Accrued expenses and other consist of the following (in thousands):
At December 31, 2019 and 2018, accounts receivable, accounts payable and accrued expenses are not measured at fair value; however, the Company believes that the carrying amounts of these assets and liabilities are a reasonable estimate of their fair value because of their relative short maturity.

December 31,                     |        |
-------------------------------- | ------ | ------
                                 | 2019   | 2018
Accrued advertising expense      | $1,774 | $1,875
Accrued compensation expense     | 2,955  | 2,813
Reserve for member refunds       | 293    | 382
Other accrued expenses           | 2,455  | 2,266
Deferred rent                    | —      | 517
Total accrued expenses and other | $7,477 | 7,853

Accrued expenses
 December 31, 2019 2018 receivable payable expenses not measured fair value Company believes value short maturity.
 December
 2018
 advertising $1,774 $1,875
 compensation 2,955 2,813
 member refunds 293
 Other expenses 2,455 2,266
 Deferred rent 517
 Total expenses $7,477


Note 2. Business Acquisitions
Acquisition of Microsemi
The following unaudited pro-forma consolidated results of operations for the fiscal year ended March 31, 2019 and 2018 assume the closing of the Microsemi acquisition occurred as of April 1, 2017. The pro-forma adjustments are mainly comprised of acquired inventory fair value costs and amortization of purchased intangible assets. The pro-forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on April 1, 2017 or of results that may occur in the future (in millions except per share data):

                                           | Year Ended March 31, |
------------------------------------------ | -------------------- | --------
                                           | 2019                 | 2018
Net sales                                  | $5,563.7             | $5,875.0
Net income (loss)                          | $542.0               | $(762.3)
Basic net income (loss) per common share   | $2.29                | $(3.27)
Diluted net income (loss) per common share | $2.17                | $(3.27)

. Business Acquisitions
 Microsemi
 unaudited results year March 31, 2019 2018 closing Microsemi acquisition April 1, 2017. pro-forma adjustments acquired inventory value costs amortization purchased intangible assets. results informational not indicative April 1 2017 future
 Ended March 31,
 Net sales $5,563. $5,875.
 Net income (loss $542. $(762.
 Basic net income (loss common share $2. 29.
 (loss $2. 17.


NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is based upon the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding and computed as follows:
* For the twelve months ended December 31, 2018, the diluted earnings per common share included the weighted average effect of 215,196 unvested Restricted Stock Units and 716,661 stock options that are potentially dilutive to earnings per share since the exercise price of such securities was less than the average market price during the period. For the twelve months ended December 31, 2017, the diluted earnings per common share included 438,712 unvested Restricted Stock Units and the weighted average effect of 477,048 stock options that are potentially dilutive to earnings per share since the exercise price of such securities was less than the average market price during the period.

                                                      |            | Years Ended                                     |
----------------------------------------------------- | ---------- | ----------------------------------------------- | ----------
                                                      |            | December 31,                                    |
                                                      | 2019       | 2018                                            | 2017
                                                      |            | (In thousands, except share and per share data) |
Numerator:                                            |            |                                                 |
Net income (loss) attributable to common stockholders | $(16,490)  | $19,813                                         | $17,929
Denominator:                                          |            |                                                 |
Weighted-average common shares, basic                 | 27,618,284 | 27,484,655                                      | 25,353,966
Weighted-average common shares, diluted*              | 27,618,284 | 28,416,512                                      | 26,269,727
Net income (loss) per common share:                   |            |                                                 |
Basic:                                                | $(0.60)    | $0.72                                           | $0.71
Diluted:                                              | $(0.60)    | $0.70                                           | $0.68

INCOME (LOSS) PER COMMON SHARE
 Basic income based weighted-average shares outstanding. Diluted income potentially dilutive shares
 twelve months December 31, 2018 diluted earnings per included 215,196 unvested Restricted Stock Units 716,661 stock options potentially dilutive average market price. twelve months December 31, 2017 diluted earnings included 438,712 unvested Restricted Stock Units,048 stock options potentially dilutive.
 December 31,
 2019 2018
 thousands
 Net income (loss) attributable common stockholders $(16,490) $19,813  $17,929
 Weighted-average common shares 27,618,284 27,484,655 25,353,966
 diluted 27,618,284 28,416,512 26,269,727
 Net income (loss) per common share
.
 Diluted.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (United States Dollars in thousands, except per share data and unless otherwise indicated)
Cash flows
We prepare our Consolidated Statements of Cash Flows using the indirect method, under which we reconcile net income to cash flows provided by operating activities by adjusting net income for those items that impact net income, but may not result in actual cash receipts or payments during the period. The following table provides a summary of our operating, investing and financing cash flows for the periods indicated.

                                          |            | Year Ended December 31, |
----------------------------------------- | ---------- | ----------------------- | ---------
                                          | 2019       | 2018                    | 2017
Net cash provided by operating activities | $153,327   | $256,426                | $160,394
Net cash used in investing activities     | $(15,381)  | $(6,581)                | $(4,135)
Net cash used in financing activities     | $(150,604) | $(145,184)              | $(30,535)

. MANAGEMENT DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS States Dollars share
 Cash flows
 Consolidated Statements Cash Flows indirect method reconcile net income. table summary operating investing financing cash flows.
 December 31,
 2019 2018 2017
 cash operating $153,327 $256,426 $160,394
 investing $(15,381) $(6,581) $(4,135)
 financing $(150,604) $(145,184) $(30,535)


Products, Support and Professional Services
We are a leading developer and marketer of software enabled solutions and services to the hospitality industry, including: software solutions fully integrated with third party hardware and operating systems; support, maintenance and subscription services; and, professional services. Areas of specialization are point of sale, property management, and a broad range of solutions that support the ecosystem of these core solutions.
We present revenue and costs of goods sold in three categories: • Products (hardware and software) • Support, maintenance and subscription services • Professional services
Total revenue for these three specific areas is as follows:
Products: Products revenue is comprised of revenue from the sale of software along with third party hardware and operating systems. Software sales include up front revenue for licensing our solutions on a perpetual basis. Software sales are driven by our solutions' ability to help our customer meet the demands of their guests and improve operating efficiencies. Our software revenue is also driven by the ability of our customers to configure our solutions for their specific needs and the robust catalog of integrations we offer to third party solutions. Our software solutions require varying form factors of third party hardware and operating systems to operate, such as staff facing terminals, kiosk solutions, mobile tablets or servers. Third party hardware and operating system revenue is typically driven by new customer wins and existing customer hardware refresh purchases.
Support, Maintenance and Subscription Services: Technical software support, software maintenance and software subscription services are a significant portion of our consolidated revenue and typically generate higher profit margins than products revenue. Growth has been driven by a strategic focus on developing and promoting these offerings while market demand for maintenance services and updates that enhance reliability, as well as the desire for flexibility in purchasing options, continue to reinforce this trend. Our commitment to exceptional service has enabled us to become a trusted partner with customers who wish to optimize the level of service they provide to their guests and maximize commerce opportunities both on premise and in the cloud.
Professional Services: We have industry-leading expertise in designing, implementing, integrating and installing customized solutions into both traditional and newly created platforms. For existing enterprises, we seamlessly integrate new systems and for start-ups and fast-growing customers, we become a partner that can manage large-scale rollouts and tight construction schedules. Our extensive experience ranges from staging equipment to phased rollouts as well as training staff to provide operational expertise to help achieve maximum effectiveness and efficiencies in a manner that saves our customers time and money.

                                               |          | Year ended March 31, |
---------------------------------------------- | -------- | -------------------- | --------
(In thousands)                                 | 2019     | 2018                 | 2017
Products                                       | $39,003  | $33,699              | $38,339
Support, maintenance and subscription services | 75,496   | 69,068               | 63,308
Professional services                          | 26,343   | 24,593               | 26,031
Total                                          | $140,842 | $127,360             | $127,678

Products Support Professional Services
 leading developer marketer software solutions services hospitality industry software integrated third party hardware operating systems support maintenance subscription services professional services. specialization point of sale property management solutions.
 present revenue costs three categories Products software Support maintenance subscription services Professional services
 Total revenue
 Products revenue sale software third party hardware operating systems. sales include revenue licensing solutions. driven by solutions operating efficiencies. integrations third party solutions. require third party hardware operating systems tablets. Third party hardware operating system revenue driven by new customer wins hardware refresh purchases.
 Support Maintenance Subscription Services software support significant revenue generate higher profit margins than. Growth driven by focus developing promoting offerings demand maintenance flexibility purchasing. commitment to exceptional service trusted partner service commerce opportunities cloud.
 Professional Services industry-leading expertise designing implementing integrating installing customized solutions traditional platforms.enterprises integrate systems start-ups large-scale rollouts construction schedules. experience staging equipment rollouts training effectiveness time money.
 Year ended March 31,
 2019
 Products $39,003 $33,699 $38,339
 Support maintenance subscription services 75,496 69,068 63,308
 Professional services 26,343 24,593 26,031
 Total $140,842 $127,360


