EXPENSES
 research development expenses excluding impairment charges increased 22% 2019 higher development activities. sales patent expenses decreased 10% 11% 2018. Currency changes 4% increase R&D expenses year-over-year.
 expenses
 capitalized development expenses new technology in-demand.
 R&D. development programs customers research institutes. develop products access new technology expertise. costs prototypes experimental models charged to cost sales.
 R&D operations Netherlands Belgium United States receive grants credits sources.
 Year ended December 31,
 million) 2018 2019 %
 Research development expenses 125. 150. 20%
 Capitalization expenses (49. 21%
 Research grants credits.
 Amortization capitalized development expenses 12.
 87. 106. 22%
 Impairment capitalized development expenses.
 88. 110.


Stock options weighted average remaining contractual terms (in years) information at December 31, for the years 2019, 2018, and 2017 is as follows:
As of December 31, 2019, total unrecognized expense related to non-vested restricted stock unit awards and stock options was $45 million, and is expected to be recognized over a weighted average period of 1.8 years.

                            | 2019 | 2018 | 2017
--------------------------- | ---- | ---- | ----
Outstanding                 | 4.2  | 3.6  | 4.1
Vested and expected to vest | 5.0  | 3.6  | 4.1
Exercisable                 | 2.1  | 2.4  | 2.8

Stock options average contractual terms December 31, 2019 2018 2017
 December 31, 2019 unrecognized expense non restricted stock unit awards options $45 million expected recognized 1. 8 years.
 2019 2018 2017
 4. 3.
 Vested expected vest 5. 3.
.


ITEM 6. SELECTED FINANCIAL DATA
In December 2016, we acquired the 67% remaining interest in Inotera and began consolidating Inotera's operating results. In the periods presented above through December 2016, Inotera sold DRAM products exclusively to us through supply agreements. The cash paid for the Inotera Acquisition was funded, in part, with a term loan of 80 billion New Taiwan dollars and $986 million from the sale of 58 million shares of our common stock. See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Acquisition of Inotera."

                                         | 2019    | 2018    | 2017                                    | 2016    | 2015
---------------------------------------- | ------- | ------- | --------------------------------------- | ------- | -------
                                         |         |         | (in millions, except per share amounts) |         |
Revenue                                  | $23,406 | $30,391 | $20,322                                 | $12,399 | $16,192
Gross margin                             | 10,702  | 17,891  | 8,436                                   | 2,505   | 5,215
Operating income                         | 7,376   | 14,994  | 5,868                                   | 168     | 2,998
Net income (loss)                        | 6,358   | 14,138  | 5,090                                   | (275)   | 2,899
Net income (loss) attributable to Micron | 6,313   | 14,135  | 5,089                                   | (276)   | 2,899
Diluted earnings (loss) per share        | 5.51    | 11.51   | 4.41                                    | (0.27)  | 2.47
Cash and short-term investments          | 7,955   | 6,802   | 5,428                                   | 4,398   | 3,521
Total current assets                     | 16,503  | 16,039  | 12,457                                  | 9,495   | 8,596
Property, plant, and equipment           | 28,240  | 23,672  | 19,431                                  | 14,686  | 10,554
Total assets                             | 48,887  | 43,376  | 35,336                                  | 27,540  | 24,143
Total current liabilities                | 6,390   | 5,754   | 5,334                                   | 4,835   | 3,905
Long-term debt                           | 4,541   | 3,777   | 9,872                                   | 9,154   | 6,252
Total Micron shareholders' equity        | 35,881  | 32,294  | 18,621                                  | 12,080  | 12,302
Noncontrolling interests in subsidiaries | 889     | 870     | 849                                     | 848     | 937
Total equity                             | 36,770  | 33,164  | 19,470                                  | 12,928  | 13,239

