Significant components of our deferred tax assets and liabilities are as follows:
The deferred tax assets and liabilities for fiscal 2019 and 2018 include amounts related to various acquisitions. The total change in deferred tax assets and liabilities in fiscal 2019 includes changes that are recorded to other comprehensive income (loss), retained earnings and goodwill.
We calculate deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities and measure them using the enacted tax rates and laws that we expect will be in effect when the differences reverse.

                                   |          | September 30,
---------------------------------- | -------- | --------------
                                   | 2019     | 2018
                                   |          | (in thousands)
Deferred tax assets:               |          |
Accrued employee benefits          | $ 11,409 | $ 8,285
Allowances for loss contingencies  | 3,561    | 3,518
Deferred compensation              | 3,071    | 3,272
Intangible assets                  | —        | 1,361
Inventory valuation                | 8,036    | 1,154
Long-term contracts                | 6,995    | 7,751
Prepaid and accrued expenses       | 1,816    | 1,229
Retirement benefits                | 4,967    | 1,398
Tax credit carryforwards           | 33,118   | 35,137
Loss carryforwards                 | 36,248   | 29,097
Other                              | 818      | 264
Total gross deferred tax assets    | 110,039  | 92,466
Valuation allowance                | (69,098) | (81,838)
Total deferred tax assets          | 40,941   | 10,628
Deferred tax liabilities:          |          |
Debt obligation basis difference   | (4,582)  | —
Deferred revenue                   | (12,135) | (2,351)
Intangible assets                  | (18,592) | —
Property, plant and equipment      | (4,524)  | (5,079)
Unremitted earnings                | (977)    | (823)
Other                              | (587)    | (351)
Total deferred tax liabilities     | (41,397) | (8,604)
Net deferred tax asset (liability) | $ (456)  | $ 2,024

deferred tax assets liabilities
 2019 acquisitions. income earnings goodwill.
 financial reporting tax rates laws.
 Deferred tax assets
 Accrued employee benefits $ 11,409 $ 8,285
 loss contingencies 3,561
 Deferred compensation 3,071
 Intangible assets 1,361
 Inventory valuation 8,036
 Long-term contracts 6,995
 Prepaid expenses 1,816
 Retirement benefits 4,967
 Tax credit carryforwards 33,118
 Loss carryforwards 36,248
 deferred tax assets 110,039 92,466
 Valuation allowance (69,098)
 deferred tax assets 40,941 10,628
 Debt obligation basis difference (4,582)
 Deferred revenue (12,135 (2,351)
 Intangible assets (18,592
 Property plant equipment (4,524)
 Unremitted earnings (977)
(587)
 deferred tax liabilities,397 (8,604
 (456) 2,024


Our net sales by offering category for EMEA for 2019 and 2018, were as follows (dollars in thousands):
Net sales in EMEA remained flat (increased 5% excluding the effects of fluctuating foreign currency exchange rates), or down $3.6 million, in 2019 compared to 2018. Net sales of hardware declined 5%, year to year, while net sales of software and services were up 2% and 7%, respectively, year over year. The changes were the result of the following:
• Lower volume of net sales of networking solutions, partially offset by higher volume of net sales of devices, to large enterprise and public sector clients in hardware net sales. • Higher volume of software net sales to large enterprise and public sector clients.
• Higher volume of net sales of cloud solution offerings and increased software referral fees that are recorded on a net sales recognition basis. In addition, there was an increase in the volume of Insight delivered services.

          | EMEA       |            |
--------- | ---------- | ---------- | -------
Sales Mix | 2019       | 2018       | %Change
Hardware  | $622,949   | $653,499   | (5%)
Software  | 753,729    | 736,509    | 2%
Services  | 149,966    | 140,233    | 7%
          | $1,526,644 | $1,530,241 | —

net sales EMEA 2019 2018
 EMEA flat (increased 5% excluding foreign currency down $3. 6 million 2019 2018. hardware declined 5% software services up 2% 7%. changes
 Lower networking solutions higher devices enterprise. Higher software.
 Higher cloud solution offerings increased software referral fees. increase volume Insight delivered services.
 EMEA
 Sales Mix 2019 2018 %Change
 Hardware $622,949 $653,499 (5%
 Software 753,729 736,509 2%
 Services 149,966 140,233 7%
 $1,526,644  $1,530,241


Environmental Performance Summary Below are some key environmental indicators, and are compiled based on the “ESG Reporting Guide” in Appendix 27 to the Listing Rules. Unless otherwise specified, the following data covers Tencent’s major office buildings and the main data centres in Mainland China. 1. Emissions 1.1 Office Buildings
Due to its business nature, the significant air emissions of the Group are GHG emissions, arising mainly from fuels and purchased electricity produced from fossil fuels.
The Group’s GHG inventory includes carbon dioxide, methane and nitrous oxide. GHG emissions data for the year ended 31 December 2019 is presented in carbon dioxide equivalent and is calculated based on the “2017 Baseline Emission Factors for Regional Power Grids in China for CDM and CCER Projects” issued by the Ministry of Ecology and Environment of China, and the “2006 IPCC Guidelines for National Greenhouse Gas Inventories” issued by the Intergovernmental Panel on Climate Change (IPCC)
Diesel is consumed by backup power generators.
Hazardous waste produced by the Group’s office buildings mainly includes waste toner cartridge and waste ink cartridge from printing equipment. Waste toner cartridge and waste ink cartridge are centralised and disposed of by printing suppliers. Such data covers all office buildings of the Group in Mainland China.
Non-hazardous waste produced by the Group’s office buildings mainly includes domestic waste and non-hazardous office waste. Domestic waste is disposed of by the property management companies and kitchen waste recycling vendors, and its data is not available, therefore estimation of domestic waste is made with reference to “Handbook on Domestic Discharge Coefficients for Towns in the First Nationwide Census on Contaminant Discharge” published by the State Council. Non-hazardous office waste is centralised for disposal by vendors; hence such data covers all office buildings of the Group in Mainland China.
Hazardous waste produced by the Group’s data centres mainly includes waste lead-acid accumulators. Waste lead-acid accumulators are disposed of by qualified waste recycling vendors.
Non-hazardous waste produced by the Group’s data centres mainly includes waste servers and waste hard drives. Waste servers and destroyed waste hard drives are centralised and recycled by waste recycling vendors. Such data covers all the Group’s data centres.

Indicators                                                   | For the year ended 31 December |
------------------------------------------------------------ | ------------------------------ | ----------
                                                             | 2019                           | 2018
Total GHG emissions (Scopes 1 and 2) (tonnes)                | 113,501.50                     | 102,831.74
Direct GHG emissions (Scope 1) (tonnes)                      | 3,785.86                       | 2,554.31
Including: Gasoline (tonnes)                                 | 197.25                         | 191.00
Diesel (tonnes)                                              | 10.87                          | 11.07
Natural gas (tonnes)                                         | 3,577.74                       | 2,352.24
Indirect GHG emissions (Scope 2) (tonnes)                    | 109,715.64                     | 100,277.43
Including: Purchased electricity (tonnes)                    | 109,715.64                     | 100,277.43
Total GHG emissions per employee (tonnes per employee)       | 1.90                           | 2.01
Total GHG emissions per floor area (tonnes per square metre) | 0.07                           | 0.09
Hazardous waste (tonnes)                                     | 2.40                           | 2.51
Hazardous waste per employee (tonnes per employee)           | 0.00004                        | 0.00005
Non-hazardous waste (tonnes)                                 | 5,227.11                       | 4,566.52
Non-hazardous waste per employee (tonnes per employee)       | 0.09                           | 0.09

Environmental Performance Summary key environmental indicators “ESG Reporting Appendix 27 Listing Rules. data covers Tencent’s office buildings data centres Mainland China. Emissions. Office Buildings
 air emissions GHG emissions fuels electricity fossil fuels.
 GHG inventory includes carbon methane nitrous oxide. 31 December 2019 carbon equivalent calculated Baseline Emission Factors Regional Power Grids China IPCC Guidelines National Greenhouse Gas
 Diesel consumed backup power generators.
 Hazardous waste toner cartridge ink cartridge printing equipment. disposed printing suppliers. covers buildings Mainland China.
 Non-hazardous waste domestic waste non-hazardous office waste. Domestic waste disposed property management companies kitchen waste recycling vendors estimation “Handbook Domestic Discharge Coefficients. Non-hazardous waste centralised disposal vendors covers buildings Mainland China.
 waste lead-acid accumulators.lead-acid accumulators disposed recycling vendors.
 Non-hazardous waste includes servers hard drives. recycled vendors. data covers centres.
 year 31 December
 Total GHG emissions 1 2) 113,501. 50 102,831. 74
 Direct GHG emissions 1) 3,785. 86 2,554. 31
 Gasoline 197. 25.
 Diesel 10.
 Natural gas 3,577. 74 2,352. 24
 Indirect GHG emissions 2) 109,715. 64 100,277. 43
 Purchased electricity.
 Total GHG emissions per employee 1.
 GHG emissions floor area.
 Hazardous waste 2.
.
 Non-hazardous waste 5,227. 11 4,566. 52
.