Information About Our Executive Officers
Set forth below are the name, age and position of each of our executive officers
The following are biographical summaries of our executive officers other than Mr. Kirchner, for whom a biographical summary is set forth under “Information about Our Board of Directors.”
Robert Andersen is executive vice president and chief financial officer of Xperi Corporation. He became executive vice president and chief financial officer of Xperi Corporation in January 2014. Prior to joining Xperi Corporation, he served as executive vice president and CFO of G2 Holdings Corp. d/b/a Components Direct. Mr. Andersen previously served as CFO at Phoenix Technologies Ltd. and held senior financial roles at Wind River Systems, Inc. and NextOffice, Inc. His finance career began at Hewlett-Packard Company, where he served in various controller, treasury and technology finance management roles. Mr. Andersen served on the board of directors of publicly traded Quantum Corporation through March 2017. He currently serves on the board of directors of the Alameda County Community Food Bank in the role of vice chair. Mr. Andersen holds a B.A. in economics from the University of California, Davis, and an M.B.A. from the Anderson School of Management at the University of California, Los Angeles.
Paul Davis is general counsel and corporate secretary of Xperi Corporation. He joined Xperi Corporation in August 2011, and became general counsel and corporate secretary in July 2013. Before joining Xperi Corporation, he was an attorney at Skadden, Arps, Slate, Meagher & Flom LLP, where his practice focused on mergers and acquisitions, corporate securities matters and corporate governance. Mr. Davis holds a Juris Doctor from the University of California, Hastings College of the Law and B.A. degrees in history and political science from the University of California, San Diego. While at Hastings, he was magna cum laude, an Order of the Coif member and a managing editor on the Hastings Law Journal.
Murali Dharan has served as president of Tessera Intellectual Property Corp. (“Tessera”) since October of 2017 and is responsible for the strategic direction, management and growth of the Tessera intellectual property licensing business. He has extensive leadership experience, most recently as CEO of IPVALUE, guiding the company from a start-up to an industry leader and helping partners to generate more than $1.6 billion in IP revenue. Prior to joining IPVALUE in 2002, Mr. Dharan held executive roles at various technology companies, including executive vice president at Preview Systems, vice president and general manager at Silicon Graphics, and vice president and general manager at NEC. Mr. Dharan holds an electrical engineering degree from Anna University in India, a master’s degree in computer science from Indiana University, and an MBA from Stanford University.
Geir Skaaden has served as our chief products and services officer since December 2016 and leads global sales, business development and product management for our portfolio of imaging and audio solutions. He served as DTS’s Executive Vice President, Products, Platforms and Solutions from October 2015 until its acquisition by the Company in December 2016, having previously served as DTS’s Senior Vice President, Corporate Business Development, Digital Content and Media Solutions since December 2013. Prior to that, Mr. Skaaden served as DTS’s Senior Vice President, Products & Platforms from April 2012 to December 2013. From 2008 to 2012, Mr. Skaaden served in a number of positions overseeing numerous aspects including strategic sales, licensing operations, and business development. Prior to joining DTS in 2008, Mr. Skaaden served as the Chief Executive Officer at Neural Audio Corporation from 2004 to 2008, where he previously served as Vice President, Corporate Development from 2002 to 2004. Mr. Skaaden holds a B.A. in Finance from the University of Oregon, a Business degree from the Norwegian School of Management and an M.B.A. from the University of Washington.
We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons serving similar functions. The text of our code of business conduct and ethics has been posted on our website at http://www.xperi.com. and is included as an exhibit to our Current Report on Form 8-K filed with the SEC on December 1, 2016.

Name            | Age | Position(s)
--------------- | --- | ------------------------------------------------
Jon Kirchner    | 52  | Chief Executive Officer, Director
Robert Andersen | 56  | Chief Financial Officer
Paul Davis      | 44  | General Counsel and Corporate Secretary
Murali Dharan   | 58  | President of Tessera Intellectual Property Corp.
Geir Skaaden    | 53  | Chief Products and Services Officer

Executive Officers
 name age position
 biographical summaries.
 Robert Andersen executive vice president chief financial officer Xperi Corporation. January 2014. CFO G2 Holdings. CFO Phoenix Technologies. financial roles Wind River Systems. NextOffice. finance career Hewlett-Packard Company controller treasury technology finance management. board Quantum Corporation March 2017. Alameda County Community Food Bank vice chair. B. A. economics University California Davis M. B. Anderson School Management University California Los Angeles.
 Paul Davis general counsel corporate secretary Xperi Corporation. August 2011, July 2013. attorney Skadden, Arps Slate Meagher Flom mergers corporate securities governance. Juris Doctor University California Hastings B. A. history political science University California San Diego. Order Coif member managing editor Hastings Law Journal.
 Murali Dharan president Tessera Intellectual Property Corp. October 2017 responsible strategic direction management growth intellectual property licensing business.leadership experience CEO IPVALUE start-up industry leader $1. 6 billion IP revenue. executive roles technology companies Preview Systems Silicon Graphics. electrical engineering Anna University master’s computer science Indiana University MBA Stanford University.
 Geir Skaaden chief products services officer since December 2016 leads global sales business development product management imaging audio solutions. DTS’s Executive Vice President Products Platforms Solutions October 2015 Senior Vice President Corporate Business Development December 2013. Senior Vice President Products Platforms April 2012 December 2013. strategic sales licensing operations business development. Chief Executive Officer Neural Audio Corporation 2004 to 2008, Vice President Corporate Development 2002 2004. B. A. Finance University Oregon Business degree Norwegian School Management M. B. University of Washington.
 adopted code business conduct ethics principal executive officer financial officer accounting officer controller. posted website. exhibit Current Report Form 8-K SEC December 1, 2016.
 Age Position
Kirchner
 Robert Andersen Financial Officer
 Paul Davis
 Murali Dharan President Tessera.
 Geir Skaaden Products Services


Hotels sales improvement in the second half was driven by Bars, Food and Accommodation, benefitting from venue refurbishments completed in the year.
Hotels sales increased by 3.7% in F19 or 1.8% on a normalised basis. Comparable sales increased by 1.9% with 3.0% growth in Q4. Sales growth accelerated in the second half due to continued growth in Bars, Food and Accommodation benefitting from venue refurbishments with 49 completed during the year. Gaming sales continue to be more subdued, particularly in Victoria. During the year, five venues were opened or acquired with 328 hotels at year‐end.
Normalised gross profit declined by 54 bps reflecting business mix and increasing input cost prices on Food margins. CODB was well controlled and declined by 18 bps on a normalised basis.
EBIT of $261 million decreased by 0.5% on a normalised basis reflecting a weaker first half trading performance. Normalised EBIT in the second half increased by 1.3%.
Normalised ROFE decreased by 38 bps due to an increase in funds employed driven by refurbishments and acquisitions of hotels.

                              | F19      | F18      |          |
----------------------------- | -------- | -------- | -------- | -----------------
$ MILLION                     | 53 WEEKS | 52 WEEKS | CHANGE   | CHANGE NORMALISED
Sales                         | 1,671    | 1,612    | 3.7%     | 1.8%
EBITDA                        | 372      | 361      | 3.5%     | 2.5%
Depreciation and amortisation | (111)    | (102)    | 9.9%     | 9.9%
EBIT                          | 261      | 259      | 1.0%     | (0.5)%
Gross margin (%)              | 83.6     | 84.2     | (55) bps | (54) bps
Cost of doing business (%)    | 68.0     | 68.1     | (12) bps | (18) bps
EBIT to sales (%)             | 15.6     | 16.1     | (43) bps | (35) bps
Funds employed                | 2,068    | 1,995    | 3.7%     |
ROFE (%)                      | 12.9     | 13.1     | (20) bps | (38) bps

Hotels sales improvement second half driven Bars Food Accommodation venue refurbishments.
 sales increased. 7% F19. 8%. Comparable sales increased. 9%. 0% growth Q4. accelerated second half Bars Food Accommodation venue refurbishments 49. Gaming sales subdued Victoria. five venues opened acquired 328 hotels year‐end.
 gross profit declined 54 bps business mix input cost prices. CODB declined 18 bps.
 EBIT $261 million decreased. 5% weaker first half trading performance. EBIT second half increased. 3%.
 ROFE decreased 38 bps increase refurbishments acquisitions.
 Sales 1,671 3. 7%. 8%
 EBITDA 372.
 Depreciation amortisation.
 EBIT 261.
 Gross margin (%) 83. 84.
 Cost business (%) 68.
 EBIT to sales (%) 15.
Funds 2,068 1,995 3. 7%
 ROFE 12.


Stock-based Compensation Expense
The income tax benefit related to share-based compensation was $66 million, $158 million and $97 million for 2019, 2018 and 2017, respectively. The income tax benefits related to share-based compensation for the periods presented prior to the second quarter of 2018 were offset by an increase in the U.S. valuation allowance. Stock-based compensation expense of $30 million and $19 million was capitalized and remained in inventory as of August 29, 2019 and August 30, 2018, respectively. As of August 29, 2019, $439 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2023, resulting in a weighted-average period of 1.3 years.