6. DATA
 December 2016, acquired 67% Inotera results. sold DRAM products supply agreements. Acquisition funded loan 80 billion Taiwan dollars $986 million sale 58 million common stock. 8. Financial Statements Data Acquisition Inotera.
 2018 2017 2016 2015
 Revenue $23,406 $30,391 $20,322 $12,399 $16,192
 Gross margin 10,702 17,891 8,436
 Operating income 7,376 14,994 5,868
 Net income 6,358 14,138 5,090
 Micron 6,313 14,135 5,089
 Diluted earnings (loss) per share.
 Cash short-term investments 7,955 6,802 5,428 4,398
 assets 16,503 16,039 12,457
 Property equipment 28,240 23,672 19,431 14,686
assets 48,887 43,376 35
 liabilities 6,390,754
 debt 4,541 3,777,154 6
 Micron equity 35,881 32,294 18,621 12,302
 interests subsidiaries 889
 equity 36,770 33,164 19,470 12,928


9. Income Taxes
On December 22, 2017, the Tax Act was enacted into law, which made changes to U.S. tax law, including, but not limited to: (1) reducing the U.S. Federal corporate income tax rate from 35% to 21%; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. Federal corporate income taxes on dividends from foreign subsidiaries; (4) capitalizing R&D expenses which are amortized over five to 15 years; and (5) other changes to how foreign and domestic earnings are taxed.
The Tax Act includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a base erosion anti-abuse tax (“BEAT”) measure that taxes certain payments between a U.S. corporation and its foreign subsidiaries. These provisions of the Tax Act were effective for the Company beginning August 1, 2018 and had no impact on the tax benefit for the year ended July 31, 2019.
Under U.S. GAAP, the Company can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into its measurement of deferred taxes. The Company has elected the current period expense method. The Company has finalized its assessment of the transitional impacts of the Tax Act.
In December 2018, the IRS issued proposed regulations related to the BEAT tax, which the Company is in the process of evaluating. If the proposed BEAT regulations are finalized in their current form, the impact may be material to the tax provision in the quarter of enactment.
The U.S. Treasury Department, the Internal Revenue Service (“IRS”), and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered. The Company continues to obtain, analyze, and interpret guidance as it is issued and will revise its estimates as additional information becomes available.
Any legislative changes, including any other new or proposed U.S. Department of the Treasury regulations that have yet to be issued, may result in income tax adjustments, which could be material to our provision for income taxes and effective tax rate in the period any such changes are enacted. The Company’s income (loss) before provision for (benefit from) income taxes for the years ended July 31, 2019, 2018 and 2017 is as follows (in thousands):

                                                               |          | Fiscal years ended July 31, |
-------------------------------------------------------------- | -------- | --------------------------- | -------
                                                               | 2019     | 2018                        | 2017
Domestic                                                       | $(1,778) | $(13,501)                   | $21,723
International                                                  | 14,230   | 5,225                       | 6,803
Income (loss) before provision for (benefit from) income taxes | $12,452  | $(8,276)                    | $28,526

. Income Taxes
 December 22, 2017 Tax Act enacted U. S. tax law. Federal corporate income tax rate 35% to 21% requiring one-time transition tax unrepatriated earnings foreign subsidiaries eliminating. taxes dividends foreign subsidiaries capitalizing R&D expenses amortized five to 15 years changes foreign domestic earnings.
 Tax Act global intangible low-taxed income foreign subsidiaries base erosion anti tax. corporation foreign subsidiaries. effective Company August 1, 2018 no impact tax benefit July 31, 2019.
. Company treat taxes GILTI current period expense or deferred taxes. elected current period expense method. finalized assessment transitional impacts Tax Act.
 December 2018 IRS issued regulations BEAT tax evaluating. impact tax provision.
. Treasury Department Internal Revenue Service standard-setting bodies guidance Tax Act. Company analyze guidance revise estimates information.
 legislative changes.Treasury regulations income tax adjustments rate. Company’s income (loss) before taxes years ended July 31, 2019 2018 2017
 Fiscal years July 31,
 2019 2018 2017
 Domestic $(1,778) $(13,501) $21,723
 International 14,230 5,225
 Income before taxes $12,452 $(8,276) $28,526