Stock Options—Stock options are typically granted at prices not less than 100% of market value of the underlying stock at the date of grant. Stock options typically vest over a period of 3 to 5 years from the grant date and expire 10 years after the grant date. The Company recorded $32.0, $23.2, and $18.3 of compensation expense relating to outstanding options during 2019, 2018 and 2017, respectively, as a component of general and administrative expenses at Corporate.
The Company estimates the fair value of its option awards using the Black-Scholes option valuation model. The stock volatility for each grant is measured using the weighted-average of historical daily price changes of the Company’s common stock over the most recent period equal to the expected life of the grant. The expected term of options granted is derived from historical data to estimate option exercises and employee forfeitures, and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of options granted in 2019, 2018 and 2017 were calculated using the following weighted-average assumptions:

                                     | 2019  | 2018  | 2017
------------------------------------ | ----- | ----- | -----
Weighted-average fair value ($)      | 68.05 | 57.75 | 40.87
Risk-free interest rate (%)          | 2.37  | 2.65  | 2.03
Average expected option life (years) | 5.42  | 5.32  | 5.26
Expected volatility (%)              | 19.22 | 18.05 | 18.74
Expected dividend yield (%)          | 0.58  | 0.59  | 0.67

Stock granted less 100% market value stock. vest 3 to 5 years expire 10 years. Company recorded $32. $23. 2 $18. 3 compensation expense options 2019 2018 2017 expenses.
 estimates fair value option awards Black-Scholes option valuation model. stock volatility measured weighted historical daily price changes common stock. term derived from historical data. risk-free rate based U. S. Treasury yield curve. weighted-average fair value options 2019 2018 2017 calculated assumptions
-average fair value ($) 68. 05 57. 75. 87
 Risk-free interest rate (%) 2. 37. 65.
 option life (years 5. 42. 32.
 Expected volatility (%) 19. 22 18.
 Expected dividend yield (%). 58. 59.


15 Financial risk management (continued)
(b) Credit risk
Credit risk arises from cash and cash equivalents, and trade and other receivables.
(i) Cash and cash equivalents and security deposits
Deposits are placed with Australian banks or independently rated parties with a minimum rating of ‘BBB+’. To reduce exposure deposits are placed with a variety of financial institutions.
The credit quality of financial assets can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:
In determining the credit quality of these financial assets, NEXTDC has used the long-term rating from Standard & Poor’s as of July 2019.

                  | 30 June 2019 | 30 June 2018
----------------- | ------------ | ------------
                  | $'000        | $'000
CASH AT BANK      |              |
AA rated          | 398,999      | 417,982
SECURITY DEPOSITS |              |
AA rated          | 8,822        | 4,151

Financial risk management
 Credit risk
 cash equivalents trade receivables.
 Cash equivalents security deposits
 Australian banks parties minimum ‘BBB+’. financial institutions.
 credit quality assessed external credit ratings historical counterparty default rates
 NEXTDC used long rating Standard & Poor’s July 2019.
 CASH BANK
 AA rated 398,999 417,982
 SECURITY DEPOSITS
 rated 8,822 4,151


Acquisitions and divestments
Acquisitions
In 2019, Ericsson made acquisitions with a negative cash flow effect amounting to SEK 1,815 (1,220) million. The acquisitions presented below are not material, but the Company gives the information to provide the reader a summarized view of the content of the acquisitions made. The acquisitions consist primarily of:
Kathrein: On October 2, 2019, the Company acquired assets from Kathrein, a world leading provider of antenna and filter technologies with approximately 4,000 employees. Kathrein’s antenna and filters business has a strong R&D organization with extensive experience in antenna design and research, coupled with a strong IPR portfolio. In addition to broadening Ericsson’s portfolio of antenna and filter products, the acquisition will bring vital competence for the evolution of advanced radio network products. The acquired Kathrein business has had a negative impact of SEK –0.5 billion since the acquisition, corresponding to –1 percentage point in Networks operating margin. Balances to facilitate the Purchase price allocation are preliminary.
CSF: On August 20, 2019, the Company acquired 100% of the shares in CSF Holdings Inc. a US-based technology company with approximately 25 employees. CSF strengthens iconectiv’s Business to Consumer (B2C) product platforms to enable growth in messaging and Toll-Free Number (TFN) management. Balances to facilitate the Purchase price allocation are final.
ST-Ericsson: Before ST-Ericsson was a joint venture where Ericsson and ST Microelectronics had a 50/50 ownership. This joint venture consisted of a number of legal entities where the two parties owned different stakes in the different legal entities. In December 2019 the Company initiated transactions to wind-down the legal structure of ST-Ericsson by acquiring the remaining shares in two legal ST-Ericsson entities and costs of SEK –0.3 billion impacted the result. The Company now owns 100% of the shares in those entities.
In order to finalize a Purchase price allocation all relevant information needs to be in place. Examples of such information are final consideration and final opening balances, they may remain preliminary for a period of time due
to for example adjustments of working capital, tax items or decisions from local authorities.
1) Acquisition-related costs are included in Selling and administrative expenses in the consolidated income statement.

Acquisitions 2017–2019                     |       |       |
------------------------------------------ | ----- | ----- | ----
                                           | 2019  | 2018  | 2017
Total consideration, including cash        | 1,957 | 1,314 | 62
Net assets acquired                        |       |       |
Cash and cash equivalents                  | 142   | 94    | –
Property, plant and equipment              | 353   | 4     | 12
Intangible assets                          | 497   | 481   | 101
Investments in associates                  | 101   | 64    | –
Other assets                               | 1,357 | 254   | 1
Provisions, incl. post-employment benefits | –102  | –     | –
Other liabilities                          | –743  | –494  | 25
Total identifiable net assets              | 1,605 | 403   | 139
Costs recognized in net income             | 153   | –     | –
Goodwill                                   | 199   | 911   | –77
Total                                      | 1,957 | 1,314 | 62
Acquisition-related costs 1)               | 85    | 24    | 49

Acquisitions divestments
 2019 Ericsson acquisitions negative cash flow SEK 1,815 (1,220) million. acquisitions not material. acquisitions
 Kathrein October 2, 2019 acquired assets Kathrein provider antenna filter technologies 4,000 employees. strong R&D organization design IPR portfolio. competence advanced radio network products. Kathrein business negative impact SEK –0. 5 billion acquisition –1 percentage point Networks operating margin. preliminary.
 CSF August 20, 2019 Company acquired 100% shares CSF Holdings Inc. US technology company 25 employees. CSF strengthens Business growth messaging Toll-Free Number) management. final.
 ST-Ericsson joint venture Ericsson ST Microelectronics 50/50 ownership. December 2019 Company remaining shares two entities SEK –0. 3 billion impacted. Company now owns 100% shares entities.
 Purchase price allocation relevant information.final balances preliminary
 adjustments capital tax items decisions local authorities.
 Acquisition-related costs administrative expenses consolidated income statement.
 Acquisitions 2017–2019
 cash 1,957  1,314 62
 assets acquired
 Cash equivalents 142
 Property plant equipment
 Intangible assets 481 101
 Investments associates
 Other assets 1,357  254
 Provisions. post-employment benefits
 Other liabilities
 net assets 1,605  403  139
 Costs net income 153
 Goodwill 199
 1,957 1,314 62
 Acquisition-related costs


Operating income in the Transportation Solutions segment decreased $352 million in fiscal 2019 as compared to fiscal 2018. The Transportation Solutions segment’s operating income included the following:
Excluding these items, operating income decreased in fiscal 2019 primarily as a result of lower volume, unfavorable product mix, and price erosion, partially offset by lower material costs.

                                                                                |        | Fiscal
-------------------------------------------------------------------------------------- | ------ | -------------
                                                                                | 2019   | 2018
                                                                                |        | (in millions)
Acquisition-related charges:                                                           |        |
Acquisition and integration costs                                                      | $  17  | $  8
Charges associated with the amortization of acquisition-related fair value adjustments | —      | 4
                                                                                | 17     | 12
Restructuring and other charges, net                                                   | 144    | 33
Other items                                                                            | 14     | —
Total                                                                                | $  175 | $  45

income Transportation Solutions segment decreased $352 million 2019 2018. included
 decreased lower volume unfavorable product mix price erosion offset lower material costs.
 millions
 Acquisition-related charges
 Acquisition integration costs $ 17 $ 8
 amortization acquisition fair value adjustments
 Restructuring charges 144
 items
 $ 175 $ 45


BENEFIT OBLIGATION AND PLAN ASSETS FOR PENSION BENEFIT PLANS
The vested benefit obligation for a defined-benefit pension plan is the actuarial present value of the vested benefits to which the employee is currently entitled based on the employee’s expected date of separation or retirement.
1 The projected benefit obligation was approximately 35% in the U.S. and 65% outside of the U.S. as of December 28, 2019 and December 29, 2018.
2 The fair value of plan assets was approximately 55% in the U.S. and 45% outside of the U.S. as of December 28, 2019 and December 29, 2018.
3 The accumulated other comprehensive loss (income), before tax, was approximately 35% in the U.S. and 65% outside of the U.S. as of December 28, 2019 and December 29, 2018.
Changes in actuarial gains and losses in the projected benefit obligation are generally driven by discount rate movement. We use the corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of 10% of the larger of the projected benefit obligation or the fair value of plan assets are amortized on a straight-line basis.