For the year ended                                | 2019 | 2018 | 2017
------------------------------------------------- | ---- | ---- | ----
Stock-based compensation expense by caption       |      |      |
Cost of goods sold                                | $102 | $83  | $88
Selling, general, and administrative              | 73   | 61   | 75
Research and development                          | 68   | 54   | 52
                                                  | $243 | $198 | $215
Stock-based compensation expense by type of award |      |      |
Restricted stock awards                           | $178 | $140 | $144
Stock options                                     | 33   | 55   | 71
ESPP                                              | 32   | 3    | —
                                                  | $243 | $198 | $215

Stock Compensation Expense
 income tax benefit $66 million $158 million $97 million 2019 2018 2017. offset U. S. valuation allowance. expense $30 million $19 million capitalized remained inventory August 29, 30. $439 million unrecognized compensation costs unvested recognized fourth quarter 2023 weighted-average 1. 3 years.
 year 2019 2018 2017
 compensation expense caption
 Cost goods sold $102 $83 $88
 Selling general administrative 73
 Research development
 $243 $198 $215
 type award
 Restricted stock awards $178 $140 $144
 Stock options
 $243 $198


NOTE 8—INVENTORIES
Inventories consist of the following (in thousands):
At September 30, 2019, work in process and inventoried costs under long-term contracts includes approximately $5.8 million in costs incurred outside the scope of work or in advance of a contract award compared to $0.9 million at September 30, 2018. We believe it is probable that we will recover the costs inventoried at September 30, 2019, plus a profit margin, under contract change orders or awards within the next year.
Costs we incur for certain U.S. federal government contracts include general and administrative costs as allowed by government cost accounting standards. The amounts remaining in inventory at September 30, 2019 and 2018 were $0.5 million and $2.0 million, respectively.

                                                                |            | September 30,
--------------------------------------------------------------- | ---------- | -------------
                                                                | 2019       | 2018
Finished products                                               | $10,905    | $7,099
Work in process and inventoried costs under long-term contracts | 46,951     | 63,169
Materials and purchased parts                                   | 48,938     | 23,710
Customer advances                                               | —          | (9,779)
Net inventories                                                 | $  106,794 | $  84,199

NOTE 8—INVENTORIES
 September 30, 2019 $5. 8 million outside $0. 9 million September 30 2018. recover costs 2019 profit margin contract change next year.
. federal government contracts general administrative costs. remaining September 30 2019 2018 $0. 5 million $2. 0 million.
 Finished products $10,905 $7,099
 costs-term contracts 46,951 63,169
 Materials purchased parts 48,938 23,710
 Customer advances (9,779
 Net inventories $ 106,794 $ 84,199


Summarised cash flow statement
Cash flow
We generated a net cash inflow from operating activities of £4,256m, down £671m, mainly driven by £2bn contributions to the BT Pension Scheme, offset by favourable working capital movements. In line with our outlook, normalised free cash flowb was £2,440m, down £533m or 18%, driven by increased cash capital expenditure, decrease in EBITDA and higher tax payments.
Free cash flow, which includes specific item outflows of £598m (2017/18: £828m) and a £273m (2017/18: £109m) tax benefit from pension deficit payments, was £619m (2017/18: £1,586m). Last year also included payments of £325m for the acquisition of mobile spectrum.
The spectrum auction bidding took place across the 2017/18 and 2018/19 financial years. Whilst £325m was on deposit with Ofcom at 31 March 2018, we went on to acquire spectrum for a total price of £304m and the excess deposit balance has since been refunded. We made pension deficit payments of £2,024m (2017/18: £872m) and paid dividends to our shareholders of £1,504m (2017/18: £1,523m).
The net cash cost of specific items of £598m (2017/18: £828m) includes restructuring payments of £372m (2017/18: £189m) and regulatory payments of £170m (2017/18: £267m). Last year also included payments of £225m relating to the settlement of warranty claims under the 2015 EE acquisition agreement.
b After net interest paid, before pension deficit payments (including the cash tax benefit of pension deficit payments) and specific items.

                                                                   | 2019    | 2018    | 2017
------------------------------------------------------------------ | ------- | ------- | -------
Year ended 31 March                                                | £m      | £m      | £m
Cash generated from operations                                     | 4,687   | 5,400   | 6,725
Tax paid                                                           | (431)   | (473)   | (551)
Net cash inflows from operating activities                         | 4,256   | 4,927   | 6,174
Net purchase of property, plant and equipment and software         | (3,637) | (3,341) | (3,119)
Free cash flow                                                     | 619     | 1,586   | 3,055
Interest received                                                  | 23      | 7       | 7
Interest paid                                                      | (531)   | (555)   | (629)
Add back pension deficit payments                                  | 2,024   | 872     | 274
Add back net cash flow from specific items                         | 598     | 828     | 205
Add back net sale of non-current asset investments                 | 1       | 19      | (20)
Add back prepayments in respect of acquisition of spectrum licence | -       | 325     | -
Remove refund on acquisition of spectrum licence                   | (21)    | -       | -
Remove cash tax benefit of pension deficit payments                | (273)   | (109)   | (110)
Normalised free cash flow b                                        | 2,440   | 2,973   | 2,782

cash flow statement
 net cash inflow £4,256m down £671m driven £2bn contributions BT Pension Scheme offset working capital movements. free cash £2,440m down £533m 18% driven increased cash capital expenditure decrease EBITDA higher tax payments.
 flow outflows £598m £273m tax benefit pension deficit payments £619m. £325m acquisition mobile spectrum.
 2017/18 2018/19 years. £325m deposit £304m excess balance refunded. pension deficit payments £2,024m paid dividends £1,504m.
 net cash cost £598m includes restructuring payments £372m regulatory payments £170m. £225m settlement warranty claims 2015 EE acquisition agreement.
 net interest paid pension deficit payments.
 31 March
 Cash generated operations 4,687 5,400 6,725
 Tax paid
cash 4,256 4,927 6,174
 purchase property (3,637,341),119
 Free cash flow 619 1,586 3,055
 received 23
 paid (531) (629)
 pension deficit payments 2,024 274
 cash flow 598 828 205
 sale non-current asset investments
 prepayments acquisition spectrum licence
 refund
 tax pension deficit (273) (109)
 free cash flow 2,440 2,973 2,782


The table below shows the carrying amounts and estimated fair values of our debt, excluding lease liabilities:
(1) Includes borrowings denominated in currencies other than US Dollars.
(2) At December 31, 2019, the carrying amount and estimated fair value of debt exclude lease liabilities.
In addition to the table above, the Company remeasures amounts related to certain equity compensation that are carried at fair value on a recurring basis in the Consolidated Financial Statements or for which a fair value measurement was required. Refer to Note 21, “Stockholders’ Deficit,” of the Notes to Consolidated Financial Statements for share-based compensation in the Notes to Consolidated Financial Statements. Included among our non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis are inventories, net property and equipment, goodwill, intangible assets and asset retirement obligations.

                                         | December 31, 2019 |            | December 31, 2018 |
---------------------------------------- | ----------------- | ---------- | ----------------- | ----------
(In millions)                            | Carrying Amount   | Fair Value | Carrying Amount   | Fair Value
Term Loan A Facility due July 2022       | $ 474.6           | $ 474.6    | $ —               | $ —
Term Loan A Facility due July 2023(1)    | 223.8             | 223.8      | 222.2             | 222.2
6.50% Senior Notes due December 2020     | —                 | —          | 424.0             | 440.1
4.875% Senior Notes due December 2022    | 421.9             | 450.1      | 421.1             | 421.2
5.25% Senior Notes due April 2023        | 422.0             | 454.1      | 421.2             | 424.5
4.50% Senior Notes due September 2023(1) | 445.6             | 509.5      | 454.9             | 489.9
5.125% Senior Notes due December 2024    | 421.9             | 458.9      | 421.3             | 419.8
5.50% Senior Notes due September 2025    | 397.4             | 441.2      | 397.1             | 394.8
4.00% Senior Notes due December 2027     | 420.4             | 431.5      | —                 | —
6.875% Senior Notes due July 2033        | 445.7             | 528.8      | 445.5             | 453.4
Other foreign borrowings(1)              | 12.1              | 12.4       | 98.5              | 99.2
Other domestic borrowings                | 89.0              | 89.0       | 168.4             | 170.0
Total debt(2)                            | $ 3,774.4         | $ 4,073.9  | $ 3,474.2         | $ 3,535.1

table shows carrying amounts estimated values debt excluding lease liabilities
 Includes borrowings US Dollars.
 December 31, 2019 carrying amount estimated value debt exclude lease liabilities.
 Company remeasures amounts equity compensation fair value. Refer Note 21, “Stockholders’ Deficit Statements share-based compensation. Included non assets liabilities not inventories net property equipment goodwill intangible assets asset retirement obligations.
 December 31, 2019 December 31, 2018
 millions Carrying Amount Fair Value
 July 2022 474. 6 474.
 July 223. 8.
. 50% Notes December 2020 424. 440.
. 875% December 2022 421. 450. 421.
. 25% April 2023 422. 454. 421.
. 50% September 445. 509. 454. 489.
. 125% December 2024 421. 9 458. 421.419.
. 50% Notes September 2025 397. 441. 397. 394
. December 2027 420. 431.
. 875% July 2033 445. 528. 445. 453.
 foreign 12. 98. 99.
 domestic borrowings 89. 168. 170.
 $ 3,774. 4,073. 3,474. 3,535.


35 Related party transactions
Key management1 compensation
1 Key management comprises the directors of intu properties plc and the Executive Committee who have been designated as persons discharging managerial responsibility (PDMR).
During 2017 the Group’s joint ventures in intu Puerto Venecia and intu Asturias sold shares in subsidiaries, previously wholly owned by the respective joint ventures, listed on the Spanish MaB to PDMRs of the Group. The total value of the shares at 31 December 2019 is €1.0 million for each joint venture, representing 1 per cent of the respective outstanding share capital. The sale of shares in these entities was required to comply with Spanish MaB free float listing requirements. The Group provided an interest-free loan to PDMRs to enable them to purchase the shares. The loans are treated as a taxable benefit which accordingly is included in the above table. In line with the terms of the relevant loan agreements entered into, the loans are repayable in full upon cessation of employment or the sale of the underlying assets. Further to the exchange of contracts in respect of the sale of intu Puerto Venecia in December 2019 and of intu Asturias in January 2020, the relevant PDMRs sold these shareholdings in January 2020 and February 2020 respectively. All outstanding loans in respect of the above arrangements have been repaid to the Company in full or in part. For those loans which have been partially repaid, the outstanding balance has been written off by the Company.