Contractual Obligations
We have various contractual obligations impacting our liquidity. The following represents our contractual obligations as of January 31, 2020 (table in millions)
(1) Consists of principal and interest payments on the Senior Notes. Refer to “Liquidity and Capital Resources” for a discussion of the public debt offering we issued on August 21, 2017 in the aggregate principal amount of $4.0 billion.
(2) Consists of principal and interest payments on the outstanding note payable to Dell. Refer to “Liquidity and Capital Resources” for a discussion of the $270 million note payable we entered into with Dell per the note exchange agreement from January 21, 2014.
(3) Consists of the principal on the senior unsecured term loan facility (the “Term Loan”). The Term Loan can be repaid any time before October 2020. Given the variable nature of the interest on the Term Loan, including when the repayment will take place, interest payments have been excluded from the table above.
(4) Consists of both operating and finance leases. Our operating leases are primarily for facility space and land. Amounts in the table above exclude legally binding minimum lease payments for leases signed but not yet commenced of $361 million, as well as expected sublease income.
(5) Consists of future cash payments related to the Transition Tax.
(6) As of January 31, 2020, we had $479 million of gross uncertain tax benefits, excluding interest and penalties. The timing of future payments relating to these obligations is highly uncertain. Based on the timing and outcome of examinations of our subsidiaries, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that within the next 12 months total unrecognized tax benefits could be potentially reduced by approximately $17 million.

                             |        |                  | Payments Due by Period |           |
---------------------------- | ------ | ---------------- | ---------------------- | --------- | -----------------
                             | Total  | Less than 1 year | 1-3 years              | 3-5 years | More than 5 years
Senior Notes(1)              | $4,552 | $1,372           | $1,686                 | $98       | $1,396
Note payable to Dell(2)      | 283    | 5                | 278                    | —         | —
Term Loan(3)                 | 1,500  | 1,500            | —                      | —         | —
Future Lease Commitments(4)  | 1,202  | 144              | 268                    | 178       | 612
Purchase obligations         | 255    | 168              | 87                     | —         | —
Tax obligations(5)           | 545    | 53               | 104                    | 227       | 161
Asset Retirement Obligations | 13     | 1                | 5                      | 2         | 5
Sub-Total                    | 8,350  | 3,243            | 2,428                  | 505       | 2,174
Uncertain tax positions(6)   | 479    |                  |                        |           |
Total                        | $8,829 |                  |                        |           |

Contractual Obligations
 obligations impacting liquidity. obligations as of January 31, 2020 millions
 principal interest payments Senior Notes. public debt offering issued August 21, 2017 principal $4. 0 billion.
 principal interest payments outstanding note payable Dell. $270 million note payable Dell exchange agreement January 21, 2014.
 principal senior unsecured term loan facility. repaid before October 2020. variable interest interest payments excluded.
 operating finance leases. operating leases facility space land. exclude minimum lease payments leases $361 million expected sublease income.
 future cash payments Transition Tax.
 January 31, 2020 $479 million uncertain tax benefits excluding interest penalties. timing future payments uncertain. statutes limitations next 12 months unrecognized tax benefits reduced by $17 million.
 Payments Due Period
 Less than 1 year 1-3 years 3-5 years More than 5 years
Senior $4,552 $1,372 $1,396
 283 278
 Term 1,500
 Future Lease 1,202 144 268 178 612
 Purchase obligations 255 168 87
 Tax 545 53 104 227
 Asset Retirement Obligations
 Sub-Total 8,350 3,243 2,428 505 2,174
 Uncertain tax positions(6) 479
 $8,829


The following table provides a reconciliation of Adjusted SG&A to SG&A expenses, the most directly comparable financial measure presented in accordance with U.S. GAAP:
(a) Represents depreciation and amortization expense included in SG&A.
(b) Represents non-cash share-based compensation expense included in SG&A.
(c) Represents new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network.
(d) Represents fees associated with secondary public offerings of our common stock.
(e) Represents charges associated with our former Chief Executive Officer’s separation agreement, as well as changes in estimates associated with leadership transition costs
(f) Represents fees associated with two securities lawsuits.