(In Millions)                                               | Dec 28, 2019 | Dec 29, 2018
----------------------------------------------------------- | ------------ | ------------
Changes in projected benefit obligation:                    |              |
Beginning projected benefit obligation                      | $3,433       | $3,842
Service cost                                                | 54           | 65
Interest cost                                               | 113          | 113
Actuarial (gain) loss                                       | 829          | (204)
Currency exchange rate changes                              | (2)          | (121)
Plan curtailments                                           | —            | (150)
Plan settlements                                            | (57)         | (74)
Other                                                       | (86)         | (38)
Ending projected benefit obligation 1                       | 4,284        | 3,433
Changes in fair value of plan assets:                       |              |
Beginning fair value of plan assets                         | 2,551        | 2,287
Actual return on plan assets                                | 193          | (38)
Employer contributions                                      | 30           | 480
Currency exchange rate changes                              | 3            | (62)
Plan settlements                                            | (57)         | (74)
Other                                                       | (66)         | (42)
Ending fair value of plan assets 2                          | 2,654        | 2,551
Net funded status                                           | $1,630       | $882
Amounts recognized in the Consolidated Balance Sheets       |              |
Other long-term assets                                      | $—           | $244
Other long-term liabilities                                 | $1,630       | $1,126
Accumulated other comprehensive loss (income), before tax 3 | $1,730       | $1,038

BENEFIT OBLIGATION PLAN ASSETS PENSION BENEFIT PLANS
 vested benefit obligation defined-benefit pension plan actuarial present value benefits employee expected date separation retirement.
 projected benefit obligation 35% U. 65% outside. December 28, 2019 29, 2018.
 fair value plan assets 55%. 45% outside.
 accumulated loss before tax 35%. 65% outside.
 Changes actuarial gains losses driven by discount rate movement. corridor approach amortize gains losses. net gains losses 10% obligation amortized straight-line.
 Dec 28, 2019 29, 2018
 Changes projected benefit obligation
 Beginning $3,433 $3,842
 Service cost
 Interest cost 113
 Actuarial loss 829
 Currency exchange rate changes
 Plan curtailments
 settlements
 Ending
 Changes fair value plan assets
 2,551 2,287
 return 193
 Employer contributions
 Currency exchange rate changes
settlements (57)
 Ending 2,654 2,551
 funded $1,630 $882
 Consolidated Balance Sheets
-term assets $244
 liabilities $1,630 $1,126
 loss $1,730 $1,038


Unrecognized deferred tax assets
Deferred tax assets have not been recognized in respect of the following items, given the volatile nature of the semi-conductor equipment industry. Therefore it is not probable that future taxable profit will be available to offset deductible temporary differences.
1 These credits regards R&D credits generated in the US, in the state of Arizona. However, ASMI does not recognize these credits stemming from prior years due to the fact that utilization of prior year credits is only possibly if and when the credits generated in the current year are fully utilized. Given the level of R&D activity in the US, the company does not expect it could fully utilize the credits generated in the current year and, hence, does not expect to benefit from the available credits generated in prior years.

                                 | 2019         |
-------------------------------- | ------------ | ----------
                                 | Gross amount | Tax effect
Deductible temporary differences | 20,642       | 4,842
Credits 1)                       | 15,221       | 15,221
Unrecognized deferred tax assets | 35,863       | 20,063

Unrecognized deferred tax assets
 not recognized volatile semi-conductor equipment industry. not probable future taxable profit offset deductible temporary differences.
 R&D credits US Arizona. ASMI recognize credits prior years utilization current utilized. R&D activity utilize credits current benefit credits prior years.
 2019
 Gross amount Tax effect
 Deductible temporary differences 20,642 4,842
 Credits 15,221
 Unrecognized deferred tax assets 35,863 20,063


TREASURY SHARES
On December 31, 2019, we had 48,866,220 outstanding common shares excluding 2,431,174 treasury shares. This compared to 49,318,898 outstanding common shares and 6,978,496 treasury shares at year-end 2018. Besides the cancellation of 5 million treasury shares in July 2019, the change in the number of treasury shares in 2019 was the result of approximately 950,000 repurchased shares and approximately 498,000 treasury shares that were used as part of share based payments.

                                                          | 2018       | 2019
--------------------------------------------------------- | ---------- | ----------
As per January 1:                                         |            |
Issued shares                                             | 62,297,394 | 56,297,394
Treasury shares                                           | 6,157,241  | 6,978,496
Outstanding shares                                        | 56,140,153 | 49,318,898
Changes during the year:                                  |            |
Cancellation of treasury shares                           | 6,000,000  | 5,000,000
Share buybacks                                            | 7,242,734  | 950,902
Treasury shares used for share based performance programs | 421,479    | 498,224
As per December 31:                                       |            |
Issued shares                                             | 56,297,394 | 51,297,394
Treasury shares                                           | 6,978,496  | 2,431,174
Outstanding shares                                        | 49,318,898 | 48,866,220

 December 31, 2019 48,866,220 2,431,174 treasury. 49,318,898,496 year-end 2018. cancellation 5 million treasury shares July 2019 950,000 repurchased 498,000 based payments.
 January
 shares 62,297,394 56,297
 Treasury 6,157,241,496
 56,140,153 49,318,898
 Changes
 Cancellation treasury 6,000,000
 buybacks 7,242,734 950,902
 programs 421,479 498,224
 December 31
 56,297,394,297,394
 Treasury 6,978,496 2,431,174
 49,318,898 48,866


Our CODM evaluates each segment based on Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), and we therefore consider Adjusted EBITDA to be a primary measure of operating performance of our operating segments. We define Adjusted EBITDA as earnings before investment income, interest expense, taxes, depreciation, amortization and stock-based compensation and other adjustments as identified below. The adjustments to our financial results prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) to calculate Adjusted EBITDA are itemized below (in thousands):
It is not practicable for us to report identifiable assets by segment because these businesses share resources, functions and facilities
We do not have significant long-lived assets outside the United States.

                                                            |          | Year Ended February 28, |
----------------------------------------------------------- | -------- | ----------------------- | --------
                                                            | 2019     | 2018                    | 2017
Net income (loss)                                           | $18,398  | $16,617                 | $(7,904)
Investment income                                           | (5,258)  | (2,256)                 | (1,691)
Interest expense                                            | 16,726   | 10,280                  | 9,896
Income tax provision (benefits)                             | (1,330)  | 10,681                  | (1,563)
Depreciation and amortization                               | 20,016   | 22,957                  | 23,469
Stock-based compensation                                    | 11,029   | 9,298                   | 7,833
Impairment loss and equity in net loss of affiliate         | 6,787    | 1,411                   | 1,284
Loss on extinguishment of debt                              | 2,033    | -                       | -
Acquisition and integration related expenses                | 935      | -                       | 4,513
Non-recurring legal expenses, net of reversal of litigation |          |                         |
provision                                                   | (11,020) | 10,738                  | 9,192
Gain on LoJack battery performance legal Settlement         | (18,333) | (28,333)                | -
Restructuring                                               | 8,015    | -                       | -
Other                                                       | 217      | 989                     | 4,339
Adjusted EBITDA                                             | $48,215  | $52,382                 | $49,368

CODM evaluates segment Adjusted Earnings Before Interest Taxes Depreciation Amortization primary measure performance. before income interest taxes depreciation amortization stock-based compensation adjustments. adjustments. itemized
 assets segment share resources facilities
 long-lived assets outside United States.
 Ended February 28,
 Net income $18,398 $16,617 $(7,904)
 Investment income (5,258)
 Interest expense 16,726
 Income tax provision (1,330 10,681
 Depreciation amortization 20,016 22,957
 Stock-based compensation 11,029 9,298
 Impairment loss equity net loss 6,787 1,411
 Loss extinguishment debt 2,033
 Acquisition integration expenses 935
 Non-recurring legal expenses reversal litigation
 (11,020 10
 Gain LoJack legal Settlement (18,333 (28,333
Restructuring
 4,339
 EBITDA $48,215 $52,382,368


Pension benefit commitments
For fiscal 2019, Managing Board members were granted contributions under the BSAV totaling € 5.6 million (2018: € 5.4 million), based on a Supervisory Board decision from November 7, 2019. Of this amount, € 0.02 million (2018: € 0.03 million) relates to the funding of pension commitments earned prior to the transfer to the BSAV.
The expense recognized in fiscal 2019 as a service cost under IFRS for Managing Board members’ entitlements under the BSAV in fiscal 2019 totaled € 5.4 million (2018: € 5.3 million).
Contributions under the BSAV are added to the individual pension accounts in the January following each fiscal year. Until pension payments begin, members’ pension accounts are credited with an annual interest payment (guaranteed interest) on January 1 of each year. The interest rate is currently 0.90%.
The following table shows the individualized contributions (allocations) under the BSAV for fiscal 2019 as well as the defined benefit obligations for pension commitments:
In fiscal 2019, former members of the Managing Board and their surviving dependents received emoluments within the meaning of Section 314 para. 1 No. 6 b of the German Commercial Code totaling € 21.09 million (2018: € 39.9 million).
The defined benefit obligation (DBO) of all pension commitments to former members of the Managing Board and their surviving dependents as of September 30, 2019, amounted to €175.7 million (2018: €168.2 million). This figure is included in NOTE 17 in B.6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1 Deferred compensation totals € 4,125,612 (2018: € 4,115,237), including € 3,703,123 for Joe Kaeser (2018: € 3,694,439), € 361,494 for Klaus Helmrich (2018: € 362,606) and € 60,995 for Prof. Dr. Ralf P. Thomas (2018: € 58,192).
2 In accordance with the provisions of the BSAV, benefits to be paid to Lisa Davis are not in any way secured or funded through the trust associated with the Company’s BSAV plan or with any other trust. They represent only an unsecured, unfunded legal obligation on the part of the Company to pay such benefits in the future under certain conditions, and the payout will only be made from the Company’s general assets.