Key management1 compensation                |      |
------------------------------------------- | ---- | ----
£m                                          | 2019 | 2018
Salaries and short-term employee benefits   | 4.7  | 4.9
Pensions and other post-employment benefits | 0.3  | 0.8
Share-based payments                        | 1.5  | 1.7
                                            | 6.5  | 7.4

Related party transactions
 Key management1 compensation
 directors intu properties plc Executive Committee managerial responsibility.
 2017 joint ventures intu Puerto Venecia Asturias sold shares subsidiaries Spanish MaB to PDMRs. total value shares at 31 December 2019 €1. 0 million each 1 per cent outstanding share capital. sale Spanish MaB free float listing requirements. Group provided interest-free loan PDMRs shares. loans taxable benefit included table. loans repayable upon cessation employment sale assets. intu Puerto Venecia Asturias PDMRs sold shareholdings January 2020 February 2020. outstanding loans repaid Company or part. partially repaid outstanding balance written off Company.
 Key management1 compensation
 Salaries employee benefits.
 Pensions post-employment benefits.
 Share-based payments.
.


Cloud & Cognitive Software revenue increased in 2018 compared to the prior year with growth in all three lines of business, as reported and adjusted for currency. Within Cognitive Applications, the increase was driven by strong double-digit growth in security services, while growth in Cloud & Data Platforms was led by analytics platforms and integration offerings. Transaction Processing Platforms grew with improved revenue performance sequentially in the fourth-quarter 2018 versus the third-quarter 2018 reflecting clients’ commitment to the company’s platform for the long term and the value it provides in managing mission-critical workloads. Within Cloud & Cognitive Software, cloud revenue of $3.0 billion grew 10 percent as reported and adjusted for currency compared to the prior year.
* Recast to reflect segment changes.
Gross margin in Cloud & Cognitive Software was impacted by an increased mix toward SaaS, a mix toward security services and increased royalty costs associated with IP licensing agreements compared to the prior year. Pre-tax income improvement year to year was primarily driven by operational efficiencies and mix.

($ in millions)                 |         |         |
------------------------------- | ------- | ------- | ---------------------------------
For the year ended December 31: | 2018*   | 2017*   | Yr.-to-Yr. Percent/ Margin Change
Cloud & Cognitive Software      |         |         |
External gross profit           | $17,224 | $16,986 | 1.4%
External gross profit margin    | 77.6%   | 78.1%   | (0.5)pts.
Pre-tax income                  | $8,882  | $8,068  | 10.1%
Pre-tax margin                  | 35.0%   | 32.4%   | 2.6pts.

Cloud Cognitive Software revenue increased 2018 three lines business. Cognitive Applications driven security services Cloud Data Platforms analytics platforms integration offerings. Transaction Processing Platforms grew improved revenue performance fourth-quarter commitment platform mission-critical workloads. Cognitive Software revenue $3. 0 billion grew 10 percent.
.
 Gross margin impacted increased SaaS security services increased royalty costs IP licensing agreements. Pre-tax income improvement driven operational efficiencies mix.
 December 31 2018 2017. Percent Margin Change
 Cloud Cognitive Software
 gross profit $17,224 $16,986.
 margin 77. 6%. 1%.
 Pre-tax income $8,882 $8,068.
 margin 35. 0%. 4%.


GasLog Ltd. and its Subsidiaries
Notes to the consolidated financial statements (Continued)
For the years ended December 31, 2017, 2018 and 2019
(All amounts expressed in thousands of U.S. Dollars, except share and per share data)
21. Related Party Transactions (Continued)
Compensation of key management personnel
The remuneration of directors and key management was as follows:

                                                          |       | For the year ended December 31, |
--------------------------------------------------------- | ----- | ------------------------------- | -----
                                                          | 2017  | 2018                            | 2019
Remuneration                                              | 7,603 | 7,011                           | 7,536
Short-term benefits                                       | 106   | 136                             | 172
Expense recognized in respect of share-based compensation | 1,821 | 1,992                           | 2,044
Total                                                     | 9,530 | 9,139                           | 9,752

GasLog Ltd. Subsidiaries
 consolidated financial statements
 years December 31, 2017 2018 2019
 amounts. Dollars except
. Transactions
 Compensation management
 year December 31,
 2018 2019
 Remuneration 7,603 7,011 7,536
 Short-term benefits 106
 share-based compensation 1,821 1,992 2,044
 9,139 9,752


4. Income Taxes
Provision for Income Taxes
Income tax expense (benefit) is summarized below (in thousands):

                         |           | Fiscal Year Ended August 31, |
------------------------ | --------- | ---------------------------- | --------
                         | 2019      | 2018                         | 2017
Current:                 |           |                              |
Domestic–federal         | $(23,675) | $69,080                      | $2,436
Domestic–state           | 1,383     | 134                          | 12
Foreign                  | 175,993   | 178,790                      | 188,872
Total current            | 153,701   | 248,004                      | 191,320
Deferred:                |           |                              |
Domestic–federal         | (8,000)   | (24,342)                     | 253
Domestic–state           | (2,202)   | 93                           | 30
Foreign                  | 17,731    | 62,105                       | (62,537)
Total deferred           | 7,529     | 37,856                       | (62,254)
Total income tax expense | $161,230  | $285,860                     | $129,066

. Taxes
 expense
 Year Ended August 31,
 Domestic–federal,675 $69,080 $2,436
 1,383
 Foreign 175,993 178,790 188,872
 153,701 248,004 191,320
 Deferred
 (24,342 253
 (2,202
 Foreign 17,731 62,105 (62,537)
 deferred 7,529 37,856 (62
 income tax expense $161,230 $285,860 $129,066


Our net sales to significant customers as a percentage of total net sales were as follows:
We sell parts to these three transportation customers for certain vehicle platforms under purchase agreements that have no volume commitments and are subject to purchase orders issued from time to time.
No other customer accounted for 10% or more of total net sales during these periods. We continue to focus on broadening our customer base to diversify our end market exposure.
Changes in the level of our customers' orders have, in the past, had a significant impact on our operating results. If a major customer reduces the amount of business it does with us, or substantially changes the terms of that business, there could be an adverse impact on our operating results

                         |       | Years Ended December 31, |
------------------------ | ----- | ------------------------ | -----
                         | 2019  | 2018                     | 2017
Cummins Inc.             | 16.1% | 15.2%                    | 13.4%
Honda Motor Co.          | 11.6% | 10.5%                    | 11.2%
Toyota Motor Corporation | 9.6%  | 10.5%                    | 10.2%

net sales customers
 sell parts three transportation customers no volume commitments subject orders.
 No other customer 10% net sales. focus broadening customer base market exposure.
 Changes orders operating results. major customer reduces business changes terms adverse impact results
 Years Ended December 31,
 2019 2018 2017
 Cummins Inc. 16. 1% 15. 2% 13. 4%
 Honda Motor Co. 11. 6%. 5%.
 Toyota Motor Corporation 9. 6%. 5%.


Financial Condition, Liquidity and Capital Resources
We believe our current world-wide cash balances together with expected future cash flows to be generated from operations and our committed credit facility will be sufficient to support current operations. A significant amount of cash and expected future cash flows are located outside of the U.S. Of the $83.2 million of cash and cash equivalents as of April 27, 2019, $69.9 million was held in subsidiaries outside the U.S. and can be repatriated, primarily through the repayment of intercompany loans and the payment of dividends, without creating material additional income tax expense.
Cash flow is summarized below:
Operating Activities — Fiscal 2019 Compared to Fiscal 2018
Net cash provided by operating activities decreased $15.8 million to $102.0 million for fiscal 2019, compared to $117.8 million for fiscal 2018. The decrease was due to lower cash generated from changes in operating assets and liabilities, partially offset by higher net income adjusted for non-cash items. The $42.2 million of cash outflows for operating assets and liabilities was primarily due to higher prepaid expenses and other assets and lower accounts payable and accrued expenses.
Operating Activities — Fiscal 2018 Compared to Fiscal 2017
Net cash provided by operating activities decreased $27.4 million to $117.8 million in fiscal 2018, compared to $145.2 million in fiscal 2017. The decrease was primarily due to lower net income adjusted for non-cash items, partially offset by cash generated from changes in operating assets and liabilities. The $43.6 million of cash inflows for operating assets and liabilities was due to higher accounts payable and accrued expenses and lower prepaid expenses and other assets, offset by higher inventory levels.
Investing Activities — Fiscal 2019 Compared to Fiscal 2018
Net cash used in investing activities increased by $291.8 million to $470.8 million in fiscal 2019, compared to $179.0 million in fiscal 2018, primarily due to acquisitions. In fiscal 2019, we paid $422.1 million for the acquisition of Grakon. In fiscal 2018, we paid $130.9 million for the acquisitions of Pacific Insight and Procoplast.
Investing Activities — Fiscal 2018 Compared to Fiscal 2017
Net cash used in investing activities increased by $157.3 million to $179.0 million in fiscal 2018, compared to $21.7 million in fiscal 2017. The increase was primarily due to $130.9 million paid for the acquisitions of Pacific Insight and Procoplast. In addition, purchases of property, plant and equipment for our operations were higher in fiscal 2018 compared to fiscal 2017.
Financing Activities — Fiscal 2019 Compared to Fiscal 2018
Net cash provided by financing activities was $217.4 million in fiscal 2019, compared to net cash used in financing activities of $12.7 million in fiscal 2018. During fiscal 2019, we had net borrowings of $238.5 million which was partially used to fund the acquisition of Grakon. We paid dividends of $16.3 million in fiscal 2019, compared to $14.7 million in fiscal 2018.
Financing Activities — Fiscal 2018 Compared to Fiscal 2017
Net cash used in financing activities decreased $34.3 million to $12.7 million in fiscal 2018, compared to $47.0 million in fiscal 2017. During fiscal 2018, we had net borrowings of $2.0 million, compared to repayments on borrowings of $30.0 million in fiscal 2017. We paid dividends of $14.7 million and $13.7 million in fiscal 2018 and fiscal 2017, respectively. We did not repurchase any common stock in fiscal 2018. In fiscal 2017, we paid $9.8 million for the repurchase of common stock.