                                           | Twelve Months Ended December 31, |         |         |         |
------------------------------------------ | -------------------------------- | ------- | ------- | ------- | -------
                                           | 2019                             | 2018    | 2017    | 2016    | 2015
                                           | (Dollars in thousands)           |         |         |         |
SG&A expenses                              | $114,450                         | $94,876 | $75,167 | $62,586 | $58,297
Depreciation and amortization expense (a)  | 9,551                            | 7,977   | 6,901   | 5,859   | 5,008
Non-cash share-based compensation (b)      | 6,912                            | 5,949   | 4,195   | 3,972   | 3,723
Launch expense (c)                         | 4,563                            | 3,540   | 3,066   | 2,813   | 2,626
Loss on disposal of equipment              | 649                              | —       | —       | —       | —
Secondary offering expenses (d)            | 302                              | 362     | —       | —       | 593
Leadership transition expenses (e)         | —                                | —       | 63      | 1,291   | —
Litigation expense (f)                     | —                                | 348     | 145     | —       | —
Adjusted SG&A Expenses                     | $92,473                          | $76,698 | $60,797 | $48,651 | $46,347
Adjusted SG&A Expenses as a % of Net Sales | 37.6%                            | 39.7%   | 39.9%   | 37.5%   | 40.8%

table Adjusted SG&A expenses. GAAP
 depreciation amortization.
 non-cash share-based compensation.
 new store marketing allowance $1,000 non freight costs Freshpet Fridge replacements. enhances marketing spend distribution network.
 fees secondary public offerings common stock.
 charges former Chief Executive Officer’s separation agreement leadership transition costs
 fees securities lawsuits.
 Twelve Months Ended December 31,
 2019 2018 2017
 SG&A expenses $114,450 $94,876 $75,167 $62,586 $58,297
 Depreciation amortization 9,551 7,977 6
 Non-cash share-based compensation 6,912 5,949 4,195
 Launch expense 4,563 3,540 3,066 2,813
 Loss disposal equipment
 Secondary offering expenses 302 362
 Leadership transition expenses 1,291
Litigation expense 145
 Expenses $92,473 $76,698 $60,797 $48,651 $46,347
 Net Sales 37. 6%. 7%. 8%


Adjusted EBITDA Non-GAAP Reconciliation
(UNAUDITED)
($ in millions)
(1) Refer to Non-GAAP Integration and Transformation Costs and Special Items table for details of the integration and transformation costs and special items included above.

                                                                                |          |         | Pro Forma (1)
---------------------------------------------------------------------------------------- | -------- | ------- | -------------
                                                                                | 2019     | 2018    | 2017
Net income (loss)                                                                        | $(5,269) | (1,733) | 1,508
Income tax expense                                                                       | 503      | 170     | (770)
Total other expense, net                                                                 | 2,040    | 2,133   | 2,147
Depreciation and amortization expense                                                    | 4,829    | 5,120   | 5,125
Share-based compensation expenses                                                        | 162      | 186     | 238
Goodwill impairment                                                                      | 6,506    | 2,726   | 0
Adjusted EBITDA                                                                          | 8,771    | 8,602   | 8,248
Exclude: transaction related expenses                                                    | 0        | 0       | 192
Exclude: integration and transformation costs(1)                                         | 234      | 378     | 164
Exclude: special items(1)                                                                | 65       | 60      | 82
Adjusted EBITDA excluding integration and transformation costs and special items         | $9,070   | 9,040   | 8,686
Total revenue                                                                            | $22,401  | 23,443  | 24,128
Adjusted EBITDA Margin                                                                   | 39.2%    | 36.7%   | 34.2%
Adjusted EBITDA Margin, excluding integration and transformation costs and special items | 40.5%    | 38.6%   | 36.0%

EBITDA Non-GAAP Reconciliation
 millions
 Non-GAAP Integration Transformation Costs Special Items.
 Net income (loss $(5,269) (1,733) 1,508
 Income tax expense 503 (770)
 expense 2,040 2,133
 Depreciation amortization expense 5,120
 Share-based compensation expenses 162
 Goodwill impairment 6,506 2,726
 Adjusted EBITDA 8,771 8,602 8,248
 transaction expenses
 integration transformation 234 378
 special 65
 Adjusted EBITDA $9,070 9,040 8,686
 Total revenue $22,401 23,443 24,128
 EBITDA Margin. 2%.
 excluding. 5%. 6%.