                                                          |           | Total contributions for | Defined benefit obligation for all pension commitments excluding deferred compensation 1 |
--------------------------------------------------------- | --------- | ----------------------- | ---------------------------------------------------------------------------------------- | ----------
(in €)                                                    | 2019      | 2018                    | 2019                                                                                | 2018
Managing Board members in office as of September 30, 2019 |           |                         |                                                                                |
Joe Kaeser                                                | 1,234,800 | 1,210,440               | 14,299,267                                                                               | 12,970,960
Dr. Roland Busch                                          | 616,896   | 604,800                 | 6,071,233                                                                                | 5,121,226
Lisa Davis 2                                              | 616,896   | 604,800                 | 5,701,811                                                                                | 5,322,537
Klaus Helmrich                                            | 616,896   | 604,800                 | 6,473,904                                                                                | 5,714,522
Janina Kugel                                              | 616,896   | 604,800                 | 2,674,432                                                                                | 2,157,427
Cedrik Neike                                              | 616,896   | 604,800                 | 2,349,895                                                                                | 1,757,258
Michael Sen                                               | 616,896   | 604,800                 | 1,862,660                                                                                | 1,239,785
Prof. Dr. Ralf P. Thomas                                  | 616,896   | 604,800                 | 6,184,498                                                                                | 5,235,121
Total                                                     | 5,553,072 | 5,444,040               | 45,617,700                                                                               | 39,518,836

Pension benefit commitments
 2019 Managing Board members contributions BSAV € 5. 6 million (2018. 4 Supervisory Board decision November 7. € 0. 02 million. pension commitments transfer BSAV.
 service cost € 5. 4 million (2018. 3.
 Contributions added pension accounts. credited annual interest January 1. interest rate 0. 90%.
 table contributions BSAV defined benefit obligations
 former Managing Board surviving dependents received emoluments Section 314. German Commercial Code € 21. 09 million (2018 € 39. 9 million.
 defined obligation pension September 30, 2019 €175. 7 million (2018 €168. 2 million. NOTE 17. FINANCIAL STATEMENTS.
 Deferred compensation € 4,125,612 (2018 € 3,703,123 Joe Kaeser,494 Klaus Helmrich 60,995. Ralf. Thomas.
BSAV benefits Lisa Davis not secured. unsecured unfunded obligation payout assets.
 contributions benefit obligation pension commitments excluding deferred compensation
 Managing Board members September 30, 2019
 Joe Kaeser 1,234,800 1,210,440 14,299,267 12,970,960
. Roland Busch 6,071,233 5,121,226
 Lisa Davis 5,701,811 5,322,537
 Klaus Helmrich 6,473,904 5,714,522
 Janina Kugel 2,674,432 2,157,427
 Cedrik Neike 2,349,895 1,757,258
 Michael Sen 1,862,660 1,239,785
. Ralf P. Thomas 6,184,498 5,235,121
 5,553,072 5,444,040 45,617,700 39,518,836


Under the 2019 Plan, the Compensation Committee set the following non-equity incentive target amounts, non-equity incentive compensation cap percentages and relative percentages weights for each plan component for each of our NEOs in 2019 who are participating in our incentive compensation plans. Under the 2019 Plan, the Compensation Committee set the following non-equity incentive target amounts, non-equity incentive compensation cap percentages and relative percentages weights for each plan component for each of our NEOs in 2019 who are participating in our incentive compensation plans.
As noted above, Messrs Richard, Robert and Bruce Leeds no longer participate in incentive compensation. In addition, as
Mr. Reinhold left Systemax as the Chief Executive Officer in January 2019, he did not participate in the 2019 NEO Plan.

Name          | Target ($) | Cap (%) | Net Sales (%) | Adjusted Operating Income (%) | Strategic Objectives (%) | Corporate Governance (%) | Business Unit/Individual Objectives (%)
------------- | ---------- | ------- | ------------- | ----------------------------- | ------------------------ | ------------------------ | ---------------------------------------
Barry Litwin  | 1,113,750  | 111     | 20            | 60                            | 18                       | 4                        | 0
Thomas Clark  | 225,000    | 150     | 0             | 0                             | 0                        | 0                        | 100
Robert Dooley | 615,000    | 150     | 0             | 0                             | 0                        | 0                        | 100
Eric Lerner   | 300,900    | 150     | 0             | 0                             | 0                        | 0                        | 100
Manoj Shetty  | 241,535    | 150     | 0             | 0                             | 0                        | 0                        | 100

2019 Plan Compensation Committee set non-equity incentive target amounts compensation cap percentages weights each plan component NEOs 2019. cap percentages plan NEOs.
 Messrs Richard Robert Bruce Leeds participate incentive compensation.
 Mr. Reinhold left Systemax Chief Executive Officer January 2019 participate 2019 NEO Plan.
 Name Target$ Cap (%) Net Sales Adjusted Operating Income Strategic Objectives Corporate Governance Business Unit/Individual Objectives
 Barry Litwin 1,113,750  20 60 18 4
 Thomas Clark 225,000  150  100
 Robert Dooley 615,000 150 100
 Eric Lerner 300,900  150 100
 Manoj Shetty 241,535  150 100


4. Inventories
Inventories consisted of the following (in thousands):
We grow and maintain flocks of layers (mature female chickens), pullets (female chickens, under 18 weeks of age), and breeders (male and female chickens used to produce fertile eggs to hatch for egg production flocks). Our total flock at June 1, 2019, consisted of approximately 9.4 million pullets and breeders and 36.2 million layers.

                                        | June 1, 2019 | June 2, 2018
--------------------------------------- | ------------ | ------------
Flocks, net of accumulated amortization | $105,536     | $96,594
Eggs                                    | 14,318       | 17,313
Feed and supplies                       | 52,383       | 54,737
                                        | $172,237     | $168,644

. Inventories
 grow flocks pullets breeders. flock June 1 2019 9. 4 million pullets breeders 36. 2 million layers.
 1 2019 2 2018
 Flocks amortization $105,536 $96,594
 Eggs 14,318 17,313
 Feed supplies 52,383 54
 $172,237 $168,644


Revenues
Revenues for our reportable segments were as follows:
The increase in Semiconductor Test revenues of $60.2 million, or 4%, from 2018 to 2019 was driven primarily by an increase in semiconductor tester sales for 5G infrastructure and image sensors and higher service revenue, partially offset by a decrease in sales in the automotive and analog test segments.
The increase in Industrial Automation revenues of $36.6 million, or 14%, from 2018 to 2019 was primarily due to higher demand for collaborative robots. The MiR acquisition was completed in April 2018.
The increase in System Test revenues of $71.4 million, or 33%, from 2018 to 2019 was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers, higher sales in Defense/Aerospace test instrumentation and systems, and higher sales in Production Board Test from higher 5G demand.
The increase in Wireless Test revenues of $25.3 million, or 19%, from 2018 to 2019 was primarily due to higher demand for millimeter wave and cellular test products driven by new wireless standards and 5G, partially offset by lower sales in connectivity test products and services.

                      | 2019     | 2018          | 2018-2019 Dollar Change
--------------------- | -------- | ------------- | -----------------------
                      |          | (in millions) |
Semiconductor Test    | $1,552.6 | $1,492.4      | $60.2
Industrial Automation | 298.1    | 261.5         | 36.6
System Test           | 287.5    | 216.1         | 71.4
Wireless Test         | 157.3    | 132.0         | 25.3
Corporate and Other   | (0.5)    | (1.2)         | 0.7
                      | $2,295.0 | $2,100.8      | $194.2

 increase Semiconductor Test revenues $60. 2 million 4% 2018 to 2019 semiconductor sales 5G infrastructure sensors service revenue offset decrease automotive analog test.
 increase Industrial Automation revenues $36. 6 million 14% 2019 demand collaborative robots. MiR acquisition April 2018.
 increase System Test revenues $71. 4 million 33% higher Storage Test. Defense/Aerospace test instrumentation Production Board Test 5G demand.
 increase Wireless Test revenues $25. 3 million 19% 2019 higher demand millimeter wave cellular test products wireless standards 5G offset lower sales connectivity test services.
 Dollar Change
 Semiconductor Test $1,552. $1,492.
 Industrial Automation.
 System Test.
 Wireless Test.
 Corporate Other.
 $2,295.


Cost of Net Revenue and Gross Profit
Cost of net revenue decreased $26.7 million to $149.5 million for the year ended December 31, 2019, as compared to $176.2 million for the year ended December 31, 2018. The decrease was primarily driven by lower sales. The decrease in gross profit percentage for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was due to lower revenue and product mix.
We currently expect that gross profit percentage will fluctuate in the future, from period-to-period, based on changes in product mix, average selling prices, and average manufacturing costs.

                    | Year Ended December 31, |                        | % Change
------------------- | ----------------------- | ---------------------- | --------
                    | 2019                    | 2018                   | 2019
                    |                         | (dollars in thousands) |
Cost of net revenue | $149,495                | $176,223               | (15)%
% of net revenue    | 47%                     | 46%                    |
Gross profit        | 167,685                 | 208,774                | (20)%
% of net revenue    | 53%                     | 54%                    |

Net Revenue Gross Profit
 revenue decreased $26. 7 million to $149. 5 million December 31, 2019 $176. 2 million 2018. driven lower sales. decrease gross profit due lower revenue product mix.
 gross profit percentage product mix selling prices manufacturing costs.
 Ended December 31, % Change
 net revenue $149,495 $176,223 (15)
 revenue 47%
 Gross profit 167,685 208,774 (20)
 revenue 53%


Note 2 – Business Combinations
In November 2018, we acquired SmartRG, Inc., a provider of carrier-class, open-source connected home platforms and cloud services for broadband service providers for cash consideration. This transaction was accounted for as a business combination. We have included the financial results of this acquisition in our consolidated financial statements since the date of acquisition. These revenues are included in the Subscriber Solutions & Experience category within the Network Solutions and Services & Support reportable segments.
Contingent liabilities with a fair value totaling $1.2 million were recognized at the acquisition date, the payments of which were dependent upon SmartRG achieving future revenue, EBIT or customer purchase order milestones during the first half of 2019. The required milestones were not achieved and therefore, we recognized a gain of $1.2 million upon the reversal of these liabilities during the second quarter of 2019.
An escrow in the amount of $2.8 million was set up at the acquisition date to fund post-closing working capital settlements and to satisfy indemnity obligations to the Company arising from any inaccuracy or breach of representations, warranties, covenants, agreements or obligations of the sellers. The escrow is subject to arbitration. In December 2019, $1.3 million of the $2.8 million was released from the escrow account pursuant to the agreement, with the final settlement of the remaining balance expected during the fourth quarter of 2020. The remaining minimum and maximum potential release of funds to the seller ranges from no payment to $1.5 million.
We recorded goodwill of $3.5 million as a result of this acquisition, which represents the excess of the purchase price over the fair value of net assets acquired and liabilities assumed. We assessed the recognition and measurement of the assets acquired and liabilities assumed based on historical and forecasted data for future periods and concluded that our valuation procedures and resulting measures were appropriate.
On March 19, 2018, we acquired Sumitomo Electric Lightwave Corp.’s (SEL) North American EPON business and entered into a technology license and OEM supply agreement with Sumitomo Electric Industries, Ltd. (SEI). This acquisition establishes ADTRAN as the North American market leader for EPON solutions for the cable MSO industry and it will accelerate the MSO market’s adoption of our open, programmable and scalable architectures. This transaction was accounted for as a business combination. We have included the financial results of this acquisition in our consolidated financial statements since the date of acquisition. These revenues are included in the Access & Aggregation and Subscriber Solutions & Experience categories within the Network Solutions reportable segment.
We recorded a bargain purchase gain of $11.3 million during the first quarter of 2018, net of income taxes, which is subject to customary working capital adjustments between the parties. The bargain purchase gain of $11.3 million represents the difference between the fair-value of the net assets acquired over the cash paid. SEI, an OEM supplier based in Japan, is the global market leader in EPON. SEI’s Broadband Networks Division, through its SEL subsidiary, operated a North American EPON business that included sales, marketing, support, and region-specific engineering development. The North American EPON market is primarily driven by the Tier 1 cable MSO operators and has developed more slowly than anticipated. Through the transaction, SEI divested its North American EPON assets and established a relationship with ADTRAN. The transfer of these assets to ADTRAN, which included key customer relationships and a required assumption by ADTRAN of relatively low incremental expenses, along with the value of the technology license and OEM supply agreement, resulted in the bargain purchase gain. We have assessed the recognition and measurement of the assets acquired and liabilities assumed based on historical and forecasted data for future periods and we have concluded that our valuation procedures and resulting measures were appropriate. The gain is included in the line item ”Gain on bargain purchase of a business” in the 2018 Consolidated Statements of Income.
The final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date for SmartRG and the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date for Sumitomo are as follows:
(In thousands)