                                                             |           | Fiscal Year Ended |
------------------------------------------------------------ | --------- | ----------------- | ---------
                                                             | April 27, | April 28,         | April 29,
(Dollars in Millions)                                        | 2019      | 2018              | 2017
Operating activities:                                        |           |                   |
Net Income                                                   | $91.6     | $57.2             | $92.9
Non-cash Items                                               | 52.6      | 17.0              | 32.1
Changes in Operating Assets and Liabilities                  | (42.2)    | 43.6              | 20.2
Net Cash Provided by Operating Activities                    | 102.0     | 117.8             | 145.2
Net Cash Used in Investing Activities                        | (470.8)   | (179.0)           | (21.7)
Net Cash Provided by (Used In) Financing Activities          | 217.4     | (12.7)            | (47.0)
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (11.5)    | 26.0              | (10.3)
Net Increase (Decrease) in Cash and Cash Equivalents         | (162.9)   | (47.9)            | 66.2
Cash and Cash Equivalents at Beginning of the Year           | 246.1     | 294.0             | 227.8
Cash and Cash Equivalents at End of the Year                 | $83.2     | $246.1            | $294.0

Financial Condition Liquidity Capital Resources
 cash balances future cash flows credit facility operations. cash flows outside U. S. $83. 2 million cash equivalents April 27, 2019 $69. 9 million subsidiaries outside. repatriated repayment loans dividends income tax expense.
 Cash flow
 Operating Activities 2019
 Net cash decreased $15. 8 million $102. million $117. 8 million 2018. lower cash higher net income non. $42. 2 million outflows higher prepaid expenses lower accounts payable accrued expenses.
 cash decreased $27. 4 million $117. 8 million $145. 2 million 2017. lower net income offset. $43. 6 million cash inflows higher accounts payable accrued expenses lower prepaid expenses offset higher inventory levels.
 Investing Activities
 cash increased $291. 8 million $470. 8 million $179. million 2018 due. paid $422. 1 million acquisition Grakon. 2018.million Pacific Insight Procoplast.
 Investing Activities 2018
 Net cash increased $157. 3 million $179. million $21. 7 million 2017. increase due $130. 9 million acquisitions. purchases property plant equipment higher 2018.
 Financing Activities 2019
 Net cash $217. 4 million 2019 $12. 7 million 2018. net borrowings $238. 5 million Grakon. paid dividends $16. 3 million $14. 7 million 2018.
 Financing Activities
 Net cash decreased $34. 3 million $12. 7 million $47. million 2017. net borrowings $2. million repayments $30. million 2017. paid dividends $14. 7 million $13. 7 million 2017. repurchase common stock 2018. 2017 paid $9. 8 million repurchase common stock.
 Fiscal Year Ended
 Operating activities
 Net Income $91. $57. $92.
 Non-cash Items 52.
 Changes Operating Assets Liabilities.
Cash Operating Activities 102. 117. 145.
 Investing Activities (470. 8). (21.
 Financing Activities 217. (12. (47.
 Exchange Rate Changes Cash Equivalents (11. 26. (10.
 Increase Cash Equivalents (162. 9) (47. 66.
 Beginning 246. 294. 227.
 End $83. $246. $294.


The significant components of the Company’s deferred income tax assets and liabilities as of December 31, 2019 and 2018 are as follows:
In July 2019, the Company formally established its EMEA headquarters in Ireland and its Asia-Pacific headquarters in Singapore. As a result of these actions, the Company transferred regional relationship and territory rights from its Canadian entity to enable each regional headquarters to develop and maintain merchant and commercial operations within its respective region, while keeping the ownership of all of the Company's current developed technology within Canada. These transfers reflect the growing proportion of the Company's business occurring internationally and resulted in a one-time capital gain. As a result of the capital gain, ongoing operations, the recognition of deferred tax assets and liabilities, and the utilization of all applicable credits and other tax attributes, including loss carryforwards, the Company has a provision for income taxes of $29,027 in the year ended December 31, 2019.
During the year ended December 31, 2019, the Company released some of its valuation allowance against its deferred tax assets in Canada, the United States, and Sweden. In the third quarter of 2019, the Company released a portion of its valuation allowance against its Canadian deferred tax assets as a result of the capital gain from the transfer of the regional relationship and territory rights. In the United States, as a result of the acquisition of 6RS the Company released a portion of its valuation allowance during its fourth quarter against deferred tax assets on its United States net operating losses.
The Company has provided for deferred income taxes for the estimated tax cost of distributable earnings of its subsidiaries of $292.
The Company had no material uncertain income tax positions for the years ended December 31, 2019 and 2018. The Company's accounting policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. In the years ended December 31, 2019 and 2018, there was no interest or penalties related to uncertain tax positions.
The Company remains subject to audit by the relevant tax authorities for the years ended 2012 through 2019.
Investment tax credits, which are earned as a result of qualifying R&D expenditures, are recognized and applied to reduce income tax expense in the year in which the expenditures are made and their realization is reasonably assured.
As at December 31, 2019 and 2018, the Company had unused non-capital tax losses of approximately $209,759 and $53,941 respectively. Of the December 31, 2019 balance, $150,707 of the non-capital tax losses do not expire, while the remaining non-capital losses of $59,052 are due to expire between 2033 and 2039. The Company has U.S. state losses of $298,998 as at December 31, 2019 (December 31, 2018 - $116,026). There is no SR&ED expenditure pool balance as at December 31, 2019 (December 31, 2018 - $9,575). In addition, at December 31, 2019 and 2018, the Company had investment tax credits of $2,111 and $4,179, respectively. The investment tax credits are due to expire between 2035 and 2039.
Expressed in US $000's except share and per share amounts

                                                              | December 31, 2019 | December 31, 2018
------------------------------------------------------------- | ----------------- | -----------------
                                                              | $                 | $
Deferred tax assets                                           |                   |
Tax loss carryforwards                                        | 59,407            | 19,540
Temporary differences on capital and intangible assets        | 44,445            | 2,366
Stock-based compensation expense                              | 11,324            | 6,427
Accruals and reserves                                         | 10,397            | 8,384
Share issuance costs                                          | 6,590             | 8,011
Temporary differences related to lease assets and liabilities | 4,526             | —
Investment tax credits                                        | 694               | 5,833
Valuation allowance                                           | (89,363)          | (46,343)
Total deferred tax assets                                     | 48,020            | 4,218
Deferred tax liabilities                                      |                   |
Temporary differences on intangible assets                    | (35,967)          | (5,350)
Other deferred tax liabilities                                | (1,374)           | —
Total deferred tax liabilities                                | (37,341)          | (5,350)
Net deferred tax assets (liabilities)                         | 10,679            | (1,132)

Company’s deferred income tax assets liabilities as December 31, 2019 2018
 July 2019 Company established EMEA headquarters Ireland Asia-Pacific headquarters Singapore. transferred regional territory rights from Canadian entity develop merchant operations ownership technology Canada. transfers reflect business internationally one-time capital gain. tax provision for income taxes $29,027 year December 31, 2019.
 released valuation allowance against deferred tax assets Canada United States Sweden. third quarter 2019 released valuation allowance against Canadian deferred tax assets. 6RS released valuation allowance fourth quarter against deferred tax assets United States net operating losses.
 provided deferred income taxes estimated tax cost distributable earnings subsidiaries $292.
 no uncertain income tax positions December 31, 2019 2018. interest penalties uncertain tax positions tax expense. no interest penalties related uncertain tax positions.
 subject to audit tax authorities 2012 through 2019.
Investment tax credits R&D reduce income tax expense.
 December 31, 2019 2018 Company unused non-capital tax losses $209,759 $53,941. $150,707 expire remaining $59,052 expire 2033 2039. state losses $298,998 December 31, 2019 $116,026). no SR&ED expenditure pool balance $9,575). investment tax credits $2,111 $4,179. expire 2035 2039.
 US $000's
 2019
 Deferred tax assets
 Tax loss carryforwards 59,407 19,540
 Temporary differences capital intangible assets 44,445
 Stock-based compensation expense 11,324
 Accruals reserves
 Share issuance costs
 Temporary differences lease assets liabilities 4,526
 Investment tax credits
 Valuation allowance
 deferred tax assets 48,020 4
 Temporary differences intangible assets (35,967)
deferred tax (1,374
 (37,341) (5,350)
 10,679 (1,132