Notes to Consolidated Financial Statements - (Continued) Fiscal Years Ended May 26, 2019, May 27, 2018, and May 28, 2017 (columnar dollars in millions except per share amounts) General
The Revolving Credit Facility (as defined in Note 5) and the Term Loan Agreement generally require our ratio of earnings before interest, taxes, depreciation and amortization ("EBITDA") to interest expense not to be less than 3.0 to 1.0 and our ratio of funded debt to EBITDA not to exceed certain decreasing specified levels, ranging from 5.875 through the first quarter of fiscal 2020 to 3.75 from the second quarter of fiscal 2023 and thereafter, with each ratio to be calculated on a rolling fourquarter basis. As of May 26, 2019, we were in compliance with all financial covenants under the Revolving Credit Facility and the Term Loan Agreement.
Net interest expense consists of:
Interest paid from continuing operations was $375.6 million, $164.5 million, and $223.7 million in fiscal 2019, 2018, and 2017, respectively.

                     | 2019   | 2018   | 2017
-------------------- | ------ | ------ | ------
Long-term debt       | $385.9 | $161.2 | $203.6
Short-term debt      | 15.0   | 4.8    | 0.6
Interest income      | (6.8)  | (3.8)  | (3.7)
Interest capitalized | (2.7)  | (3.5)  | (5.0)
                     | $391.4 | $158.7 | $195.5

Consolidated Financial Statements Fiscal Years Ended 2019 2018 28, 2017 share amounts
 Revolving Credit Facility Term Loan Agreement require earnings interest taxes depreciation amortization interest expense 3. to 1. funded debt EBITDA levels 5. 875 2020 to 3. 75 2023 calculated fourquarter. May 26, 2019 compliance financial covenants Credit Facility Term Loan Agreement.
 Net interest expense
 Interest paid operations $375. 6 million $164. 5 million $223. 7 million 2019 2018 2017.
 Long-term debt $385. $161. $203.
 Short-term debt 15.
 Interest income.
 Interest capitalized.
 $391. $195.


H. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common stock outstanding and potentially dilutive securities outstanding during the period, as calculated using the treasury stock method. Potentially dilutive securities primarily include unvested restricted stock units (“RSUs”), including PSU awards, and stock options, including purchase options under VMware’s employee stock purchase plan, which included Pivotal’s employee stock purchase plan through the date of acquisition. Securities are excluded from the computation of diluted net income per share if their effect would be anti-dilutive. VMware uses the two-class method to calculate net income per share as both classes share the same rights in dividends; therefore, basic and diluted earnings per share are the same for both classes.
The following table sets forth the computations of basic and diluted net income per share during the periods presented (table in millions, except per share amounts and shares in thousands):

                                                                                |                  | For the Year Ended |
------------------------------------------------------------------------------------------------------------------- | ---------------- | ------------------ | ----------------
                                                                                | January 31, 2020 | February 1, 2019   | February 2, 2018
Net income attributable to VMware, Inc.                                                                             | $6,412           | $1,650             | $437
Weighted-average shares, basic for Classes A and B                                                                  | 417,058          | 413,769            | 410,315
Effect of other dilutive securities                                                                                | 8,177            | 7,362              | 10,572
Weighted-average shares, diluted for Classes A and B                                                                | 425,235          | 421,131            | 420,887
Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B   | $15.37           | $3.99              | $1.07
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B | $15.08           | $3.92              | $1.04

. Net Income Per Share
 computed common stock. Diluted income potentially dilutive securities treasury stock method. dilutive securities include unvested restricted stock units stock options VMware’s employee stock purchase plan. Securities excluded diluted anti-dilutive. VMware two-class method income basic diluted earnings same.
 table computations basic diluted net income share millions
 January 31, 2020 February 1, 2019 February 2, 2018
 Net income VMware, Inc. $6,412  $1,650  $437
 Weighted-average shares Classes A B 417,058 413,769  410,315
 other dilutive securities 8,177  7,362  10,572
 shares diluted 425,235  421,131  420,887
 Net income per share VMware. stockholders $15. 37 $3. 99  $1. 07
.stockholders Classes A B $15. $3.