(In thousands)                                     | Sumitomo | SmartRG
-------------------------------------------------- | -------- | -------
Assets                                             |          |
Tangible assets aquired                            | $1,006   | $8,594
Intangible assets                                  | 22,100   | 9,960
Goodwill                                           | —        | 3,476
Total assets acquired                              | 23,106   | 22,030
Liabilities                                        |          |
Liabilities Assumed                                | (3,978)  | (6,001)
Total liabilities assumed                          | (3,978)  | (6,001)
Total net assets                                   | 19,128   | 16,029
Gain on bargain purchase of a business, net of tax | (11,322) | —
Total purchase price                               | $7,806   | $16,029

Business Combinations
 November 2018 acquired SmartRG. provider open-source home platforms cloud services. business combination. included financial results financial statements. revenues Subscriber Solutions Experience Network Solutions Services Support.
 Contingent liabilities $1. 2 million recognized payments dependent SmartRG future revenue EBIT purchase order milestones 2019. achieved recognized gain $1. 2 million reversal liabilities second quarter 2019.
 escrow $2. 8 million set capital settlements indemnity obligations. escrow subject arbitration. December 2019 $1. 3 million. million released escrow final settlement remaining expected fourth quarter 2020. remaining release no to $1. 5 million.
 recorded goodwill $3. 5 million acquisition excess purchase price fair value assets acquired liabilities assumed. assessed valuation procedures measures appropriate.
 March 19, 2018 acquired Sumitomo Electric Lightwave. North American EPON business technology license OEM supply agreement Sumitomo Electric Industries.acquisition establishes ADTRAN North American leader EPON solutions adoption open programmable scalable architectures. business combination. included financial results statements. revenues Access Aggregation Subscriber Solutions Experience Network Solutions.
 recorded bargain purchase gain $11. 3 million first quarter 2018 net taxes subject adjustments. $11. 3 million difference fair-value assets cash paid. SEI leader EPON. Broadband Networks Division operated North American EPON business sales marketing support engineering. North American EPON market driven Tier 1 cable MSO operators developed. SEI divested North EPON assets established relationship ADTRAN. transfer ADTRAN customer relationships low expenses technology license OEM supply agreement resulted bargain gain. assessed assets liabilities assumed valuation procedures measures appropriate. gain included bargain purchase 2018 Consolidated Statements Income.
final allocation purchase price assets liabilities SmartRG Sumitomo
 Sumitomo SmartRG
 Assets
 Tangible assets aquired $1,006 $8,594
 Intangible assets 22,100 9,960
 Goodwill 3,476
 assets acquired 23,106 22,030
 Liabilities
 Assumed (3,978) (6,001)
 net assets 19,128 16,029
 Gain bargain purchase business net tax (11,322)
 purchase price $7,806 $16,029


Stock-based Compensation Expense
The following table sets forth our stock-based compensation expense for the years ended December 31, 2019, 2018 and 2017 (in thousands):
Stock-based compensation awards include employee stock options, restricted stock awards and units, and employee stock purchases. For the year ended December 31, 2019, stock-based compensation expense was $31.6 million, of which $0.2 million related to employee stock options, $29.1 million related to restricted stock awards and units and $2.3 million related to employee stock purchases. For the year ended December 31, 2018, stock-based compensation expense was $31.0 million, of which $0.4 million related to employee stock options, $28.0 million related to restricted stock awards and units and $2.6 million related to employee stock purchases. The increase in stock-based compensation expense in 2019 compared to 2018 was due primarily to a higher volume of restricted stock unit grants.

                                              |         | Years Ended December 31, |
--------------------------------------------- | ------- | ------------------------ | -------
                                              | 2019    | 2018                     | 2017
Research, development and other related costs | $14,643 | $13,168                  | $13,277
Selling, general and administrative           | 16,911  | 17,843                   | 20,185
Total stock-based compensation expense        | $31,554 | $31,011                  | $33,462

Stock Compensation Expense
 2019 2018 2017
 options restricted stock awards units purchases. 2019 $31. 6 million $0. 2 million options $29. 1 million restricted stock awards units $2. 3 million purchases. 2018 $31. 0 million $0. 4 million options $28. 0 million restricted stock awards units $2. 6 million purchases. increase higher restricted stock unit grants.
 2017
 Research development costs $14,643 $13,168,277
 Selling general administrative 16,911
 stock-based compensation expense $31,554 $31,011


Subsequent to origination, the delinquency and write-off experience is monitored as key credit quality indicators for the portfolio of device payment plan agreement receivables and fixed-term service plans. The extent of collection efforts with respect to a particular customer are based on the results of proprietary custom empirically derived internal behavioral-scoring models that analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent.
These customer-scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts.
Collection performance results and the credit quality of device payment plan agreement receivables are continuously monitored based on a variety of metrics, including aging. An account is considered to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date.
At December 31, 2019 and 2018, the balance and aging of the device payment plan agreement receivables on a gross basis was as follows:

                                                 | 2019     | 2018
------------------------------------------------ | -------- | --------
Unbilled                                         | $ 12,403 | $ 11,485
Billed:                                          |          |
Current                                          | 815      | 641
Past due                                         | 262      | 209
Device payment plan agreement receivables, gross | $ 13,480 | $ 12,335

origination delinquency write-off experience monitored credit quality indicators for device payment plan receivables fixed-term service plans. collection efforts based behavioral-scoring models performance.
 models assess variables origination characteristics account history payment patterns. accounts grouped by risk category collection strategy.
 Collection performance credit quality receivables monitored aging. account delinquent default unpaid charges remaining due date.
 December 31, 2019 2018 balance aging receivables
 2018
 Unbilled $ 12,403  $ 11,485
 Billed
 Current 815 641
 Past due 262 209
 receivables gross $ 13,480  $ 12,335


Audit Fees consist of fees billed for the annual audit of our Company’s Consolidated Financial Statements, the statutory audit of the financial statements of the Company’s subsidiaries and consultations on complex accounting issues relating to the annual audit. Audit Fees also include services that only our independent external auditor can reasonably provide, such as comfort letters and carve-out audits in connection with strategic transactions.
Audit-related services are assurance and related fees consisting of the audit of employee benefit plans, due diligence services related to acquisitions and certain agreed-upon procedures.
Tax Fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance in connection with tax audits and expatriate tax compliance.

                                                                                | 2019      | Percentage of Total Fees | 2018      | Percentage of Total Fees
----------------------------------------------------------------------------------------- | --------- | ------------------------ | --------- | ------------------------
Audit Fees                                                                                |           |                          |           |
Statutory Audit, Certification, Audit of Individual and Consolidated Financial Statements | 4,105,000 | 95.2%                    | 4,556,500 | 96.3%
Audit-Related Fees                                                                        | 209,005   | 4.8%                     | 173,934   | 3.7%
Non-audit Fees                                                                            |           |                          |           |
Tax Fees                                                                                | —         | —                        | —         | —
All Other Fees                                                                            | —         | —                        | —         | —
Total                                                                                | 4,314,005 | 100.0%                   | 4,730,434 | 100%

Audit Fees annual audit Financial Statements statutory audit subsidiaries consultations accounting issues. comfort letters carve-out audits strategic transactions.
 Audit-related services employee benefit plans due diligence acquisitions agreed-upon procedures.
 Tax Fees tax compliance returns claims refund tax consultations expatriate tax compliance.
 2019 2018
 Audit Fees
 Statutory Audit Certification Financial Statements 4,105,000 95. 2% 4,556,500 96. 3%
 Audit-Related Fees 209,005 4. 8% 173,934 3. 7%
 Non-audit Fees
 Tax Fees
 Other Fees
 4,314,005 100. 0% 4,730,434 100%


Net Debt to Adjusted EBITDA Ratio
(UNAUDITED)
($ in millions)
(1) 2017 Adjusted EBITDA shown pro forma, assuming the Level 3 acquisition and the colocation and data center sale took place on January 1, 2017.

                                                                                | 2019    | 2018   | 2017(1)
------------------------------------------------------------------------------------ | ------- | ------ | -------
Gross Debt                                                                           | $35,039 | 36,352 | 38,053
Cash and cash equivalents                                                            | (1,690) | (488)  | (551)
Net debt                                                                             | $33,349 | 35,864 | 37,502
Adjusted EBITDA excluding integration and transformation costs and special items (1) | $9,070  | 9,040  | 8,686
Net Debt to Adjusted EBITDA Ratio                                                    | 3.7     | 4.0    | 4.3

Debt EBITDA Ratio
 Adjusted EBITDA Level 3 acquisition colocation data center sale January 1.
 Gross Debt $35,039 36,352 38,053
 equivalents
 Net debt $33,349 35,864 37,502
 Adjusted EBITDA integration costs items $9,070 9,040 8
 Debt Adjusted EBITDA Ratio.