Item 6. Selected Financial Data
Five-Year Financial Summary in millions, except per share data (Fiscal years ended June 30,)
(a) Fiscal year 2019 included $1.2 million of acquisition-related costs related to LPW Technology Ltd. See Note 4 in the Notes to the Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” of this report.
(b) Fiscal year 2018 included $68.3 million of discrete income tax net benefits related to the U.S. tax reform and other legislative changes. See Note 17 in the Notes to the Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” of this report.
(c) Fiscal year 2017 included $3.2 million of loss on divestiture of business. See Note 4 in the Notes to the Consolidated Financial Statements included in Item 8. "Financial Statements and Supplementary Data" of this report.
(d) Fiscal year 2016 included $22.5 million of excess inventory write-down charges, $12.5 million of goodwill impairment charges and $18.0 million of restructuring and impairment charges including $7.6 million of impairment of intangible assets and property, plant and equipment and $10.4 million of restructuring costs related primarily to an early retirement incentive and other severance related costs.
(e) Fiscal year 2015 included $29.1 million of restructuring costs related principally to workforce reduction, facility closures and write-down of certain assets.
(f) The weighted average common shares outstanding for fiscal years 2016 and 2015 included 5.5 million and 0.9 million less shares, respectively, related to the share repurchase program authorized in October 2014. During the fiscal years ended June 30, 2016 and 2015, we repurchased 3,762,200 shares and 2,995,272 shares, respectively, of common stock for $123.9 million and $124.5 million, respectively.
See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of factors that affect the comparability of the “Selected Financial Data”.

                                            | 2019 (a) | 2018(b)  | 2017(c)  | 2016(d)(f) | 2015 (e)(f)
------------------------------------------- | -------- | -------- | -------- | ---------- | -----------
Summary of Operations:                      |          |          |          |            |
Net sales                                   | $2,380.2 | $2,157.7 | $1,797.6 | $1,813.4   | $2,226.7
Operating income                            | $241.4   | $189.3   | $121.5   | $70.8      | $119.3
Net income                                  | $167.0   | $188.5   | $47.0    | $11.3      | $58.7
Financial Position at Year-End:             |          |          |          |            |
Cash and cash equivalents                   | $27.0    | $56.2    | $66.3    | $82.0      | $70.0
Total assets                                | $3,187.8 | $3,007.0 | $2,878.1 | $2,794.3   | $2,902.6
Long-term debt, net of current portion      | $550.6   | $545.7   | $550.0   | $611.3     | $603.8
Per Common Share:                           |          |          |          |            |
Net earnings:                               |          |          |          |            |
Basic                                       | $3.46    | $3.96    | $0.99    | $0.23      | $1.11
Diluted                                     | $3.43    | $3.92    | $0.99    | $0.23      | $1.11
Cash dividend-common                        | $0.80    | $0.72    | $0.72    | $0.72      | $0.72
Weighted Average Common Shares outstanding: |          |          |          |            |
Basic                                       | 47.7     | 47.2     | 47.0     | 48.1       | 52.6
Diluted                                     | 48.1     | 47.6     | 47.1     | 48.2       | 52.7

6. Financial Data
 Five-Year Summary millions years ended June 30
 year 2019 $1. 2 million costs LPW Technology. Note 4 Financial Statements.
 2018 $68. 3 million income tax benefits. tax reform changes. Note 17.
 2017 $3. 2 million loss divestiture.
 2016 $22. 5 million excess inventory write-down charges $12. 5 million goodwill impairment charges $18. million restructuring impairment charges $7. 6 million impairment intangible assets property equipment $10. 4 million restructuring costs early retirement incentive.
 2015 $29. 1 million restructuring costs workforce reduction facility write assets.
 common shares 2016 2015 5. million. million shares repurchase program October 2014. repurchased 3,762,200 2,995,272 shares common stock $123. 9 million $124. 5 million.
. Discussion Analysis Financial Condition Results Financial.
2019 2018 2017 2016 2015
 Summary Operations
 Net sales $2,380. $2,157. $1,797. $1,813. $2,226.
 Operating income $241. $189. $121. $70. $119.
 Net income $167. $188. $47. $11. $58.
 Financial Position Year-End
 Cash equivalents $27. $56. $66. $82. $70.
 Total assets $3,187. $3,007. $2,878. $2,794. $2,902.
 Long-term debt current portion $550. $545. $550. $611. $603. 8
 Common Share
 Net earnings
 $3. $3. $1.
 $3. $3. $1.
 Cash dividend-common.
 Average Common Shares
 47. 48. 52.
 48. 47.|. 52.


We do not allocate to our operating segments certain operating expenses that we manage separately at the corporate level and are not used in evaluating the results of, or in allocating resources to, our segments. These unallocated expenses consist primarily of stock-based compensation expense; amortization of intangible assets; restructuring, transition and other costs; and acquisition-related costs.
The following table provides a reconciliation of our total reportable segments’ operating income to our total operating income (loss):

                                                                      |                | Year Ended     |
--------------------------------------------------------------------- | -------------- | -------------- | --------------
(In millions)                                                         | March 29, 2019 | March 30, 2018 | March 31, 2017
Total segment operating income                                        | $1,414         | $1,584         | $1,026
Reconciling items:                                                    |                |                |
Stock-based compensation expense                                      | 352            | 610            | 440
Amortization of intangible assets                                     | 443            | 453            | 293
Restructuring, transition and other costs                             | 241            | 410            | 273
Acquisition-related costs                                             | 3              | 60             | 120
Other                                                                 | (5)            | 2              | -
Total consolidated operating income (loss) from continuing operations | $380           | $49            | $(100)

allocate expenses evaluating allocating resources. unallocated expenses stock-based compensation expense amortization restructuring transition acquisition-related costs.
 table operating income
 March 29, 2019 30, 2018 31, 2017
 segment operating income $1,414 $1,584 $1,026
 Reconciling items
 Stock-based compensation expense 352 610
 Amortization intangible assets 443 453 293
 Restructuring transition costs 241 410 273
 Acquisition-related costs 60
 consolidated operating income (loss operations $380 $49 $


7. Property, Plant, and Equipment, Net
Net property, plant, and equipment consisted of the following:
Depreciation expense was $510 million, $487 million, and $442 million in fiscal 2019, 2018, and 2017, respectively.

                                       |          | Fiscal Year End
-------------------------------------- | -------- | ---------------
                                       | 2019     | 2018
                                       |          | (in millions)
Property, plant, and equipment, gross: |          |
Land and improvements                  | $  152   | $  171
Buildings and improvements             | 1,393    | 1,379
Machinery and equipment                | 7,298    | 7,124
Construction in process                | 637      | 724
                                       | 9,480    | 9,398
Accumulated depreciation               | (5,906)  | (5,901)
Property, plant, and equipment, net    | $  3,574 | $  3,497

. Property Plant Equipment
 Depreciation expense $510 million $487 million $442 million 2019 2018 2017.
 Year
 millions
 Property plant equipment
 Land improvements $ 152
 Buildings improvements 1,393
 Machinery equipment 7,298
 Construction
 9,480
 Accumulated depreciation (5,906)
 $ 3,574 $ 3,497


Note 12 – Income Taxes
The provision for income taxes consists of the following for the fiscal years ended December 27, 2019, December 28, 2018 and December 29, 2017:

                                            | December 27, 2019  | December 28, 2018  | December 29, 2017
------------------------------------------- | ------------------ | ------------------ | -----------------
Current income tax expense:                 |                    |                    |
Federal                                     | $4,003             | $2,945             | $3,342
State                                       | 2,144              | 1,943              | 1,403
Total current income tax expense            | 6,147              | 4,888              | 4,745
Deferred income tax expense (benefit):      |                    |                    |
Federal                                     | 1,617              | 2,363              | (1,059)
Foreign                                     | 17                 | (472)              | 215
State                                       | 429                | 663                | 141
Total deferred income tax expense (benefit) | 2,063              | 2,554              | (703)
Total income tax expense                    | $8,210             | $7,442             | $4,042

Income Taxes
 fiscal years 27, 2019 28, 2018 29,
 income tax expense
 Federal $4,003 $2,945 $3,342
 State 2,144 1,943 1,403
 6,147 4,888 4,745
 Deferred tax expense
 Federal 1,617 2,363 (1,059)
 Foreign
 State 663
 deferred expense 2,063 2,554 (703)
 $8,210 $7,442 $4,042


Key Business Metrics
In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
Devices Sold
Devices sold represents the number of wearable devices that are sold during a period, net of expected returns. Devices sold does not include sales of accessories. Growth rates between devices sold and revenue are not necessarily correlated because our revenue is affected by other variables, such as the types of products sold during the period, the introduction of new product offerings with differing U.S. manufacturer’s suggested retail prices, or MSRPs, and sales of accessories and premium services.
Active Users
We grow our community of users through device sales and investment in software to drive engagement. We define an active user as a registered Fitbit user who, within the three months prior to the date of measurement, has (a) an active Fitbit Premium or Fitbit Coach subscription, (b) paired a wearable device or Aria scale with his or her Fitbit account, or (c) logged at least 100 steps with a wearable device or a weight measurement using an Aria scale. Active users can be new users who joined the community during the past 90 days, existing users who have remained active, or previously active users who were inactive for 90 days or greater, if they meet the preceding definition of an active user. The active user number excludes users who have downloaded our mobile apps without purchasing any of our wearable devices and users who have downloaded free versions of Fitbit Coach but are not subscribers to its paid premium offerings.

                |            | For the Year Ended or As of December 31, |
--------------- | ---------- | ---------------------------------------- | ---------
                | 2019       | 2018                                     | 2017
                |            | (in thousands)                           |
Devices sold    | 15,988     | 13,939                                   | 15,343
Active users    | 29,566     | 27,627                                   | 25,367
Adjusted EBITDA | $(128,333) | $(31,361)                                | $(52,158)
Free cash flow  | $(193,363) | $60,327                                  | $(24,919)

Business Metrics
 financial statements use metrics evaluate business performance develop financial forecasts strategic decisions.
 Devices Sold
 wearable devices sold net expected returns. include accessories. Growth rates sold revenue not correlated affected by variables types products sold new offerings. prices sales accessories premium services.
 Active Users
 grow community through device sales investment software. define active user registered Fitbit user three months active Fitbit Premium or Fitbit Coach subscription paired wearable device Aria scale Fitbit account logged 100 steps. Active users new users existing users users inactive 90 days. excludes users downloaded mobile apps without wearable devices downloaded free versions Fitbit Coach not subscribers paid premium.
 Year December 31,
 Devices sold 15,988 13,939,343
 Active users 29,566 27,627 25,367
 Adjusted EBITDA $(128,333) $(31,361) $(52,158)
cash flow,363 $60,327


10 Auditor’s Remuneration
The Group paid the following amounts to its auditor in respect of the audit of the historical financial information and for other non-audit services provided to the Group.