Contract Assets and Liabilities
Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. While the Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied, under certain circumstances the related billing occurs in arrears, generally within one month of the services being rendered.
At the inception of a contract, the Company generally expects the period between when it transfers its services to its customers and when the customer pays for such services will be one year or less.
Contract liabilities relate to advance consideration received or the right to consideration that is unconditional from customers for which revenue is recognized when the performance obligation is satisfied and control transferred to the customer.
The table below sets forth the Company’s contract assets and contract liabilities from contracts with customers.
The increase in the contract assets balance during the period was primarily due to $203 million of revenue recognized that was not billed, in accordance with the terms of the contracts, as of December 31, 2019, offset by $193 million of contract assets included in the December 31, 2018 balance that were invoiced to Nielsen’s clients and therefore transferred to trade receivables.
The decrease in the contract liability balance during the period was primarily due to $326 million of advance consideration received or the right to consideration that is unconditional from customers for which revenue was not recognized during the period, offset by $337 million of revenue recognized during the period that had been included in the December 31, 2018 contract liability balance.

(IN MILLIONS)        | Year Ended December 31, |
-------------------- | ----------------------- | ----
                     | 2019                    | 2018
Contract assets      | $218                    | $210
Contract liabilities | $346                    | $359

Contract Assets Liabilities
 represent rights to consideration for services transferred not billed reporting. rights unconditional performance obligations billing occurs in arrears within one month of services rendered.
 expects between services one year or less.
 liabilities to advance consideration unconditional from customers revenue recognized performance obligation satisfied control transferred to customer.
 table contract assets liabilities from contracts.
 increase contract assets balance due to $203 million revenue not billed offset by $193 million assets 2018 invoiced to transferred to trade receivables.
 decrease contract liability balance due to $326 million advance consideration from customers offset by $337 million revenue December 31, 2018.
 MILLIONS Year Ended December 31,
 Contract assets $218 $210
 liabilities $346 $359


Our revenues and operating results are significantly affected by the timing, number and breadth of our theatrical releases and their budgets, the timing of television syndication agreements, and our amortization policy for the first 12 months of commercial exploitation for a film. The timing of releases is determined based on several factors. A significant portion of the films we distribute are delivered to Indian theaters at times when theater attendance has traditionally been highest, including school holidays, national holidays and the festivals. This timing of releases also takes into account competitor film release dates, major cricket events in India and film production schedules. Significant holidays and festivals, such as Diwali, Eid and Christmas, occur during July to December each year, and the Indian Premier League cricket season generally occurs during April and May of each year. The Tamil New Year, called Pongal, falls in January each year making the quarter ending March an important one for Tamil releases.
Our quarterly results can vary from one period to the next, and the results of one quarter are not necessarily indicative of results for the next or any future quarter. Our revenue and operating results are therefore seasonal in nature due to the impact on income of the timing of new releases as well as timing and quantum of catalogue revenues.

                                                   |               | Three Months Ended |                   |
-------------------------------------------------- | ------------- | ------------------ | ----------------- | --------------
                                                   | June 30, 2018 | September 30, 2018 | December 31, 2018 | March 31, 2019
                                                   |               | (in thousands)     |                   |
Revenue                                            | 60,212        | 63,425             | 76,744            | 69,745
Adjustment towards significant financing component | 6,410         | 8,837              | 9,917             | 9,303
Gross Revenue                                      | 66,622        | 72,262             | 86,661            | 79,048

revenues operating results affected by timing theatrical releases budgets television syndication agreements amortization policy first 12 months. timing. films Indian theaters attendance highest school holidays national holidays festivals. competitor dates cricket events film production schedules. holidays festivals Diwali Eid Christmas July to December Indian Premier League cricket season April May. Tamil New Year January March important Tamil releases.
 quarterly results vary not indicative. revenue operating results seasonal new releases catalogue revenues.
 Three Months
 June 30, 2018 September 30 December 31, 2018 March 31, 2019
 Revenue 60,212 63,425  76,744 69,745
 Adjustment financing 6,410 8,837 9,917 9,303
 Gross Revenue 66,622 72,262 86,661 79,048


Other Intangible Assets, Net
Other intangible assets include developed technologies, customer relationships, trade names, patents, user lists and the related accumulated amortization. These assets are shown as “Developed technologies, net” and as part of “Other assets” in the Consolidated Balance Sheet. The majority of Autodesk’s other intangible assets are amortized to expense over the estimated economic life of the product, which ranges from two to ten years. Amortization expense for developed technologies, customer relationships, trade names, patents, and user lists was $33.5 million in fiscal 2019, $36.6 million in fiscal 2018 and $72.2 million in fiscal 2017.
Other intangible assets and related accumulated amortization at January 31 were as follows:
(1) Included in “Other assets” in the accompanying Consolidated Balance Sheets. (2) Includes the effects of foreign currency translation.

                                                                          | 2019    | 2018
------------------------------------------------------------------------- | ------- | -------
Developed technologies, at cost                                           | $670.2  | $578.5
Customer relationships, trade names, patents, and user lists, at cost (1) | 533.1   | 372.5
Other intangible assets, at cost (2)                                      | 1,203.3 | 951.0
Less: accumulated amortization                                            | (922.5) | (895.8)
Other intangible assets, net                                              | $280.8  | $55.2

Intangible Assets
 technologies customer relationships trade names patents user lists accumulated amortization. Consolidated Balance Sheet. majority assets amortized over economic life two to ten years. Amortization trade names patents lists $33. 5 million 2019 $36. 6 million 2018 $72. 2 million 2017.
 amortization at January 31
 Included. Includes foreign currency translation.
 Developed technologies $670. $578.
 Customer relationships trade names patents user lists 533. 372.
 intangible assets 1,203. 951.
 accumulated amortization (922.
 $280. $55.


Gross Profit
Gross profit in fiscal year 2019 increased to $444.8 million, or 18.7 percent of net sales from $382.3 million, or 17.7 percent of net sales for fiscal year 2018. Excluding the impact of the surcharge revenue, our gross margin in fiscal year 2019 was 22.9 percent compared to 21.3 percent in fiscal year 2018. The results reflect the impact of improved product mix coupled with capacity gains and operating cost reductions compared to the same period a year ago. Fiscal year 2019 also reflects an $11.4 million benefit related to an insurance recovery in our third fiscal quarter.
Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin. We present and discuss these financial measures because management believes removing the impact of surcharge provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section “Non-GAAP Financial Measures” below for further discussion of these financial measures.

                                         | Fiscal Year |
---------------------------------------- | ----------- | --------
($ in millions)                          | 2019        | 2018
Net sales                                | $2,380.2    | $2,157.7
Less: surcharge revenue                  | 438.1       | 365.4
Net sales excluding surcharge revenue    | $1,942.1    | $1,792.3
Gross profit                             | $444.8      | $382.3
Gross margin                             | 18.7%       | 17.7%
Gross margin excluding surcharge revenue | 22.9%       | 21.3%

 2019 increased $444. 8 million 18. 7 percent sales from $382. 3 million 17. 7 percent 2018. Excluding surcharge revenue gross margin 22. 9 percent compared 21. 3 percent 2018. improved product mix capacity gains operating cost reductions. reflects $11. 4 million benefit insurance recovery third quarter.
 surcharge mechanism raw material costs. surcharge protects profit gross margin. summary dilutive impact surcharge margin. removing impact surcharge comparing results. “Non-GAAP Financial Measures”.
 Net sales $2,380. $2,157.
 surcharge revenue 438.
 sales excluding surcharge revenue $1,942. $1,792.
 Gross profit $444. 8 $382.
 margin 18. 7%.
 excluding surcharge revenue 22. 9% 21. 3%


4.4 Operating costs
Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers.
Labour costs (net of capitalized costs) include wages, salaries and related taxes and benefits, post-employment benefit plans service cost, and other labour costs, including contractor and outsourcing costs
Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, IT costs, professional service fees and rent
BCE Total BCE operating costs declined by 0.5% in 2019, compared to last year, driven by reduced costs in Bell Media of 2.5%, while costs in Bell Wireless and Bell Wireline remained relatively stable year over year. These results reflected the benefit from the adoption of IFRS 16 in 2019.

                           | 2019     | 2018     | $ CHANGE | % CHANGE
-------------------------- | -------- | -------- | -------- | --------
Bell Wireless              | (5,300)  | (5,297)  | (3)      | (0.1%)
Bell Wireline              | (6,942)  | (6,946)  | 4        | 0.1%
Bell Media                 | (2,367)  | (2,428)  | 61       | 2.5%
Inter-segment eliminations | 751      | 738      | 13       | 1.8%
Total BCE operating costs  | (13,858) | (13,933) | 75       | 0.5%

. Operating costs
 wireless devices equipment network content costs payments carriers.
 Labour costs include wages salaries taxes benefits post-employment service contractor outsourcing
 marketing advertising sales debt taxes IT service fees rent
 operating costs declined. 5% 2019 reduced costs Bell Media. 5% Bell Wireless Wireline stable. results IFRS 16 2019.
 Bell Wireless (5,300),297.
 Bell Wireline (6,942). 1%
 Bell Media (2,367) (2,428). 5%
 Inter-segment eliminations. 8%
 Total BCE operating costs (13,858)  (13,933).


Provision for income taxes
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
The increase in our effective tax rate in fiscal 2019 compared to fiscal 2018 was primarily due to one-time benefits from the 2017 Tax Act in fiscal 2018. In addition, increases in tax expense in fiscal 2019 are attributable to the valuation allowance on capital losses for which we cannot yet recognize a tax benefit.

                                                        | Fiscal Year |
------------------------------------------------------- | ----------- | ------
(In millions, except for percentages)                   | 2019        | 2018
Income from continuing operations before income taxes   | $108        | $437
Provision for (benefit from) income taxes               | $92         | $(690)
Effective tax rate on income from continuing operations | 85%         | (158)%

income taxes
 U. S. multinational company tax. international jurisdictions. international earnings from subsidiaries Ireland Singapore. results geographical mix higher tax rates favorably lower. change earnings difficult predict.
 increase effective tax rate 2019 due to one-time benefits 2017 Tax Act. increases tax expense attributable valuation allowance capital losses tax benefit.
 Fiscal Year
 2019 2018
 Income from operations before income taxes $108  $437
 Provision income taxes $92 $(690)
 Effective tax rate income operations 85% (158)%


Note 7 — Inventories, net
Inventories are used in the manufacture and service of Restaurant/Retail products. The components of inventory, net consist of the following:
At December 31, 2019 and 2018, the Company had recorded inventory write-downs of $9.6 million and $9.8 million , respectively, against Restaurant/Retail inventories, which relate primarily to service parts.

                | December 31,   |
--------------- | -------------- | -------
                | (in thousands) |
                | 2019           | 2018
Finished Goods  | $8,320         | $12,472
Work in process | —              | 67
Component parts | 6,768          | 4,716
Service parts   | 4,238          | 5,482
                | $19,326        | $22,737

Inventories
 manufacture Restaurant/Retail products. components
 December 31, 2019 2018 inventory write-downs $9. 6 million $9. 8 million against Restaurant/Retail inventories service parts.
 Finished Goods $8,320 $12,472
 Component parts 6,768
 Service parts 4,238 5
 $19,326 $22,737


Expected Future Pension Benefit Payments
Future benefit payments are expected to be paid as follows:

          | United States  | Foreign
--------- | -------------- | -------
          | (in thousands) |
2020      | $8,027         | $1,237
2021      | 8,416          | 985
2022      | 9,163          | 982
2023      | 9,785          | 1,258
2024      | 10,558         | 1,098
2025-2029 | 59,665         | 6,129

Pension Benefit Payments
 2020 $8,027 $1,237
 2021 8,416
 2022 9
 2023,785 1,258
 10,558 1,098
 2025-2029 59,665 6,129


3.6 PROFIT FOR THE YEAR
(1) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy as well as to reclassify results from Cogeco Peer 1 as discontinued operations. For further details, please consult the "Accounting policies" and "Discontinued operations" sections.
(2) The non-controlling interest represents a participation of 21% in Atlantic Broadband's results by Caisse de dépôt et placement du Québec ("CDPQ"), effective since the MetroCast acquisition on January 4, 2018.
Fiscal 2019 profit for the year from continuing operations and profit for the year from continuing operations attributable to owners of the Corporation decreased by 7.2% and 9.4%, respectively, as a result of: • last year's $94 million income tax reduction following the United States tax reform; and • the increase in depreciation and amortization mostly related to the impact of the MetroCast acquisition; partly offset by • higher adjusted EBITDA mainly as a result of the impact of the MetroCast acquisition; • the decrease in financial expense; and • the decrease in integration, restructuring and acquisition costs.
Fiscal 2019 profit for the year and profit for the year attributable to owners of the Corporation increased by 20.0% and 18.4%, respectively, mainly due to a profit for the year from discontinued operations of $75.4 million resulting from the sale of Cogeco Peer 1 in the third quarter of fiscal 2019 compared to a loss for the year from discontinued operations of $24.4 million for the prior year in addition to the elements mentioned above.

Years ended August 31,                                                                     | 2019    | 2018 (1) | Change
------------------------------------------------------------------------------------------ | ------- | -------- | ------
(in thousands of dollars, except percentages and earnings per share)                       | $       | $        | %
Profit for the year from continuing operations                                             | 356,908 | 384,578  | (7.2)
Profit for the year                                                                        | 432,288 | 360,197  | 20.0
Profit for the year from continuing operations attributable to owners of the Corporation   | 339,973 | 375,214  | (9.4)
Profit for the year attributable to owners of the Corporation                              | 415,353 | 350,833  | 18.4
Profit for the year from continuing operations attributable to non-controlling interest(2) | 16,935  | 9,364    | 80.9
Basic earnings per share from continuing operations                                        | 6.89    | 7.61     | (9.5)
Basic earnings per share                                                                   | 8.41    | 7.12     | 18.1

. 6 PROFIT YEAR
 Fiscal 2018 restated comply IFRS 15 change accounting policy reclassify results Cogeco Peer 1 discontinued operations. consult "Accounting policies "Discontinued operations sections.
 non-controlling interest participation 21% Atlantic Broadband results Caisse dépôt placement Québec since MetroCast acquisition January 4, 2018.
 Fiscal 2019 profit decreased 7. 2% 9. 4% $94 million income tax reduction increase depreciation amortization MetroCast acquisition offset higher adjusted EBITDA decrease financial expense integration restructuring acquisition costs.
 Fiscal 2019 profit increased 20. 0% 18. 4% profit discontinued operations $75. 4 million sale Cogeco Peer 1 loss $24. 4 million prior year.
 Years ended August 31, 2019 2018 Change
 earnings share
 Profit continuing operations 356,908 384,578.
 Profit year 432,288 360,197.
Profit operations owners Corporation 339,973 375,214 (9.
 415,353 350,833 18.
 non-controlling 16,935 9,364 80.
 earnings share 6. 89 7. 61 (9. 5)
 8. 41 7. 12 18.


6. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
Depreciation expense was $51.7 million, $51.1 million and $48.8 million in fiscal years 2019, 2018 and 2017, respectively.
The Company maintains insurance for both property damage and business interruption relating to catastrophic events, such as fires. Insurance recoveries received for property damage and business interruption in excess of the net book value of damaged assets, clean-up and demolition costs, and post-event costs are recognized as income in the period received or committed when all contingencies associated with the recoveries are resolved. Gains on insurance recoveries related to business interruption are recorded within “Cost of sales” and any gains or losses related to property damage are recorded within “Other income (expense).” Insurance recoveries related to business interruption are classified as operating cash flows and recoveries related to property damage are classified as investing cash flows in the statement of cash flows. Insurance claims incurred or finalized during the fiscal years ended 2019, 2018, and 2017 did not have a material affect on the Company's consolidated financial statements.

                               | June 1, 2019 | June 2, 2018
------------------------------ | ------------ | ------------
Land and improvements          | $93,046      | $90,757
Buildings and improvements     | 370,451      | 360,030
Machinery and equipment        | 496,166      | 478,997
Construction-in-progress       | 52,551       | 9,307
                               | 1,012,214    | 939,091
Less: accumulated depreciation | 555,920      | 513,707
                               | $456,294     | $425,384

. Property Plant Equipment
 Depreciation expense $51. 7 million $51. 1 million $48. 8 million 2019 2018 2017.
 Company maintains insurance property damage business interruption. recoveries value recognized income contingencies resolved. Gains insurance recoveries “Cost of damage income. Insurance recoveries operating damage investing cash flows. Insurance claims 2019 2018 2017 consolidated financial statements.
 June 1 2019 June 2 2018
 Land improvements $93,046 $90,757
 Buildings improvements 370,451 360,030
 Machinery equipment 496,166 478,997
 Construction-in-progress 52,551 9,307
 1,012,214 939,091
 accumulated depreciation 555,920 513,707
 $456,294 $425,384


7. Accrued Expenses
Accrued expenses consist of the following (in thousands):

                                                   | August 31, 2019 | August 31, 2018
-------------------------------------------------- | --------------- | ---------------
Contract liabilities                               | $511,329        | $—
Deferred income                                    | —               | 691,365
Accrued compensation and employee benefits         | 600,907         | 570,400
Obligation associated with securitization programs | 475,251         | —
Other accrued expenses                             | 1,402,657       | 1,000,979
Accrued expenses                                   | $2,990,144      | $2,262,744

. Accrued Expenses
 2019
 Contract liabilities $511,329
 Deferred income 691,365
 compensation benefits 600,907 570,400
 securitization 475,251
 expenses 1,402,657 1,000,979
 $2,990,144,262,744


Other income, net
The components of other income, net from continuing operations for the years ended December 31 are as follows:
In 2018, we recorded a $0.5 million adjustment to decrease the fair value of the Company's contingent consideration related to the Brink Acquisition. Also, during 2019 and 2018, the Company incurred a net loss on rental contracts of approximately $1.0 million and $0.9 million, respectively.