                                  | Year-ended 31 March 2019 | Year-ended 31 March 2018
--------------------------------- | ------------------------ | ------------------------
                                  | $M                       | $M
Audit of the Financial Statements | 0.4                      | 0.4
Subsidiary local statutory audits | 0.2                      | 0.3
Total audit fees                  | 0.6                      | 0.7
Other assurance services          | 0.1                      | 0.1
Total non-audit fees              | 0.1                      | 0.1

Auditor’s Remuneration
 Group paid amounts auditor audit historical financial information non-audit services.
 Year-ended 31 March 2019 March 2018
 $M
 Audit Financial Statements.
 Subsidiary statutory audits.
 Total audit fees.
 assurance services.
 non-audit fees.


26 Operating leases
The Group earns rental income by leasing its investment properties to tenants under operating leases.
In the UK the standard shopping centre lease is for a term of 10 to 15 years. Standard lease provisions include service charge payments, recovery of other direct costs and review every five years to market rent. Standard turnover-based leases have a turnover percentage agreed with each lessee which is applied to a retail unit’s annual sales and any excess between the resulting turnover rent and the minimum rent is receivable by the Group and recognised as income in the period in which it arises.
The Group’s secure rental income profile is underpinned by long lease lengths (as mentioned above), high occupancy and upward only rent reviews.
The future minimum lease amounts receivable by the Group under non-cancellable operating leases for continuing operations are as follows:
The income statement includes £12.7 million (2018: £14.4 million) recognised in respect of contingent rents calculated by reference to tenants’ turnover.

£m                                                | 2019    | 2018
------------------------------------------------- | ------- | -------
Not later than one year                           | 322.6   | 374.6
Later than one year and not later than five years | 788.3   | 987.2
Later than five years                             | 657.3   | 973.5
                                                  | 1,768.2 | 2,335.3

Operating leases
 Group earns rental income leasing investment properties.
 UK standard shopping centre lease 10 to 15 years. provisions include service charge recovery costs review five years. turnover-based leases percentage applied sales excess receivable recognised income.
 rental income long lease lengths high occupancy upward rent reviews.
 future minimum lease amounts receivable
 income statement includes £12. 7 million (2018 £14. 4 million) contingent rents tenants’ turnover.
 one 322. 374.
 five years 788. 987.
 five years 657. 973.
 1,768. 2,335.


Note 5 – Goodwill and Intangible Assets
Goodwill and indefinite-lived intangible assets consisted of the following:
Goodwill
The Company performed the annual impairment assessment of goodwill for our single reporting unit as of December 31, 2019, noting no impairment loss. The fair value exceeded the carrying value by 2.4%. Considerable management judgment is necessary to evaluate goodwill for impairment. We estimate fair value using widely accepted valuation techniques including discounted cash flows and market multiples analysis with respect to our single reporting unit. These valuation approaches are dependent upon a number of factors, including estimates of future growth rates, our cost of capital, capital expenditures, income tax rates, and other variables. Assumptions used in our valuations were consistent with our internal projections and operating plans. Our discounted cash flows forecast could be negatively impacted by a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for our products or changes in the size of the market for our products. Additionally, under the market approach analysis, we used significant other observable inputs including various guideline company comparisons. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Changes in these estimates or assumptions could materially affect the determination of fair value and the conclusions of the quantitative goodwill test for our one reporting unit.
Indefinite-lived Intangible Assets
The Company performed the annual impairment assessment on the indefinite-lived intangible asset as of December 31, 2019 and 2018, resulting in no impairment losses.

                                                |          | December 31,
----------------------------------------------- | -------- | ------------
                                                | 2019     | 2018
Goodwill                                        | $ 10,368 | $ 10,368
Accumulated impairment losses                   | (1,244 ) | (1,244 )
Goodwill                                        | 9,124    | 9,124
Brand names                                     | 3,700    | 3,700
Goodwill and indefinite lived intangible assets | $ 12,824 | $ 12,824

Note 5 Goodwill Intangible Assets
 Goodwill
 performed annual impairment assessment single unit December 31, 2019 no impairment loss. fair value exceeded carrying value 2. 4%. management judgment goodwill impairment. fair value techniques discounted cash flows market multiples analysis single unit. dependent factors future growth rates cost capital capital expenditures income tax rates variables. Assumptions consistent with internal projections operating plans. discounted cash flows impacted competitive landscape decisions loss customer market place size market. used company comparisons. base fair value estimates on assumptions unpredictable uncertain. Changes could affect fair value conclusions goodwill test.
 Indefinite-lived Intangible Assets
 annual impairment assessment December 31, 2019 2018 no impairment losses.
 $ 10,368
 Accumulated impairment losses (1,244
 9,124
 Brand names 3,700
Goodwill indefinite assets 12,824


As of December 31, 2019 and 2018, the fair value of the 2022 Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted price of the 2022 Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s convertible notes classified in equity) were as follows (in thousands):
In connection with the issuance of the 2022 Notes, the Company entered into capped call transactions with certain counterparties affiliated with the initial purchasers and others. The capped call transactions are expected to reduce potential dilution of earnings per share upon conversion of the 2022 Notes.
Under the capped call transactions, the Company purchased capped call options that in the aggregate relate to the total number of shares of the Company’s common stock underlying the 2022 Notes, with an initial strike price of approximately $33.71 per share, which corresponds to the initial conversion price of the 2022 Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2022 Notes, and have a cap price of approximately $47.20.
The cost of the purchased capped calls of $12.9 million was recorded to shareholders’ equity and will not be re-measured.
Based on the closing price of the Company’s common stock of $78.08 on December 31, 2019, the if-converted value of the 2022 Notes was more than their respective principal amounts.

           |            | As of December 31, |            |
---------- | ---------- | ------------------ | ---------- | --------------
           | 2019       |                    | 2018       |
           | Fair Value | Carrying Value     | Fair Value | Carrying Value
2022 Notes | $215,801   | $79,224            | $ 189,802  | $94,097

December 31, 2019 2018 fair value 2022 Notes determined based quoted price over-the-counter market 2) carrying value debt instruments equity
 issuance 2022 Notes Company entered capped call transactions counterparties initial purchasers. transactions reduce potential dilution earnings per share conversion.
 purchased options total shares common stock 2022 Notes initial strike price $33. 71 per share conversion price subject to anti-dilution adjustments cap price $47. 20.
 cost purchased capped calls $12. 9 million recorded to shareholders’ equity not re-measured.
 closing price common stock $78. 08 December 31, 2019 if-converted value 2022 Notes more than principal amounts.
 December 31,
 2019 2018
 Fair Value Carrying
 2022 Notes $215,801 $79,224 189,802 $94,097


4 Expenses
The Group has identified a number of significant expense items below that impacted financial performance for the year:
(a) Finance costs
Included in finance costs are costs related to unsecured notes on issue and interest expense on lease liabilities.
Refer to note 16 for details on unsecured notes on issue and note 12 for details on interest expense on lease liabilities for the year.
(b) Data centre rent paid to APDC
NEXTDC Limited acquired Asia Pacific Data Centre ("APDC") on 18 October 2018 (refer to note 26). Prior to acquisition, APDC was the landlord of three of NEXTDC’s data centre facilities: M1 Melbourne, S1 Sydney and P1 Perth. For the year ended 30 June 2018, NEXTDC paid rent and ancillary amounts to APDC totalling $13.8 million that was included in the Consolidated Statement of Comprehensive Income in Data centre facility costs. On early adoption of AASB 16 from 1 July 2018, this rent ceased to be a Data centre facility cost, and became a depreciation expense and finance cost, until 18 October 2018, when the three leases were derecognised on acquisition.
(c) APDC acquisition costs
A number of acquisition related costs were incurred as a result of the acquisition of APDC. Refer note 26 for further details.