                                               | Year ended December 31 (in thousands) |
---------------------------------------------- | ------------------------------------- | ------
                                               | 2019                                  | 2018
Foreign currency loss                          | $(83)                                 | $(258)
Rental loss-net                                | (996)                                 | (865)
Gain on sale of real estate                    | —                                     | 649
Fair value adjustment contingent consideration | —                                     | 450
Other                                          | (424)                                 | 330
Other income, net                              | $(1,503)                              | $306

income
 December 31
 2018 $0. 5 million adjustment fair value consideration Brink Acquisition. 2019 2018 net loss rental contracts $1. million $0. 9 million.
 Year December 31
 Foreign currency loss $(83) $(258)
 Rental loss-net (996)
 Gain sale real estate 649
 Fair value adjustment 450
 net $(1,503) $306


Net sales by segment and industry end market(1) were as follows:
(1) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

                                 |          | Fiscal        |
-------------------------------- | -------- | ------------- | --------
                                 | 2019     | 2018          | 2017
                                 |          | (in millions) |
Transportation Solutions:        |          |               |
Automotive                       | $ 5,686  | $ 6,092       | $  5,228
Commercial transportation        | 1,221    | 1,280         | 997
Sensors                          | 914      | 918           | 814
Total Transportation Solutions   | 7,821    | 8,290         | 7,039
Industrial Solutions:            |          |               |
Industrial equipment             | 1,949    | 1,987         | 1,747
Aerospace, defense, oil, and gas | 1,306    | 1,157         | 1,075
Energy                           | 699      | 712           | 685
Total Industrial Solutions       | 3,954    | 3,856         | 3,507
Communications Solutions:        |          |               |
Data and devices                 | 993      | 1,068         | 963
Appliances                       | 680      | 774           | 676
Total Communications Solutions   | 1,673    | 1,842         | 1,639
Total                            | $ 13,448 | $ 13,988      | $ 12,185

sales segment industry
 revised.
 millions
 Transportation Solutions
 Automotive $ 5,686 6,092 5,228
 Commercial transportation 1,221 1,280 997
 Sensors
 8,290 7,039
 Industrial Solutions
 Industrial equipment 1,949 1,987 1,747
 Aerospace defense oil gas 1,306 1,157 1,075
 Energy 699 712 685
 3,954 3,856 3,507
 Communications Solutions
 Data devices 993 1,068 963
 Appliances 774 676
 1,673 1,842 1,639
 $ 13,448 13,988


14. Segment Information
The Company operates under two reportable segments based on the geographic locations of its subsidiaries:
(1)  FEI-NY – operates out of New York and its operations consist principally of precision time and frequency control products used in three principal markets- communication satellites (both commercial and U.S. Government-funded); terrestrial cellular telephone or other ground-based telecommunication stations; and other components and systems for the U.S. military.
The FEI-NY segment also includes the operations of the Company’s wholly-owned subsidiaries, FEI-Elcom and FEI-Asia. FEI- Asia functions as a manufacturing facility for the FEI-NY segment with historically minimal sales to outside customers. FEI- Elcom, in addition to its own product line, provides design and technical support for the FEI-NY segment’s satellite business.
(2)  FEI-Zyfer – operates out of California and its products incorporate Global Positioning System (GPS) technologies into systems and subsystems for secure communications, both government and commercial, and other locator applications. This segment also provides sales and support for the Company’s wireline telecommunications family of products, including US5G, which are sold in the U. S. market.
The Company measures segment performance based on total revenues and profits generated by each geographic location rather than on the specific types of customers or end-users. Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Company’s management views the business.
The accounting policies of the two segments are the same as those described in the “Summary of Significant Accounting Policies.” The Company evaluates the performance of its segments and allocates resources to them based on operating profit which is defined as income before investment income, interest expense and taxes. All acquired assets, including intangible assets, are included in the assets of both reporting segments.
The table below presents information about reported segments for each of the years ended April 30, 2019 and 2018, respectively, with reconciliation of segment amounts to consolidated amounts as reported in the statement of operations or the balance sheet for each of the years (in thousands):

                                                   | 2019      | 2018
-------------------------------------------------- | --------- | ----------
Net revenues:                                      |           |
FEI-NY                                             | $38,096   | $26,936
FEI-Zyfer                                          | 12,235    | 15,272
Less intersegment revenues                         | (822 )    | (2,801)
Consolidated revenues                              | $49,509   | $ 39,407
Operating loss:                                    |           |
FEI-NY                                             | $(4,429 ) | $ (15,097)
FEI-Zyfer                                          | 1,730     | 3,164
Corporate                                          | (118 )    | (462)
Consolidated operating loss                        | $(2,817 ) | $ (12,395)
                                                   | 2019      | 2018
Identifiable assets:                               |           |
FEI-NY (approximately $1.5 in China in 2019)       | $54,295   | $ 55,181
FEI-Zyfer                                          | 10,478    | 8,168
less intersegment receivables                      | (8,346 )  | (11,888)
Corporate                                          | 30,344    | 32,123
Consolidated identifiable assets                   | $86,771   | $ 83,584
Depreciation and amortization (allocated):         |           |
FEI-NY                                             | $2,695    | $ 2,355
FEI-Zyfer                                          | 92        | 114
Corporate                                          | 15        | 15
Consolidated depreciation and amortization expense | $2,802    | $ 2,484

. Segment Information
 Company operates two segments subsidiaries
 (1) FEI-NY operates New York operations precision time frequency control products communication satellites. terrestrial cellular telecommunication stations components systems. military.
 includes operations subsidiaries FEI-Elcom FEI-Asia. FEI- Asia manufacturing facility minimal sales outside customers. FEI Elcom provides design technical support satellite business.
 (2) FEI-Zyfer operates California products Global Positioning System (GPS) technologies secure communications government locator applications. provides sales support wireline telecommunications family US5G.
 measures segment performance revenues profits location customers. segments reflect management business.
 accounting policies same “Summary of Significant Accounting Policies. evaluates performance allocates resources operating profit income before interest taxes. acquired assets included in segments.
table segments 2019 2018 consolidated amounts
 Net revenues
 FEI-NY $38,096 $26,936
 FEI-Zyfer 12,235 15,272
 intersegment revenues
 Consolidated revenues $49,509 $ 39,407
 Operating loss
 FEI-NY $(4,429 (15,097)
 FEI-Zyfer 1,730 3,164
 loss $(2,817 (12,395
 assets
 FEI-NY $1. $54,295 55,181
 FEI-Zyfer 10
 intersegment receivables
 30 32,123
 Consolidated assets $86,771 $ 83,584
 Depreciation amortization
 FEI-NY $2,695 2,355
 FEI-Zyfer
 depreciation $2,802 2,484


(3) Accounts Receivable, Net
Accounts receivable, net, is as follows (in thousands):
Bad debt expense for the years ended December 31, 2019, 2018 and 2017 was $0.7 million, $0.1 million and $0.6 million, respectively.

                                | As of December 31, |
------------------------------- | ------------------ | -------
                                | 2019               | 2018
Accounts receivable             | $69,767            | $41,818
Allowance for doubtful accounts | (1,125)            | (711)
Net accounts receivable         | $68,642            | $41,107

Accounts Receivable
 Bad debt expense December 2019 2018 2017 $0. 7 million. 1 million. 6 million.
 December
 receivable $69,767 $41,818
 doubtful accounts
 Net accounts $68,642 $41,107


Statement of financial position
Net assets have decreased to $157,164,000 at 30 June 2019 from $163,937,000 at 30 June 2018.
Current assets have decreased from 30 June 2018 by 18% to $75,460,000. This is driven by a reduction in cash assets, a result of continued investment in technology and further investment in iMoney. The current component of the trail commission asset is $25,626,000, which increased by 16% since 30 June 2018.
Non-current assets have increased from 30 June 2018 by 2% to $150,607,000 which is largely due to higher non-current trail commission asset partially offset by capital asset writeoffs and Home Loans Goodwill impairment. The non-current component of the trail commission asset is $88,452,000 which increased by 9% since 30 June 2018, mainly due to sales volume and partner mix.
Current liabilities decreased from 30 June 2018 to 30 June 2019 by 20% to $34,555,000 primarily due to payments to suppliers in addition to trade related payable balances post 30 June 2018.
Non-current liabilities have increased by 9% ending on $34,348,000. This relates to an increase in lease liabilities and deferred tax liabilities.

FINANCIAL PERFORMANCE SUMMARY | 2019  $’000 | 2018  $’000 RESTATED | CHANGE
----------------------------- | ----------- | -------------------- | ------
Current assets                | 75,460      | 91,457               | (18%)
Non-current assets            | 150,607     | 147,234              | 2%
Total assets                  | 226,067     | 238,691              | (5%)
Current liabilities           | 34,555      | 43,336               | (20%)
Non-current liabilities       | 34,348      | 31,418               | 9%
Total liabilities             | 68,903      | 74,754               | (8%)
Net assets                    | 157,164     | 163,937              | (4%)
Equity                        | 157,164     | 163,937              | (4%)

 assets $157,164,000 2019 $163,937,000 2018.
 assets decreased 18% $75,460,000. cash technology iMoney. trail commission asset $25,626,000 increased 16% 2018.
 Non-current assets increased 2% $150,607,000 capital writeoffs Home Loans Goodwill impairment. $88,452,000 increased sales volume partner mix.
 liabilities decreased 20% $34,555,000 payments suppliers balances.
 Non-current liabilities increased 9% $34,348,000. lease deferred tax liabilities.
 FINANCIAL PERFORMANCE SUMMARY 2019 2018
 assets 75,460 91,457 (18%)
 Non-current 150,607 147,234 2%
 226,067 238 (5%
 liabilities 34,555 43,336 (20%)
 Non-current 34,348 9%
 68,903 74 (8%)
 Net assets 157,164 163,937


Research and Development Expense
Research and development expense increased by $8.7 million in 2019 compared to 2018. The increase was primarily due to a $5.4 million increase in employee-related costs, which includes stock-based compensation, associated with our increased headcount from 229 employees as of December 31, 2018 to 252 employees as of December 31, 2019, a $1.3 million increase in hosting and software related cost to support research and development activities and an increase of $0.4 million in office related expenses to support research and development activities. In addition, a total of $6.5 million of internally-developed software costs during 2019 and $7.7 million of internally-developed software costs during 2018 were capitalized, resulting in an increase of the expense by $1.2 million compared to 2018.

                         | Year Ended December 31, |                        | Change  |
------------------------ | ----------------------- | ---------------------- | ------- | -----
                         | 2019                    | 2018                   | $       | %
                         |                         | (dollars in thousands) |         |
Research and development | $ 50,024                | $ 41,305               | $ 8,719 | 21.1%
% of revenue             | 25%                     | 28%                    |         |

Research Development Expense
 increased $8. 7 million 2019 2018. due $5. 4 million employee costs stock-based compensation increased headcount 229 to 252 $1. 3 million increase hosting software $0. 4 million office expenses. $6. 5 million-developed 2019 $7. 7 million 2018 capitalized expense $1. 2 million 2018.
 Year Ended December 31,
 2019 2018
 thousands
 Research development $ 50,024 $ 41,305 $ 8,719. 1%
 revenue 25% 28%