                                                                                |      | 30 June 2019 | 30 June 2018
-------------------------------------------------------------------------------------------------- | ---- | ------------ | ------------
                                                                                | Note | $'000        | $'000
EXPENSE                                                                                |      |              |
Finance costs                                                                                | 4(a) | (54,897)     | (25,803)
Data centre rent paid to APDC (included in Data centre facility costs)                             | 4(b) | -            | (13,785)
APDC transaction costs (included in Professional fees)                                             | 4(c) | (5,459)      | -
Landholder duty on acquisition of APDC properties (included in Office and administrative expenses) | 4(c) | (3,498)      | -

Expenses
 Group identified significant expense items impacted financial performance
 Finance costs
 unsecured notes interest expense lease liabilities.
 note 16 12.
 Data centre rent APDC
 NEXTDC acquired Asia Pacific Data Centre 18 October 2018. APDC landlord three facilities Melbourne Sydney Perth. 30 June 2018 NEXTDC paid rent ancillary amounts APDC $13. 8 million Consolidated Statement Comprehensive Income Data centre facility costs. AASB 16 July 2018 rent ceased became depreciation expense finance cost until 18 October 2018 leases derecognised acquisition.
 APDC acquisition costs
 acquisition costs incurred. Refer note 26 details.
 30 June 2019 June 2018
 Finance costs
 Data centre rent APDC
 APDC transaction costs Professional fees
 Landholder duty acquisition APDC properties expenses


3. Operating segments continued
Note
1. Non-current assets excludes trade and other receivables, assets recognised from costs to obtain a contract, defined benefit pension plan surplus and deferred tax asset.
Europe, Middle East and Africa includes United Kingdom non-current assets of $6.9 million (2018 $2.0 million). Americas includes United States non-current assets of $182.4 million (2018 $171.1 million).

                               | 2019      | 2018
------------------------------ | --------- | ---------
                               | $ million | $ million
Non-current assets1            |           |
Americas                       | 196.9     | 184.6
Asia Pacific                   | 7.4       | 4.4
Europe, Middle East and Africa | 11.5      | 5.1
                               | 215.8     | 194.1

. Operating segments
. Non-current assets trade receivables contract pension plan surplus deferred tax.
 Europe Middle East Africa United Kingdom-current $6. 9 million $2. million Americas United States non-current $182. 4 million $171. million
 Non-current
 Americas 196.
 Asia Pacific.
 Europe Middle East Africa.
.


Unrecognized Tax Benefits
We recognize the benefits of tax return positions if we determine that the positions are “more-likely-than-not” to be sustained by the taxing authority. Interest and penalties accrued on unrecognized tax benefits are recorded as tax expense in the period incurred. The following table reflects changes in the unrecognized tax benefits (in thousands):
Of the unrecognized tax benefits at December 28, 2019, $13.4 million would impact the effective tax rate if recognized.
The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities which might result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is judgmental in nature. However, we believe we have adequately provided for any reasonably foreseeable outcome related to those matters.
Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. As of December 28, 2019, changes to our uncertain tax positions in the next 12 months that are reasonably possible are not expected to have a significant impact on our financial position or results of operations.
At December 28, 2019, our tax years 2016 through 2019, 2015 through 2019 and 2014 through 2019, remain open for examination in the federal, state and foreign jurisdictions, respectively. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the net operating loss and credit carryforward amounts.

                                                                                |                   | Fiscal Year Ended |
---------------------------------------------------------------------------------------- | ----------------- | ----------------- | -----------------
                                                                                | December 28, 2019 | December 29, 2018 | December 30, 2017
Unrecognized tax benefit, beginning balance                                              | $25,224           | $18,296           | $17,978
Additions based on tax positions related to the current year                             | 3,679             | 1,677             | 694
Additions based on tax positions from prior years                                        | —                 | 5,332             | —
Reductions for tax positions of prior years                                              | (5)               | (7)               | —
Reductions due to lapse of the applicable statute of limitations                         | (98)              | (74)              | (376)
Unrecognized tax benefit, ending balance                                                 | $28,800           | $25,224           | $18,296
Interest and penalties recognized as a component of Provision (benefit) for income taxes | $59               | $71               | $67
Interest and penalties accrued at period end                                             | 212               | 230               | 218

Unrecognized Tax Benefits
 recognize tax return positions sustained by taxing authority. Interest penalties on benefits recorded as tax expense. table reflects changes unrecognized tax benefits
 unrecognized benefits December 28, 2019 $13. 4 million effective tax rate if recognized.
 income subject to audits proposed assessments. estimate outcome judgmental. provided for foreseeable outcome.
 future results may include adjustments tax liabilities statutes of limitation. December 28, 2019 changes uncertain tax positions impact financial position results.
 tax years 2016 2015 2014 open for examination. taxing authorities examine prior periods losses make adjustments loss credit carryforward.
 Fiscal Year Ended
 December 28, 2019 29, 2018 December 30, 2017
 Unrecognized tax benefit balance $25,224 $18,296 $17,978
 Additions tax positions current year 3,679 1,677 694
 Additions prior years 5,332
tax (5)
 statute limitations (98) (376)
 Unrecognized tax benefit balance $28,800 $25,224 $18,296
 Interest penalties taxes $59 $71 $67
 Interest penalties period 212 230


SEGMENT RESULTS
Cubic Transportation Systems
Sales: CTS sales increased 27% to $849.8 million in 2019 compared to $670.7 million in 2018, including the impact of the adoption of ASC 606. The increase in sales was primarily driven by growth in both organic and inorganic business in North America. Sales in 2019 were higher in the U.S. primarily due to system development on contracts in New York, Boston, and the San Francisco Bay Area. Businesses acquired by CTS during fiscal year 2019, whose operations are all located in the U.S., had sales of $74.4 million in fiscal year 2019. Sales increased slightly in Australia between fiscal years 2018 and 2019 as increased system development work on a contract in Brisbane was partially offset by the negative impact of foreign currency exchange rates as well as a decrease in service sales. Sales were lower in the UK primarily due to a decrease in system development work in London and the negative impact of currency exchange rates. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in a decrease in CTS sales of $22.2 million for 2019 compared to 2018, primarily due to the strengthening of the U.S. dollar against the British pound and Australian dollar.
Amortization of Purchased Intangibles: Amortization of purchased intangibles included in the CTS operating results totaled $22.0 million in 2019 and $5.2 million in 2018. The increase is due to the amortization of purchased intangibles for companies acquired by CTS in fiscal year 2019.
Operating Income: CTS operating income increased 28% in 2019 to $77.2 million compared to $60.4 million in 2018. The increase in operating income was primarily caused by higher margins on increased work on development projects in New York, Boston, the San Francisco Bay Area and Brisbane, as well as the impact of the adoption of ASC 606. These increases in operating income were partially offset by operating losses incurred by businesses acquired by CTS in fiscal 2019 as well as the negative impact of changes in foreign currency exchange rates. Businesses acquired by CTS in fiscal years 2019 incurred operating losses of $10.1 million in fiscal 2019, which included acquisition transaction costs of $8.1 million and amortization of intangible assets totaling $19.3 million. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in CTS operating income of $3.6 million for 2019 compared to 2018.
Adjusted EBITDA: CTS Adjusted EBITDA increased 51% to $110.5 million in 2019 compared to $73.3 million in 2018. The increase in Adjusted EBITDA was primarily driven by the same factors that drove the increase in operating income described above excluding the increases in amortization of purchased intangibles and acquisition transaction costs which are excluded from Adjusted EBITDA. Adjusted EBITDA for CTS increased by $2.3 million in 2019 as a result of the adoption of the new revenue recognition standard.

                 | Fiscal 2019 | Fiscal 2018   | % Change
---------------- | ----------- | ------------- | --------
                 |             | (in millions) |
Sales            | $  849.8    | $  670.7      | 27 %
Operating income | 77.2        | 60.4          | 28
Adjusted EBITDA  | 110.5       | 73.3          | 51

 Cubic Transportation Systems
 CTS sales increased 27% to $849. 8 million 2019 $670. 7 million 2018 ASC 606. driven by growth organic inorganic business North America. Sales higher U. S. due development New York Boston San Francisco Bay Area. Businesses acquired CTS. sales $74. 4 million. Sales increased Australia system development Brisbane foreign currency exchange rates service sales. Sales lower UK development London currency exchange rates. exchange rates. CTS sales $22. 2 million strengthening U. S. dollar against British pound Australian dollar.
 Amortization Purchased Intangibles $22. 0 million 2019 $5. 2 million 2018. increase due amortization.
 Operating Income increased 28% 2019 to $77. 2 million $60. 4 million 2018. higher margins increased work projects New York Boston San Francisco Bay Area Brisbane ASC 606. offset by losses foreign currency exchange rates. Businesses acquired CTS incurred losses $10.2019 acquisition costs $8. 1 million amortization intangible assets $19. 3 million. average exchange rates U. dollar CTS operating income $3. 6 million 2019 2018.
 increased 51% $110. 5 million 2019 $73. 3 million 2018. driven factors operating income excluding amortization intangibles costs. increased $2. 3 million 2019 new revenue recognition standard.
 Fiscal 2019 2018
 Sales $ 849. $. 27
 Operating income 77.
 Adjusted EBITDA 110. 73.


4. INVENTORIES
The components of inventories, net, are as follows (in thousands):

                  | March 30, 2019 | March 31, 2018
----------------- | -------------- | --------------
Raw materials     | $118,608       | $110,389
Work in process   | 272,469        | 221,137
Finished goods    | 120,716        | 140,766
Total inventories | $511,793       | $472,292

.
 components
 March 30
 Raw materials $118,608 $110,389
 272,469 221,137
 Finished goods 120,716 140,766
 inventories $511,793 $472,292